Shares in China Mengniu, one of the country's biggest and best-known dairy producers, were suspended in Hong Kong yesterday after the government said some Mengniu milk powder samples had tested positive for the chemical melamine.

The substance, normally used in plastics, fertilisers and cleaning products, has been linked to thousands of pet deaths in the US blamed on Chinese pet food exports.

Mengniu, which issued a public apology, said it would recall all contaminated powder and offered to pay the medical costs of all consumers who fall ill within the next five years. Mengniu has built one of China's most valuable brands on the back of a dairy industry that has grown from almost nothing a generation ago to be worth an estimated $19bn (€13bn, ￡11bn) today.