Early reports indicate that the victims were poisoned by nitrate, a chemical used in the curing of meat, after drinking bulk milk from two farms in Gansu province, in north-west China.
The sick, most of whom are children under 14, are being treated in hospitals in Pingliang city. Officials said that one of them is in a critical condition and the others are stable.
The two farms at the centre of the scare have been sealed off and senior managers are being interrogated, according to media reports.
The food safety scare comes just days after Chinese authorities pulled the licenses of more than half the dairies operating in the country. Only 643 out of the 1,176 dairies in the country were granted production licenses, forcing the rest into temporary closure.
The decision to renew production licenses was taken in the face of continued concerns over the safety of Chinese dairy products.
Consumer confidence in domestic dairy products was hit hard in 2008 when melamine-tainted milk killed six children and sickened 300,000.
And despite government crackdowns and new food safety laws, China has been unable to clean up the industry and restore consumer confidence.
Impact on global market
As a consequence Chinese consumers have developed a strong preference for imported products. Chinese imports of dairy products have more than doubled since 2008.
In its last report on the global dairy market at the end of 2010, Rabobank said China would almost certainly be the world’s biggest dairy importer in 2010. Chinese buyers have dominated buying at Fonterra’s globalDairyTrade auctions, according to the bank.
With a willingness to outbid others, they have played a major role in the increases in global dairy prices over the past year.