New Zealand supermarkets are rationing baby formula because of fears of a shortage caused by Chinese buyers selling it in bulk to parents back in their homeland.

Chinese-New Zealanders are clearing the shelves of baby formula and then selling it in online to Chinese parents still wary of feeding Chinese-made formula to their children after the 2008 melamine scandal.

The Food Safety Authority last night said it would investigate the trade.

Customers at Foodtown, Woolworths and Countdown supermarkets can now buy a maximum of four cans of baby formula at a time.

"It's pretty much a response to unfairness that we had with a lot of people stockpiling baby formula and selling it overseas," said a spokeswoman for Progressive Enterprises, the company that owns the supermarkets.

"We appreciate why people are doing it, but our supply is for the domestic market."

A spokeswoman for Foodstuffs, which owns Pak 'n Save and New World supermarkets, said its "foremost priority" was to ensure local customer demand was met.

"In some instances, to ensure this supply, individual stores have had to impose quantity limits based on what is considered a reasonable purchase for a customer," she said.

Taobao.com, a Chinese online trading website, has more than 50 advertisements for New Zealand-made Karicare baby formula.

They are aimed at parents scared to buy Chinese formula following the deaths of six children who had drunk milk tainted with the industrial chemical melamine in 2008.

Up to 300,000 other children fell sick after drinking the milk.

The scandal culminated in the execution of two people and the bankruptcy of San Lu - the dairy company that made the contaminated formula and in which New Zealand dairy giant Fonterra held a 43 per cent stake.

In a fresh scare two weeks ago, a dairy business was shut down and three people were arrested in China's northwest Shaanxi province, accused of selling 5.25 tonnes of melamine-laced milk.

Bruce Liu, who runs a warehouse in Manukau, has been selling Karicare baby formula by the box-load since last April.

Each of his boxes contains six tins of formula, and they cost between $164 and $284 a box, depending on the type of formula inside.

Mr Liu said he sold 100 boxes to China each week, giving him a profit of $6000 a month.

Natasha Bye, medical director of Nutricia, the company that manufactures Karicare products, said she was concerned at the lack of control Nutricia had over this kind of online trading.

Dr Bye said Nutricia went to great lengths to make sure products reached the market in a safe condition.

"The concern for us is that we have no relationship with this website," she said.

Nutricia is part of the Danone Group, which has a separate manufacturing division in China.

It makes baby formula under the brand name Dumex.

Mr Liu said Chinese-made formula was not popular with Chinese parents, who would much prefer to give their children New Zealand products

But the supermarkets' restrictions were making his business more difficult.

"So 80 per cent of our time is spent going over all the supermarkets [and buying baby formula]."

Despite the supermarkets' efforts, Mr Liu said prospects for the trade were positive, as it would be at least 10 years before Chinese parents again placed enough trust in locally made formula to give it to their children.

Another Auckland-based online trader, Andy Liu - who is not related to Bruce Liu - said he was selling five to 10 boxes of Karicare formula through taobao.com each week.

He made $10 profit on each box sent to China, but was finding the business challenging because of the supermarkets' purchase limits.

Quite a few people in Auckland were involved in the trade, he said.

Andy Liu said he got involved in the business to "help" the Chinese parents who were still too scared to feed Chinese-made formula to their babies.

"Because of what happened in China, with San Lu, people want New Zealand baby formula," he said.

Neil McLeod, senior programme manager for the NZ Food Safety Authority, said his agency did not know of the trade until alerted by nzherald.co.nz yesterday.

All food exported from New Zealand required a certificate from the authority.

"If it is a commercial venture and they are not getting certification from us, it's something we'll look at."