Defective fresh milk from unlawful dairy farmers is to blame for the contamination of the milk powder from Sanlu Group that has so far killed one baby and caused kidney stones in about 140 others, official sources said on Friday.
An announcement from the government of Shijiazhuang, where Sanlu is based, said an initial investigation had shown some milk providers had added an industrial contaminant, melamine, to diluted milk to boost their profits.
The chemical is used to get around factory quality tests as it makes the milk appear to be high in protein.
As of Friday morning, police had questioned 78 suspects and the investigation is ongoing, the government said.
On Thursday, Sanlu, China's largest producer of powdered milk, recalled 700 tons of baby formula produced between March and August 5.
On Friday, Su Changsheng, director of the firm's brand management department, denied the contamination had occurred in production.
"It (the problem) is from the very source of the milk," he said.
"There are no requirements or standards for testing for melamine in milk."
Sanlu began receiving complaints in March from customers who said their babies' urine was discolored and that some had been hospitalized, the government said.
The company discovered early last month that some unlawful farmers had added melamine to their fresh milk, and had reported the matter to the supervision authorities, it said.
As of Wednesday, the company had sealed 2,176 tons of milk powder that might be contaminated and recalled 8,210 tons.
About 700 tons are still on the market, the announcement said.
"All products made after August 6 are safe," it said.
As of Thursday, the Gansu health department had reported 59 infants suffering from kidney stones in the province, and one death.
Similar cases were reported in 10 other provinces, autonomous regions and municipalities, with the total now at about 140.
The Ministry of Health ordered local officials to report all possible cases by Friday evening, but the figures were not immediately known. Also on Friday, the ministry released a diagnosis and treatment guide for infants with similar symptoms.
According to local reports, almost all of the babies are under 12 months old and come from rural areas. Many of them had consumed the same brand of Sanlu milk powder, which is one of the cheapest on the market.
On Friday, supermarkets and stores across the country began pulling the formula off their shelves. Some chain stores, including Carrefour, said they had stopped selling Sanlu products altogether.
Han Yongmei, a sales assistant at a Wu-Mart store in the Chaoyang district of Beijing, said the chain suspended sales of all dried milk products from Sanlu soon after the scandal broke.
Liu Yanxi, a mother-to-be shopping in the market, said: "The Sanlu brand was credible in my mind and I planned to buy it for my baby. But now, I won't buy any milk powder. I've decided to breastfeed instead."
Melamine, which is often used in plastics, fertilizers and cleaning products, could cause kidney problems if consumed, experts have said.
Chen Min, a food science and nutrition professor with China Agricultural University, said: "It's not supposed to be in food at all, so there's no requirements or standards for testing for it in milk."
However, because melamine is nitrogen rich, it can make food appear to be high in protein. Standard tests for protein in bulk food ingredients measure levels of nitrogen, she said.
The problem first surfaced last year when melamine-contaminated pet food from China was linked to kidney failure in cats and dogs in the US, Chen said.
"It's unbelievable the same substance has now appeared in baby milk powder."
The incident could lead to dairy product companies no longer accepting, or accepting less, milk from individual farmers, she said.
"Only those who can ensure safety will get the market."