San Lu, part-owned by Fonterra, has been dealt a further blow with reports that lethal bacteria have been found in some of its milk powder.
Fonterra, which owns 43 per cent of San Lu, said it was not aware of the development, which follows an international scandal over baby deaths from the toxic chemical melamine.
"We are not aware of it. We are looking into the accuracy of it," a Fonterra spokeswoman said.
The Gansu Bureau of Quality and Technical Supervision in northwest China issued an emergency notice saying San Lu's formulas for older babies contained enterobacter sakazakii as well as melamine, the Lanzhou Morning Post reported.
Described as lethal, enterobacter sakazakii can cause meningitis or severe gut infections and is recognised by the World Health Organisation as a key pathogen that leads to infant mortality.
The newspaper said it was not yet known how or when the bacteria entered the San Lu formula, but there had been no reports of sickness or deaths.
Last night it was also reported that two baby orangutans and a lion cub at the Hangzhou Safari Park near Shanghai had kidney stones after being fed milk powder for more than a year.
The Chinese Government has taken over control of San Lu and shut down its operations. According to a Cabinet investigation, the company had received complaints about its infant formula as early as December but did not alert officials until August 2.
Nitrogen-rich melamine was added to watered-down milk to fool quality checks which often use nitrogen levels to measure the amount of protein in milk.
Melamine has been found in at least two food items here, but the New Zealand Food Safety Authority says there will not be an import ban of dairy products from China. It also said there would be no recall of White Rabbit Creamy Candy, which it tested and found to contain "unacceptable levels" of melamine.
South Korea yesterday joined more than a dozen countries that have banned the import of all products containing Chinese powdered milk after discovering the chemical in some snacks, and the decision not to do the same here has been slammed by the Consumer NZ and Green Party.
China's tainted-milk scandal has killed four babies and made 54,000 ill. "This is not an issue that should be treated lightly," said Green Party health spokeswoman Sue Kedgley. "People's health may be at risk and tip-toeing around the issue in Chinese style is not what is called for."
The US Food and Drug Administration says the tolerable daily intake of melamine is 0.63mg a kg of body weight. This means an adult weighing 60kg can ingest 37.8mg of melamine - or 47 White Rabbit candies - daily without any appreciable health risk.