Key Points:

A TV3 programme that wrongly claimed clothing imported from China contained dangerous levels of formaldehyde has been criticised by New Zealand's retail trade, which says it cost thousands of dollars in lost sales and refunds to customers.

Clothing industry members said they were also out of pocket after they were forced to carry out safety tests to quell fears.

Importers Institute secretary Daniel Silva said the programme deliberately played up to consumers' fears and played on "anti-China hysteria".

"It was just another example of jumping on the anti-China brigade and fed into those fears," Mr Silva said. "It was a discredit to New Zealand at a time we are seeking a free trade agreement with China."

It also caused a loss of consumer confidence during a time when there were other legitimate cases to be worried about, he said.

Members of the Importers Association - an informal grouping of importing companies - were concerned when the claims were made and "outraged" when they were shown to be false.

Mr Silva told the Herald he had heard retailers had angry customers demanding refunds.

The comments seemed to strike a chord with people and generated an "anti-China hysteria" that was amplified by a series of other, legitimate recalls.

He believed the programme could have made an honest mistake at first but became dishonest to boost ratings.

A spokesman for the Chinese Embassy said the announcement would help restore confidence in Chinese garments "unjustifiably blackened" by the programme.

New Zealand Retailers Association spokesman John Albertson said it was hard to quantify the impact the accusations had on the industry. "The biggest impact has been unnecessary concern for consumers."

Ed Connolly, commercial director of The Warehouse, said the firm began testing clothing as soon as it found out about the claims.

"We tested 60 odd items of clothing, including items on the Target programme, and they came back normal."

He wouldn't say how much the scare had cost but welcomed Government moves to introduce a national product safety standard.

Consumer Affairs Minister Judith Tizard said she did not believe the New Zealand Government should apologise to China.

"TV3 is not in any way an official body, and in a democracy with a free media, people make their own choices."

Target executive producer Laurie Clarke said the purpose of the programme was not to target any particular retail company, importer or brand of clothing.

"We were purely trying to draw attention to the fact that there was no monitoring happening and there were no standards in this country."

- additional reporting: NZPA