The tainted milk powder scandal that has claimed the lives of four babies in China has spread to the dairy industry.

Investigators have found contamination in liquid milk from three of the country’s top dairy companies.

Sales of domestic milk products have slumped, with consumers turning to imports or to alternatives such as rice water, in the latest shock to the “Made in China” mark already reeling from a series of scams.

The World Health Organisation has demanded Beijing find out why it took months to report that companies had sold milk powder tainted with the industrial chemical melamine to parents to feed to their babies. The organisation's China representative Hans Troedsson said the government “must find out if this was deliberate or due to ignorance”.

Robert Madelin, director-general for health and consumer protection at the European Commission said the bloc expected a full accounting and punishment of any cover-ups. He said: “We are trying to establish the facts. We are discussing all aspects of this crisis bilaterally with our colleagues in China. Our priority is to ensure the integrity of the European supply chain.”

Reports of the problem only surfaced last week after New Zealand Prime Minister Helen Clark said food giant Fonterra had been trying for weeks to persuade its Chinese partner, Sanlu Group, to make a public recall of the milk powder.

Chinese officials say the contamination, mostly likely caused by unscrupulous workers at collecting stations adding melamine to boost the protein content of the milk they sold to Sanlu and other companies, could have been going on for years.

Some 1,300 babies are still in hospital, including 158 with acute kidney failure, after being fed the powder that can cause kidney stones and other complications. The latest count said 6,244 children had fallen sick.

The government’s quality watchdog has now pointed the finger at two top producers, spreading the public dismay over almost all dairy products on supermarket shelves. Almost one-tenth of liquid milk batches from giant Mengniu Dairy and Inner Mongolia Yili Industrial Group had been found to contain melamine.

Starbucks pulled milk supplied by Mengniu from more than 300 outlets across mainland China.

Yili, a Beijing Olympics sponsor, is already facing a recall in Hong Kong after melamine was found in eight of its 30 products including ice-cream and yoghurt ice bars. Police have seized 222 kg (488 pounds) of melamine and arrested 18 people – six melamine dealers and 12 suspected of selling contaminated milk.

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