The Chinese prime minister Wen Jiabao says the government was partly responsible for the tainted milk scandal in which four children died.
Tens of thousands of children, mostly under the age of two, had to be treated in hospital after they drank milk contaminated with the industrial chemical melamine.
The New Zealand dairy company Fonterra owns a 43% stake in San Lu, the Chinese company where the milk scandal was first uncovered.
In a rare interview, in Science magazine, Mr Wen said the government felt "great sorrow" about the crisis.
He said while the problems were with a private company, the government had not properly supervised the dairy industry.
Suppliers are believed to have added the banned chemical, normally used in plastics, to watered-down milk in order to make it appear higher in protein.
"We feel great sorrow about the milk incident," Mr Wen was quoted as saying in the magazine, which is published by the American Association for the Advancement of Science.
"We feel that although problems occurred at the company, the government also has a responsibility."
Correspondents say domestic and export markets in products containing Chinese milk powder have stymied, and scores of dairy firms in the country have collapsed.
Mr Wen said that clear standards and testing requirements were needed in all the steps of making milk - the production of raw milk, collection, transportation, processing and making formula.
"I once again solemnly emphasise that it is absolutely impermissible to sacrifice people's lives and health in exchange for temporary economic development," he said.
"Food, all food, must meet international standards."
