A third baby is dead and more than 6,200 are ill after being fed formula made from tainted milk powder, Chinese officials said Wednesday.

Officials expect more babies to become sick as "more and more parents take kids to hospital," Chinese Health Minister Chen Zhu said at a news conference.

Nearly 160 babies are suffering from acute kidney failure and more than 1,300 are still in hospital, Chen said. Free medical care is being offered to all of the sick babies and officials are setting up an information hotline.

Officials believe that suppliers to China's dairy companies have added melamine, a banned substance used in the manufacture of plastic products, to watered-down milk so it would appear to have a higher protein content.

Of the dairy companies tested so far, investigators have found that 20 per cent have sold products tainted with the chemical.

Tests have confirmed that all of the sick babies consumed milk powder produced by Sanlu Group Co., Chen said.

China's official Xinhua news agency reported that the company's general manager, Tian Wnehua, was fired from her job and then taken into police custody.

Four officials from Shijiazhuang, the city where the company is based, have also been fired and four milk suppliers have been arrested.

Reports say that Sanlu waited five months before informing the Shijiazhuang municipal government of the contamination on Aug. 2.

City officials then stalled until Sept. 9 before telling provincial officials, who did not contact the central government until the next day.

China's largest milk company, Mengniu Dairy, was forced to recall all of its baby formula products after tests found it contained melamine.

The recall includes three batches of formula that were made in January. It is unclear if any of the formula was exported for sale in other countries.

Two other dairy companies, Yashili and Suncare, are also recalling their products after their milk powder tested positive for melamine. Both companies export their products to Bangladesh, Yemen, Gabon, Burundi and Myanmar.

Taiwanese authorities have announced they will ban dairy product imports from 22 Chinese companies to the island.

Arla Foods, a dairy company in Denmark, has shut down a production arm in China.

Baby formula produced in China "is not approved for sale in Canada," a statement issued by the Canadian Food Inspection Agency says.

However, some formula products may have been illegally imported into the country and consumers should be vigilant when shopping, especially in stores that cater to the Chinese community.

So far, Chinese inspectors have taken samples from 109 companies and found melamine in 69 batches of milk powder made by 22 companies, according to the General Administration of Supervision, Inspection and Quarantime.

Another 66 companies stopped production before the melamine scandal broke.

The highest melamine levels were found in Sanlu's milk powder. High levels were also found in the powder made by Yili Industrial Co., which was an Olympic sponsor.

Food supplies to the Olympic Village were not compromised, officials said.

About 5,000 inspectors will be stationed at companies that produce baby formula, effective immediately.

Melamine concerns are not relegated to baby formula producers. Officials in Hong Kong have recalled an ice cream bar manufactured by Shanghai Yili AB Foods after it tested positive for melamine.

The levels found in the bar "would not pose major health effects from normal consumption of the bar, however, small children should not eat it," Hong Kong's Center for Food Safety said in a notice posted on its website.

This latest scandal comes despite China's efforts to overhaul its food safety program after officials were forced to recall a number of consumer goods, including toothpaste, toys and car tires, made for export last year.

In 2004, more than 200 babies were sickened and 12 died after consuming fake formula that didn't contain any nutrients.

With files from The Associated Press