The mainland dairy industry suffered another blow after authorities seized 26 tonnes of melamine-contaminated milk powder, while the latest poisoning scare sent shares of a company plunging yesterday.
The seizure from the Jixida Food Company and a transport company in Chongqing is the largest haul so far this year.
It rekindled fears that not all melamine-tainted milk had been confiscated and destroyed as the government promised in 2008 after six children died and more than 300,000 were sickened from drinking melamine-tainted baby formula.
Melamine was added to raw milk to artificially improve the level of protein.
More than 27,000 tonnes of recycled milk powder were confiscated in a crackdown last year. It was not immediately clear whether the latest seizure was part of the milk that should have been destroyed three years ago.
A police investigation found the powder had originated from a dairy in Inner Mongolia and was sold by a Guangxi dairy firm.
The powder had not been processed because Jixida was doing maintenance on its equipment. Three people were detained for their involvement.
Meanwhile, the share price of China Mengniu Dairy slumped 10.4 per cent in early morning Hong Kong trading yesterday, reflecting investors' concerns over the possibility of milk poisoning after 251 primary school pupils in Shaanxi fell ill after drinking Mengniu milk on Friday.
The stock closed at HK$24, down 3.42 per cent or 85 HK cents on the day.
Analysts said the latest incident would weaken consumer confidence in Mengniu products, but to a relatively smaller extent.
'We believe this is an extremely rare case,' Gary Lau of Bocom International wrote in a research note.
'It might have an adverse influence on consumers and put pressure on the company's stock price ... But this isn't in the same league as the melamine scandal of three years ago.'
The children in Yuhe town showed symptoms of fever, abdominal pain and diarrhoea after drinking the milk, which had been bought by the district Education Bureau. The initial diagnosis suggested they had bacterial food poisoning. The nine who stayed overnight in hospital were discharged on Saturday.
Tests of milk samples from the school inventory found all indicators were in accordance with the national standard. Laboratory tests did not find any disease-causing bacteria, according to a statement by Yulin city government's food safety commission posted on Mengniu's website.
But the statement did not say what caused the pupils' illness.
Mengniu earlier suggested the schoolchildren were probably suffering from lactose intolerance as most of them drank the milk on empty stomachs at around 7am, but that explanation has drawn strong criticism online and in the media.
The school served several kinds of dairy products, including yogurt and milk with fruit, and those who showed the symptoms drank the milk.
The Mengniu facility in Baoji, which provided the milk to Yulin, also provided milk to a primary school in Zhouzhi county, Shaanxi, where 18 pupils experienced similar symptoms after drinking Mengniu milk in April last year. However, tests found the milk was up to standard.
Kenny Tang Sing-hing, general manager of AMTD Financial Planning, said investors had become sensitive to such food poisoning scandals. 'But this time it's only a regional incident and the affected students all recovered in a short period of time,' he said.