China vows export crackdown amid milk crisis

BEIJING (Reuters) - China vowed to prevent toxic milk from reaching processors and export markets after an infant powder scandal that has made more than 54,000 children sick and mired the nation's trade reputation in fresh crisis.

Milk powder laced with the industrial chemical melamine has led to nearly 13,000 Chinese infants being admitted to hospital, 104 in a serious condition with kidney stones and agonising complications. Four have died in past months.

The chemical, which can be used to cheat quality checks, has also been found in candy, buns and carton milk sold to other countries and regions, unleashing fear in markets already shaken by a string of "made-in-China" scandals last year.

Outside the mainland, only two children in Hong Kong have so far been stricken by illness blamed on the toxic Chinese milk powder.

But with the scenes of sick infants and details of a local government cover-up alarming Chinese citizens and foreign consumers, officials vowed a shake-up. China will also speed up preparing a food safety law, said a World Health Organisation (WHO) representative.

Agriculture Minister Sun Zhengcai said he would "battle" merchants blamed for selling adulterated milk to dairy companies.

"There can be no compromise in fulfilling every task of the clean-up," Sun said, according to a report on the ministry website (http:/www.agri.gov.cn) late on Monday.

China has said it found melamine in nearly 10 percent of milk and drinking yoghurt samples from three major dairy companies: Mengniu Dairy Co., the Inner Mongolia Yili Industrial Group and the Bright Dairy group

Sun singled out local "milk stations," which collect fresh milk from farmers and sell it on. Their operators have been blamed for adding nitrogen-rich melamine to sub-standard or watered-down milk, fooling quality checks measuring protein, also rich in nitrogen. Many were unregistered and unregulated, he said.

"The intermediate link in purchasing raw milk is basically out of control," he said. "These grave problems and this state of disorder have reached the stage where a clean-up is unavoidable."

"STRICT INSPECTIONS"

The milk scare has had an "adverse effect on the reputation of our products," the Commerce Ministry said in a directive.

"There will be strict inspections of businesses producing and exporting dairy products, food, pharmaceuticals, toys, furniture and other things concerning physical safety."

Markets that have banned or recalled Chinese milk products include Japan, Brunei, Singapore, Malaysia, Hong Kong and Taiwan, and official worry has been spreading this week.

Canada has expanded checks for possibly tainted Chinese dairy products and the European Union will this week issue an expert opinion on the whether processed goods with Chinese milk ingredients pose a health threat.

Taiwan plans to send experts to China to examine the milk powder contamination after the self-governed island banned all mainland dairy products, the government said on Tuesday.

Malaysia extended its ban on Chinese dairy products to chocolates, sweets and other foods containing milk, the official Bernama news agency reported. Vietnam stopped sales of milk products from unidentified sources and ordered checks focussed on finding those from China, Vietnamese state media said.

China's quality chief, Li Changjiang, quit on Monday, joining a growing line of executives and officials accused of hiding the milk poisonings or not doing enough.

The official Xinhua news agency reported that the Sanlu Group, the dairy firm at the heart of the scandal, knew in June that its infant milk powder had problems.

But Sanlu officially reported the melamine poisonings to Shijiazhuang, the north Chinese city where it is based, only on August 2, and Shijiazhuang failed to report the poisonings upwards until September 8, after the Beijing Olympics Games.

The WHO representative in Beijing, Hans Troedsson, said China needed deeper reforms to ensure safety controls were enforced, not just announced. The country was likely to speed up approving a food safety law, possibly by early next year, Troedsson added.

"What is really needed if they have a good food safety law is that it really needs to be enforced," he said. "What needs to be stepped up is supervision, inspection and regulation at the local level."

Shares in Mengniu Dairy plunged nearly two-thirds to a 33-month low on Tuesday after brokers downgraded the stock on concerns the scandal will dent industry growth.

Shares in Inner Mongolia Yili Industrial Group were down 10 percent at the lunch break in Shanghai and Bright Dairy group was down 7.8 percent.

(Additional reporting by Ben Blanchard and Ralph Jennings in Taipei; Editing by Ken Wills and Alex Richardson)