Why Chinese companies covered up milk scandal

Four children are dead, 53,000 are sick, and at least 104 are in a serious condition after they were fed contaminated milk formula in China and Hong Kong. Twenty-two manufacturers are involved, including the market leader Sanlu.

The chemical melamine was added to already watered-down milk - with the intention of making the product appear high in protein. But melamine is toxic and when ingested can cause acute renal failure and death. No one involved can claim ignorance. In 2004, 13 young children were killed as a result of milk adulterated with melamine.

The root of the problem lies with impoverished farmers who are unable to profit from conventional milk sales due to soaring cattle prices. The farmers instead opt to sell their produce to 'milk dealers' who have the facilities to dilute the product before selling it on to companies like Sanlu for

a huge profit.

To make matters worse, there has been a cover-up. A government inquiry revealed that Sanlu had been sitting on an ever-growing pile of letters from concerned parents. Ultimately whistle-blowing duties fell to Fonterra, a New Zealand-based dairy firm with a 43 per cent stake in Sanlu.

There are also reports that staff at Baidu - China's home-grown version of Google - received emails from a Beijing-based PR firm who offered 3m yuan if the Baidu search engine would censor all negative news relating to Sanlu and melamine. Baidu said no.

So why the wait until September for a product recall? In a word: the Olympics. No company was willing to come forward and provide a backdrop of contamination to the Games - even if it meant children had to die. The government has arrested 18 people in the past week - at least half of whom will probably be executed - but there is no indication that measures will be put in place to stop this happening again.