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A Chinese milk lolly found to be tainted with melamine and banned overseas, is being sold in New Zealand - and authorities have no plans to recall the sweets.

White Rabbit Creamy Candy was found to be contaminated with melamine after tests in Singapore, but the New Zealand Food Safety Authority says the chemical has not "been picked up" here.

It agreed to test the products after the Herald found them in Chinese supermarkets in Auckland.

But the authority's deputy chief executive Sandra Daly said there were no plans to recall the sweets or remove them from shop shelves.

"That would just be a knee-jerk reaction, and also, we have not found any of the Chinese products tested to contain melamine," she said.

The authority had collected samples of other milk-based products from Asian grocery shops in Wellington.

When told that White Rabbit candy - widely available in Auckland's Asian shops - has been found to be contaminated with melamine in Singapore, Ms Daly said: "Oh good grief. We've gone through as many things that contained dairy significant components as we can from items we took from the Asian supermarkets, but I don't think anyone has picked this one up."

The Herald found the sweets at Tofu Shop and Silverbell supermarkets in Botany, and attendants at both outlets said there were no plans to stop selling them, or any other dairy products, from China.

Ms Daly said it was difficult for laboratories to test products which were not liquid or powder for melamine.

China's tainted-milk scandal started after milk powder sold by New Zealand dairy giant Fonterra's Chinese partner San Lu was found to be contaminated with melamine, and has become a global food scare.

In China, four babies have died and nearly 13,00 have been hospitalised with kidney problems. Of these, China's health ministry says, 104 are in serious condition.

Hospitals throughout China had seen almost 40,000 infants and 1579 babies had been discharged, the ministry said.

On Sunday, a 3-year-old Hong Kong girl found with a kidney stone became the first victim outside mainland China, and tests there also found melamine in Chinese-made Nestle milk.

Last Friday, Singapore told people not to use Chinese milk products and suspended the sale and import of all such products.

Japan, Malaysia, Brunei, Bangladesh and African states, including Burundi, Gabon and Tanzania, have also recalled or banned Chinese airy products.

Ms Daly said that in an effort to educate Chinese importers and retailers in New Zealand, the authority had translated its melamine testing statements into Chinese for its website and for distribution to local Chinese media outlets.

"This whole thing is a nightmare. It is a really dreadful thing, and I really don't know what more we can do."

In Auckland, housewife Xu Meiqing, an immigrant from Singapore, said: "It's really scary. White Rabbit candy is something that I grew up with, and something I give my children."

Yesterday, Prime Minister Helen Clark criticised Fonterra for being too slow to speak out over the poison milk scandal.

It was a change to her previous position, in which she stood by Fonterra by saying it had tried to blow the whistle, but had been blocked by San Lu and local officials.

"I think it has been too reactive from the beginning and no doubt their shareholders will want to hold the company accountable for that," she told Newstalk ZB.

"I felt there was quite a long period of time before Fonterra spoke and I don't think that it is satisfactory."

The New Zealand embassy in Beijing had been advised about the problems on August 14, "but not in a way that they felt they had sufficient information to alert Wellington for another 17 days".

A Fonterra spokeswoman said the company chose what it believed was "the most effective and fastest route" to recall the San Lu products and give the Government the information it had at the time.

She said Fonterra would assist with any inquiry ordered by the Government, but its focus was now on restoring stability to the Chinese milk market and getting safe baby formula to consumers "in desperate need".

"It is now abundantly clear that this milk falsification issue has been endemic in the Chinese milk market for some time, as it is widespread and involves all the leading dairy companies," the spokeswoman said.