BEIJING, Aug 16 (Reuters) - China may be a trade giant but ineffective controls have kept it a quality weakling and are sapping competitiveness, the nation's safety watchdog said, as tainted toy exports were traced to a fraudulent paint supplier.

The toy recall comes after scares over tainted Chinese exports -- toothpaste containing an antifreeze ingredient, toxic chemicals in pet foods, deadly chemicals in drugs, , and substandard tyres foods.

Li Changjiang, head of the General Administration for Quality Supervision, Inspection and Quarantine, warned officials that failure to improve quality was undermining national trade strength, the official People's Daily reported on Thursday.

"We may have entered the ranks of big traders but we're still far, far from being a strong trade power, and the fundamental reason is that our product quality competitiveness is not strong," he said in comments to officials a few days ago.

"Quality is a symbol of national strength," he said.

Li's call for tougher regulation of manufacturers appeared as Beijing grapples with another massive recall of Chinese-made toys found to fail U.S. safety standards.

Mattel Inc. <MAT.N>, the largest U.S. toy company, this week recalled 18.2 million toys globally, including 9.5 million in the United States. The toys were recalled due to hazards from small, powerful magnets and lead paint.

Earlier this month, Mattel's Fisher-Price unit recalled about 1.5 million preschool toys made by contract manufacturer Lee Der Industrial Co. Ltd. because the paint on the toys might contain excessive amounts of lead.

The recall prompted some U.S. lawmakers to demand a temporary halt and inspections of shipments of Chinese products for children that contain paint.

News of the second recall came soon after an owner of the Lee Der factory at the centre of the first recall was reported to have committed suicide.

A Lee Der manager told local papers in the southern province Guangdong, where the manufacturer has factories, that the company had used a batch of yellow paint falsely certified by a long-time supplier as lead-free.

Li, whose agency has been at the centre of the uproar, blamed deep-seated problems that he said demanded a rethink of economic priorities, including "backward production methods and weak overall competitiveness."

"To transform the concept of development and reinvent the development model we must give even greater prominence to quality problems," he said.

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