BEIJING, May 31 (Reuters) - China has raided a filthy underground fake medicine factory, Chinese media reported on Thursday, as the country faces a series of food and medicine safety scandals at home and abroad.

The medicine supervision bureau in the capital, Beijing, seized 800 kg (1,760 lb) of materials, most being palmed off as traditional Chinese medicine, the Beijing News said.

The factory, which belongs to a Beiijng hospital, claimed its "specially made" formula could cure cancer and other illnesses, but was found to have mixed some banned ingredients from western medicine with Chinese medicine, the report said.

"In one of their workshops, flies were hovering above two large plastic barrels containing black medicinal liquor, with a spider's web in the corner," the newspaper said, citing the supervision bureau.

The quality and safety of China's food and drug products have come under scrutiny around the world since tainted pet food caused deaths of cats and dogs in the United States and toxins in toothpaste exported from China led to recalls in Latin America.

Mainland Chinese rely more on traditional Chinese medicines than on Western drugs and many believe them to have no side effects.

The fake medicine, which was more than 10 times more expensive than the real thing, had been sold nationwide by mail, the newspaper said.

Most of the clients were from remote or rural areas, it said. It did not say if anyone had fallen ill.

About 200,000 people die in China each year from improper use of drugs, Chinese doctors and pharmacists said earlier this month.

Public fears grew in China in 2004 when at least 13 babies died of malnutrition in Anhui after being fed fake milk powder with no nutritional value.

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