Chinese dairy stock price plunges amid recall

BEIJING (AP) -- The stock price of a company at the center of China's tainted milk product scandal plunged Tuesday as more countries expanded bans on Chinese milk products to include candies and other goods.

The tainting has sickened nearly 53,000 Chinese infants who drank contaminated baby formula and has already cost the head of the country's food safety watchdog his job. Four deaths have been blamed on the contaminated milk powder.


One of China's biggest milk producers, China Mengniu Dairy Co., saw its stock price plummet almost 60 percent in Hong Kong trading Tuesday after its products were found tainted with the industrial chemical melamine.

Mengniu, China's No. 1 dairy producer in total volume, said only a small portion of its products were contaminated and blamed the contamination on "the illegal acts of some irresponsible milk collection centers and raw milk dealers."

"The board wishes to sincerely apologize for the incident and any inconvenience caused to the public," the company said in a statement to the Hong Kong stock exchange.

The resignation Monday of Li Changjiang, who headed the General Administration of Quality Supervision, Inspection and Quarantine since 2001, comes a year after he and the government promised to overhaul the system in response to a series of product safety scares.

New regulations and procedures were introduced in an attempt to restore consumer confidence and preserve export markets after a string of recalls involving tainted toothpaste, faulty tires, contaminated seafood and in March 2007, pet food containing melamine that was blamed for the deaths of dogs and cats in the United States.

Li's resignation came as investigators revealed that China's biggest producer of powdered milk, Sanlu Group Co., had received complaints as early as December 2007 linking its infant formula to illnesses in babies. Months later, tests revealed the milk was tainted with the industrial chemical melamine, which causes kidney stones and can lead to kidney failure.

Even then, Sanlu delayed ordering a product recall until Sept. 11, after the close of the Beijing Summer Olympics and in the face of rising concern from New Zealand partner Fonterra, which owns a 43 percent share in Sanlu.

Melamine, used to make plastics and fertilizer, has been found in infant formula and other milk products from 22 of China's dairy companies. Suppliers trying to cut costs are believed to have added it to watered-down milk because its high nitrogen content masks the resulting protein deficiency.

The number of sick children reported by the Health Ministry has jumped from 6,200 to nearly 53,000. Of those, 12,892 remain hospitalized, with 104 of them in serious condition. Another 39,965 children were treated and released.

The huge jump may have been because health officials combed through hospital records from May through August to trace the origins of the contamination.

Baby formula and other milk products have been pulled from stores around the country and Chinese dairy products have been recalled or banned in Japan, Singapore, Brunei and Hong Kong.

On Tuesday, Malaysia expanded its ban on Chinese milk products to include candies, chocolates and any other food containing milk, and the country's Health Ministry said it was still determining how many products in Malaysia would be affected by the ban.

"We are in the process of identifying all products from China like biscuits, candies, chocolate and so on," said Noraini Mohamad Othman, director of the ministry's food safety and quality division. "It's a precaution."

Taiwanese officials said they were conducting a sweeping food inspection to assure consumers that local milk supplies are free of chemical contamination.

Premier Liu Chao-shiuan said Taiwan's Health Department would send experts to China to better understand how the contamination occurred.

The discovery of the tainted milk is especially damaging because Sanlu was considered one of the most reputable brands in China, winning an industry award in January and being featured on state television last fall as a domestic company with stringent quality controls.