China to 'pull dairy licenses'

More than one fifth of China's dairy producers will lose their licences after inspections aimed at preventing a repeat of a huge 2008 milk-contamination scandal, state media reported.

China's product safety watchdog, the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ), has ordered all licensed firms checked in a bid to restore consumer confidence in the industry.

The country's dairy sector was rocked in 2008 when at least six children died and nearly 300,000 suffered kidney and urinary tract problems after consuming dairy goods laced with the industrial chemical melamine.

Since then, repeated cases of melamine contamination have complicated official attempts to restore the industry's reputation.

"Dairy producers who failed to pass the quality inspections will be forced to shut down," Li Yuanping, an AQSIQ spokesman, was quoted as telling China Radio International.

The Dairy Association of China, under the agriculture ministry, said 20 percent of China's roughly 800 licensed dairy firms would likely be forced out of business, the China Daily reported.

The report added that the companies represent just 10 percent of the market.

Most affected would be smaller enterprises who cannot afford the upgrades needed to comply with tighter safety standards, the paper quoted industry analysts as saying.

The safety watchdog ordered dairy firms in November to acquire equipment that can test for 64 additives, including melamine, which can make milk appear richer in protein but also can cause severe kidney damage.

The 2008 scandal sparked a global recall of products containing Chinese dairy goods.

Highlighting the continuing consumer unease, state media reports said vacationing Chinese mainlanders had caused baby formula shortages in both Macau and Hong Kong last month as they stocked up on products they believed were safer than those available at home.