BEIJING, Aug 9 (Reuters) - China has banned two factories from exporting toys after a high-profile recall of Mattel products including Big Bird and Elmo because of fears about lead in paint.

It has also put on trial five drug company managers accused of killing patients with a tainted medicine, exposing corruption and lax safety that have alarmed consumers worldwide.

China has been struggling to convince the world its products are safe after a series of scandals over tainted pet food, drugs, tyres, toys and toothpaste.

China stripped export licences from Hansheng Wooden Products Factory and Lida Toy Company, both based in the booming southern province of Guangdong, the General Administration of Quality Supervision, Inspection and Quarantine watchdog said on its Web site on Thursday.

Lead is toxic and can pose serious health risk to young children who often put objects in their mouths.

Hansheng, based in Dongguan, was the producer of 1.5 million wooden vehicles, buildings and other train-set toys sold in the United States from January 2005 through June 2007, and then voluntarily recalled by U.S. toymaker RC2 Corp., an Illinois-based company that imports the popular "Thomas & Friends" toys.

About 1.5 million preschool toys made by Lida Toy, a Foshan-based contract manufacturer for Mattel Inc.'s Fisher-Price unit, were recalled across the globe by the U.S. company last week.

Mattel said the toys, which include popular characters such as Elmo, Cookie Monster and Dora, could have contained excessive amounts of lead in their surface paint.

The Chinese watchdog said the problem was with Lida's paint supplier, which had provided "fake lead-free" paint for use in production.

It ordered the companies to "correct" their problems, and said police were investigating.

But it defended the made-in-China brand and said the overwhelming majority of toys met American standards. Of about 300,000 batches for export, the U.S. Consumer Product Safety Commission had only made about 29 recalls, it said.

It added that importers and "brand" companies also had a "very big responsibility" and that it hoped that "foreign toy brands further improve product design and supervision and control to prevent loopholes in toy quality and safety".

The general manager of the Qiqihar No. 2 Pharmaceutical Company, Yin Jiade, and four other employees are accused of killing patients by using a cheap, fatal substitute ingredient in a drug to treat gall bladder, liver and gastric disorders, the China News Service reported on Thursday.

The tainted medicine killed 13 patients in the southern city of Guangzhou, where the trial began on Wednesday. The same Chinese-made chemical has been linked to dozens of deaths in Panama, where it was used in a cough syrup.

Testimony from the defendants has highlighted abuses that have alarmed domestic and foreign consumers and prompted China to execute the former head of its food and drug watchdog, Zheng Xiaoyu, for taking bribes and dereliction of duty in July.

Most of the staff of the company laboratory had no knowledge of chemistry or any training, lab director Chen Guifen was quoted as saying.

The victims died last year after receiving injections of tainted Armillarisni A, made by the Qiqihar No. 2 which is based in the country's northeast.

More than 5 million doses of drugs made by the company had been recalled nationwide since the scam was exposed in May 2006, state newspapers said.

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