BEIJING China said on Wednesday a third infant had died after drinking contaminated milk and the number sick had leapt to many thousands, while an official said the health threat was concealed for at least a month.
The number of children ill after drinking powdered milk laced with the compound melamine had risen nearly five-fold to 6,244, and those with "acute kidney failure" had reached 158, Health Minister Chen Zhu told a news conference.
The escalating scandal triggered a recall of exports, sacking of officials and detention of a sacked company executive.
"China's dairy industry has been pushed to the brink of outright crisis," said Li Zhiqi, a Beijing-based consultant who works with dairy companies.
A government probe announced on Tuesday showed a fifth of 109 dairy producers checked made batches of products adulterated with melamine, which is banned from use in foods.
Earlier this week, officials said 1,253 children were ill and two had died after the country's biggest baby milk powder maker, the Sanlu Group, last week revealed its products contained melamine, which can be used to bamboozle milk quality checks.
Melamine is rich in nitrogen, used to measure protein, and so can be used to disguise diluted milk. It can cause kidney stones and other organ problems. Four suppliers have so far been arrested for selling melamine-laced milk to Sanlu.
The scare has rippled beyond the nation's borders with China's quality watchdog saying two producers were recalling milk powder exported to Yemen, Bangladesh, Myanmar, Gabon and Burundi. Officials did not say whether those exports were contaminated.
Taiwan, the self-governed island claimed by China, issued a ban on all dairy products from 22 mainland companies.
China's products have suffered repeated scandals involving toxins and flaws in recent years, and this is not the first involving melamine, usually used to make plastics, fertilizers and cleaning products. In 2007, the U.S. government found pet food ingredients from China tainted with melamine.
The new scare, with claims of an official cover-up, has again shaken investor and consumer confidence. Sanlu was among seven dairy companies counted so safe it was excused from normal government quality checks.
Facing widespread public alarm, minister Chen urged hospitals to prevent further deaths.
"As far as possible, minimize the harm to infants' health from the contaminated milk powder," he said.
China is the world's second-biggest market for baby milk powder, and Sanlu has long dominated it. Based in Shijiazhuang, capital of the north Chinese province of Hebei, it is 43 percent owned by New Zealand dairy giant Fonterra.
Sanlu last week halted production and announced a big recall. But officials acted only after the New Zealand government pressed Beijing, New Zealand Prime Minister Helen Clark said on Monday.
Yang Chongyong, a vice governor of Hebei, said on Wednesday that Shijiazhuang officials had delayed reporting the poisonings throughout August -- when Beijing was hosting the Olympic Games.
"It should be said that the Shijiazhuang government did not announce to society in a timely way this major food safety incident," Yang told reporters. "...they have a major responsibility."
Sanlu kept quiet even longer, Yang said.
"We know that before they reported the problem to the Shijiazhuang government on August 2 they had already covered up many of the facts," he said.
Fonterra chief executive Andrew Ferrier defended his company from criticism that it should have gone public sooner.
"They (Chinese officials) were clear about how they wanted to proceed on this recall," he said. Sanlu's tests for threats did not include melamine, he added.
"You do the best you can and sometimes something like this (happens) whether you like it or not. If somebody breaks the law and puts poison chemical in the product, we're all vulnerable to that."
On Chinese trading websites, the substance can be found selling for around 10,000 yuan ($1,460) a tonne.
The other offending companies include Beijing Olympics sponsor Inner Mongolia Yili Industrial Group and Hong Kong-listed Mengniu Dairy Co Ltd. Mengniu Dairy's stock was suspended on Wednesday, and the company said it plans to recall "unfit" products.
Shares in Yili fell close to their daily limit of 10 percent on Wednesday. In contrast, Hong Kong's Hang Seng Index slipped 1.7 percent and Shanghai's composite index slid 3.1 percent.
As in past product safety scandals, the government has responded by sacking junior officials. Police announced they detained the just-fired chairwoman of Sanlu, Tian Wenhua.
Li, the Beijing-based consultant, said more was needed to clean up the dairy sector.
"The government has food safety measures and rules. But they're often too broad," he said. "This shows we need regulation fitted to particular industries."
(Reporting by Ben Blanchard and Ian Ransom in Beijing, Alison Leung in Hong Kong and Gyles Beckford in Wellington; Editing by Nick Macfie and Jerry Norton)