China reported on Monday the death of a second infant from tainted milk powder in a growing scandal that left hundreds more ill but only led to a product recall after the New Zealand government raised the alarm.
Two traders were arrested for selling up to 3 tons of contaminated milk a day, police reported.
The latest death blamed on infant milk powder made by the Sanlu Group was in Gansu province, a poor northwestern region where the first infant fatality linked to the chemical-laced milk was also reported, the official Xinhua news agency said.
One of the infants was a five-month-old boy who died in May. The other was an eight-month-old girl who died in July after her parents removed her from hospital, health ministry official Wang Yu told a news conference.
"The family refused an operation to insert a catheter and abandoned treatment," Wang said, without explaining why.
By Monday morning, 1,253 children had been diagnosed with illnesses linked to the milk powder, with 340 still in hospital and 53 "relatively serious," Vice Minister of Health Ma Xiaowei told the news conference. At the weekend, officials said 432 children were ill from the milk powder.
Milk powder producer Sanlu, 43 percent owned by New Zealand dairy giant Fonterra, last week halted production after investigators found the chemical compound melamine in its powder was causing kidney stones and complications in infants.
The scandal threatens to batter the nation's troubled product safety record soon after the public relations success of the Beijing Olympics and following a string of scares last year.
"The Chinese dairy sector has layer after layer of problems — technological, institutional, business," said Beijing lawyer Guan Anping, a former trade official who has dealt with the sector.
"The government has been trying to strengthen consumer protection, but until deep-rooted problems are addressed, increasing the number of inspectors twenty-fold won't solve them ... The public must have a more direct, active role."
China is the world's second biggest market for baby milk powder and the health scare and public outcry may yet grow.
Sanlu has been the top-selling company in the Chinese sector for 15 straight years, with 18.3 percent of sales in 2007, according to the company's Web site.
Two brothers surnamed Geng were arrested for "producing and selling toxic and hazardous food," police in Hebei, the north Chinese province where Sanlu is based, told Xinhua on Monday.
From late last year they added melamine to the 3 tons of milk they sold on from farmers every day, the report said.
"Geng did so because he suffered losses after milk from his station had been rejected several times by Sanlu Group," it said.
Farmers or dealers may have diluted milk with water and added melamine, used in plastics, to make the protein level appear higher than it really was. Melamine is rich in nitrogen, the element often used to measure protein.
The Ministry of Agriculture launched a nationwide inspection of the dairy sector, Xinhua reported, quoting an analyst who said fierce competition had "exacerbated price fluctuations and increased quality control risks."
'Put a towel over it'
Local Chinese officials acted only after the New Zealand government contacted Beijing, New Zealand Prime Minister Helen Clark said on Monday.
"They have been trying for weeks to get official recall and the local authorities in China would not do it," Clark told TVNZ. "I think the first inclination was to try and put a towel over it and deal with it without an official recall."
Chinese media reported on September 10 that babies had fallen ill after drinking the formula, and the next day Sanlu issued a recall of products made before Aug 6.
Sanlu started its own recall from suppliers from August 2, and wanted speedy steps but had to heed government rules, Fonterra chief executive Andrew Ferrier told reporters via a video conference link from Singapore.
The Beijing Olympics opened on August 8, and China has been keen to avoid scares during them and the following Paralympics.
Ferrier defended Fonterra's decision not to speak out earlier, saying it "would have been irresponsible without all the facts to just go public."
Sanlu began receiving complaints in March that babies' urine was discolored and some had been admitted to hospital, Chinese officials have said.
Many of the stricken Chinese babies are from remote rural areas where migrant worker mothers are often not around to breast feed or believe milk powder is healthier and easier.
This is not the first time poor Chinese families have been struck by bad infant milk powder. In 2004, at least 13 babies died in the eastern province of Anhui after drinking fake powder that had no nutrition.