By Simon Rabinovitch

BEIJING, Sept 19 (Reuters) - Nearly 10 percent of milk samples from three top Chinese dairy companies was tainted with melamine, the government quality watchdog found after testing for the banned chemical that has killed four children.

A nationwide check found melamine contamination in dairy products ran wider than the tainted milk powder that has made thousands of infants ill and sparked a widening scandal.

The General Administration of Quality Supervision, Inspection and Quarantine pointed its finger at two of China's top dairy producers, the Xinhua news agency reported late on Thursday.

Almost one-tenth of liquid milk batches from Mengniu Dairy <2319.HK> and Inner Mongolia Yili Industrial Group Co Ltd <600887.SS> contained melamine, a compound banned in food, the agency found.

Several samples of liquid milk from the Bright dairy group also had the substance, which can be used to bamboozle quality checks.

Starbucks Corp <SBUX.O> said its over 300 cafes in mainland China had pulled milk supplied by Mengniu. Starbucks said no employees or customers had fallen ill from the milk.

The Chinese government has faced panicked parents and public dismay since officials and the Sanlu Group, the nation's biggest maker of infant milk powder, last week revealed babies were sick with kidney stones and complications from drinking toxic powder.

At the latest count, 6,244 children have become ill, with four dead and 158 suffering "acute kidney failure".

The poisonings exposed regulatory failings in the dairy industry that will need more than a blitz of inspections and detentions to cure, said Guan Anping, a former trade official and now a lawyer who has dealt with dairy producers.

"Scattered milk farmers have been at the mercy of milk thugs, local strongmen who control prices and get away with putting all sorts of things in milk to maximise their profits," said Guan.

"It started with adding water, but other chemicals are used too, including out-of-date antibiotics to stop the milk going bad on long trips to processors."

Melamine is rich in nitrogen, used to measure protein, and so can be used to disguise diluted milk.

Quality officials stressed that most milk was safe to drink, trying to shore up public trust already shaken by a litany of food scares involving eggs, pork and seafood in recent years.

The quality watchdog cited experts as saying melamine-tainted milk would not make adults sick unless they drank more than two litres a day.

But it also said companies should take the initiative in recalling tainted products and expected them to implement far more rigorous safety checks.

Yili, a Beijing Olympic Games sponsor, already faced a recall in Hong Kong, where authorities found eight of its 30 products, including ice-cream and yoghurt ice bars, contained melamine.

Chinese media have largely kept quiet about claims that Sanlu and officials in Shijiazhuang, where the company is based, concealed the poisonings from the public and senior authorities during the Beijing Olympics in August.

Sanlu is 43 percent owned by New Zealand dairy giant Fonterra, and New Zealand Prime Minister Helen Clark said on Monday that Chinese officials acted last week only after her government pressed Beijing.

Police seized 222 kg of melamine and arrested 12 people on Thursday, bringing the total detained in the scandal to 18. Six were melamine dealers and the others 12 dealers suspected of selling contaminated milk.

Another 10 have been held including sacked Sanlu chairwoman, Tian Wenhua, and authorities are hunting for another milk dealer. (For a factbox on recent scandals, see CHINA-PRODUCT/SAFETY (FACTBOX) or click on [ID:nT96138]) (Additional reporting by Chris Buckley; Editing by Nick Macfie)

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