A US meat supplier said on Monday it is laying off most of the workforce of a Chinese subsidiary accused of selling expired beef and chicken to McDonald’s, KFC and other major restaurant chains. Shanghai Husi Food has been under investigation since a Shanghai TV station reported in July that it repackaged and sold out-of-date meat. Six employees were arrested in August on suspicion of producing substandard products. Its owner, OSI Group of Aurora, Illinois, said it will lay off 340 people at the Shanghai unit. It said a small number of employees would be kept on while the investigation is underway. The website of Shanghai Husi says it employs about 500 people. “Over the past two months, Shanghai Husi has experienced significant financial and customer losses,” said an OSI Group statement. “It is very unlikely that production will be resumed soon.” The scandal has alarmed Chinese diners and disrupted operations for fast food brands. Product safety is unusually sensitive in China following scandals over the past decade in which infants, hospital patients and others have been killed or sickened by phony or adulterated milk powder, drugs and other goods. KFC owner Yum Brands and McDonald’s said they immediately stopped using products from Husi. Burger King, Starbucks, pizza chain Papa John’s International and Dicos, a chain of sandwich shops, all withdrew products with ingredients from suppliers that dealt with Husi. OSI has announced plans for a “quality control centre” in Shanghai and said it will spend 10 million yuan (HK$12.6 million) on a food safety education campaign. The company announced on September 1 it was turning over management of a separate facility in Guangzhou that produces vegetable and fruit products to KanPak China, owned by Golden State Foods of Irvine, California. KFC has broken all ties with OSI Group in China, the United States and Australia. McDonald’s, which has bought meat from OSI in the United States since the 1950s, complained it felt deceived but has said it will stick with the company, possibly because Chinese food processors cannot match OSI’s scale and technology.