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Fonterra's China subsidiary, San Lu, has been dealt a further blow with reports that a lethal bacteria has been found in some of its milk powder.
Fonterra, which owns 43% of San Lu, said it was not aware of the new development, which follows an international scandal over baby deaths from the toxic chemical melamine.
"We are not aware of it.
We are looking into the accuracy of it," a Fonterra spokeswoman said.
The Gansu Bureau of Quality and Technical Supervision in north-western China issued an emergency notice saying that San Lu's formulas for older babies contained enterobacter sakazakii as well as melamine, the Lanzhou Morning Post reported.
Described as lethal, entero-bacter sakazakii can cause meningitis or severe gut infections and is recognised by the World Health Organisation as one key pathogen that leads to infant mortality.
It is not yet known how or when the bacteria entered the San Lu formula, but there have been no reports of sickness or deaths triggered by the bacteria, the newspaper said.
The Chinese Government has taken over control of San Lu and shut down its operations.
According to a Cabinet investigation, the company had received complaints about its infant formula as early as December last year, but did not alert officials until August 2.
Nitrogen-rich melamine was added to watered-down milk to fool quality checks which often use nitrogen levels to measure the amount of protein in milk.
Melamine has been found in at least two food items in New Zealand, but the New Zealand Food Safety Authority says there will not be an import ban of dairy products from China.
It also said there will be no recall of the White Rabbit Creamy Candy, which it tested and found to contain "unacceptable levels" of melamine.
More than a dozen countries, with South Korea joining yesterday, have banned the import of all products containing Chinese powdered milk after discovering the harmful chemical in some snacks, and the decision not to do the same in New Zealand has been criticised by the Consumer Institute and the Green Party.
China's widening tainted-milk scandal has already killed four and sickened 54,000 babies.
Consumer Institute chief executive Sue Chetwin says it is wrong for the authority not to inform the public which second product it found with low levels of melamine. According to the US Food and Drug Administration, the tolerable daily intake of melamine is 0.63mg per kg of body weight.
This means an adult weighing 60kg can ingest 37.8mg of melamine - or 47 White Rabbit candies - every day over a lifetime without any appreciable health risk.
- The New Zealand Herald