New Zealand dairy giant Fonterra says it knew nothing of an alleged public relations effort by Chinese dairy company Sanlu to cover up negative publicity about contaminated milk powder.
Four children have died and at least 63,000 have needed medical treatment for kidney complaints in China after drinking milk formula contaminated with melamine.
Melamine is a chemical compound used in the manufacture of plastics. It was added to baby formula to cheat nutrition tests by artificially boosting protein levels.
Chinese websites have claimed that Sanlu's strategy to cover up the melamine scare included silencing victims and paying an internet search engine to remove negative references.
A Fonterra spokesperson says the board was totally unaware of any such activities and it has not yet spoken to the Sanlu board about the issue.
Earlier, Fonterra denied reports it will be forced into giving up its 43% holding in Sanlu, the company at the heart of the contaminated milk scandal.
The China Daily is reporting the now tainted Sanlu Group may be forced into bankruptcy and taken over by a rival Chinese company.
Fonterra's chief financial officer Guy Cowan says he has heard the reports, but at this stage it is nothing more than speculation.
Mr Cowan says Fonterra would have to be involved in any talks, due to an agreement granting pre-emptive rights in any case of share sales.
Fonterra's stake in Sanlu is now worth $NZ62 million after booking a charge of $NZ139 million to reflect product recall costs and brand value decline.
Meanwhile, the European Union has introduced a new ban on all imports of Chinese children's products containing milk.
The Fonterra spokesperson says the company will not be affected by the ban as it does not export any products out of China.
China serious about food safety - premier
Chinese Premier Wen Jiabao on Saturday vowed to ensure the 'Made in China' brand is safe for consumers at home and abroad.
Speaking to a World Economic Forum meeting in the northern Chinese port city of Tianjin, Mr Wen said the tainted milk scandal showed that "any country, when it is developing, should pay particular attention to corporate, professional and social ethics".
The scandal also showed China still faced many problems and needed to improve its production processes and quality supervision, he added.
"This issue is not over yet, but please be assured that we will soon unveil plans to boost the food industry," Mr Wen said.
The government has admitted local officials delayed reporting the incident when it first became clear there was a problem with the milk powder, and this also happened in 2003, when China initially covered up the SARS epidemic.
More children fall ill
Though the Chinese government has insisted there will be "no more bad news" and the most recent tests show no melamine in goods leaving the factory, new cases of sick children keep appearing.
The Beijing Times has reported that another 176 new cases of kidney stones among children have been found in the Chinese capital.
Authorities in Shanghai have also revealed that about 5% of children under three in the city had showed symptoms of possible kidney stones after being fed contaminated milk powder.
A hospital in Taiwan said three young children had developed kidney stones after drinking Chinese milk formula, and the mother of one of the children had also fallen ill.
Hong Kong has reported five cases of children falling ill from drinking tainted milk.
NZ Customs on alert
Customs has been put on alert for a range of milk products from China. The border control watchlist includes milk, cream, buttermilk, yoghurt, whey, butter, cheese and curd.
The New Zealand Food Safety Authority says testing has found low levels of melamine in lactoferrin, a highly processed dairy product that is used in some baby formulas, milk drinks and other health drinks.
It says at low levels, melamine presents no health risk to consumers.
Earlier, the NZFSA said contamination of foods by melamine had become widespread because the toxin leaches into products from plastic packaging.
A NZFSA spokesperson, Geoff Allen, says the chemical has been used as a polymer plastic in New Zealand for a number of years.
However, the authority says unlike the high levels of melamine discovered in China's tainted milk scandal, it is usually found in very low levels in food products.
NZ reviews international standards
The NZFSA spent Friday reviewing what countries overseas are doing to assess possible contamination risks from Chinese-made food products. It says authorities worldwide are trying to determine what level of melamine is dangerous.
More than 7,000 tonnes of tainted dairy products have already been removed from shops across China.
Countries in Asia, Africa and Europe have banned imports of Chinese products in response to the scandal in China. Others, including Australia, have recalled some products.
On Saturday, Hong Kong ordered a recall of two products found to contain the industrial chemical melamine, one of them a brand of Heinz baby food.
Japan has ordered firms which import dairy products from China to test them for melamine after the chemical was found in four items made by one of its leading food makers.
Indonesia has temporarily banned imports of all dairy products from China, after melamine was detected in 12 out of the 19 Chinese food items that were tested.
The positive products also included soybean milk.
The European Food Safety Authority announced it will leave its estimated tolerable daily intake of melamine unchanged at 0.5 of a milligram per kilogram of body weight.
Based on that, the NZFSA says it has adopted a conservative threshold of five parts per million for most foods.
The only product so far found to contain melamine at unacceptable levels in New Zealand is a brand of Chinese sweets called White Rabbit Creamy Candies.
The NZFSA has not ordered a recall, but it is advising people not to eat the lollies.