A health scare has swept China after one baby was reported dead and others were hospitalised with kidney stones after drinking possibly counterfeit baby formula bearing the Sanlu Group's name.

According to state media reports, an unknown number of babies in at least seven Chinese provinces and regions developed kidney stones after drinking milk formula marked "Sanlu".

A spokesperson for the company told just-food that it was in "active dialogue" with the state health agencies. However, the spokesperson added that there is some suggestion that the unsafe infant formula is fake. Sanlu is conducting its own investigation.

New Zealand dairy Fonterra holds a 43% stake in Sanlu. According to a report by the NZAP, Fonterra said it has received reassurances from Sanlu that "they are taking all appropriate measures to ensure their products are safe for consumers."

This latest safety scare has shades of a 2004 scandal, when at least 13 babies in the Anhui province died after drinking fake milk powder. Investigators later found the milk powder contained no nutritional value.