New Zealand's reputation is under threat as Fonterra oversees an international recall of contaminated products, including infant formula.
Fonterra on Saturday announced the international recall of 900 tonnes of contaminated products, including infant formula.
Thirty eight tonnes of whey was produced in May 2012 and contaminated by a dirty pipe at one of Fonterra's processing plants in Waikato.
Testing in March indicated a problem and the whey tested positive for clostridium botulinum last Wednesday. Fonterra notified the Ministry for Primary Industries on Friday afternoon. The batches of whey product were used in 870 tonnes of products.
China is the destination for 19% of New Zealand's dairy exports. It has suspended the importation of all Fonterra products that include whey or milk powder, while Russia has imposed a ban on all New Zealand dairy products.
Financial Times Beijing bureau chief Jamil Anderlini told Radio New Zealand's Morning Report programme that this latest scandal is a blow for Chinese consumers already concerned about the safety of domestic products.
Imports are highly prized in China after a tainted milk formula scandal in 2008 killed six babies and made 300,000 infants sick.
New Zealand Trade Minister Tim Groser said China's action was "entirely appropriate".
"It's better to do blanket protection for your people then wind it back when we, our authorities, are in a position to give them the confidence and advice that they need," he said on Sunday.
Economic Development Minister Steven Joyce told Morning Report the scare is a serious economic risk, especially if it is not resolved quickly.
Later, Mr Groser said there were indications more countries including Vietnam, Sri Lanka and Malaysia could impose a ban on some Fonterra products.
The BBC reports China has named four domestic companies that have imported potentially contaminated products from New Zealand. According to state media, these companies have begun a recall.
Other countries affected include Australia, Thailand, Malaysia, Vietnam and Saudi Arabia. Russia is also reported to have begun a recall of Fonterra products.
Fonterra said there had been no reports of any illness linked to the affected whey product.
The dairy industry powers New Zealand's economy, with the country exporting up to 95% of its milk.
The Ministry for Primary Industries says it needs far more information before it can say how safe some milk powder products are.
MPI acting director Scott Gallacher told Morning Report that there have been no cases of infant botulism reported in New Zealand, since any of the potentially contaminated products have been on the market.
But Mr Gallacher said parents should avoid those products, until the ministry has better information about whether they are safe.
He said if anyone is worried their child might have had contaminated formula, they should immediately contact a doctor.
The Ministry of Primary Industries is recommending babies not be given two Nutricia products - regardless of the batch numbers
Those products are:
Karicare Infant Formula Stage 1 for babies aged up to 6 months
Karicare Follow On Formula Stage 2 for babies aged from 6 to 12 months.
The ministry is recommending parents are caregivers use alternative products until further notice.
Fonterra has listed the international companies affected by the contamination scandal.
Danone, which owns infant formula company Nutricia, has since recalled two of its Karicare products from New Zealand shelves. Its infant formula in China, Dumex, has also been recalled.
Fonterra's animal feed subsidiary, NZAgbiz, has also issed a recall on a small amount of calf milk replacer.
VitaCo Health Ltd confirmed with Fonterra it used some of the contaminated protein, but Fonterra says VitaCo has since carried out health checks on its products and is confident their goods are safe.
An unnamed company in Vietnam has issued a recall, although Fonterra wouldn't confirm what the company's name or product was.
Fonterra named one of the two animal feed companies affected in Australia as Maxim, but Fonterra says both companies have managed to keep any affected product out of the market. The other company was unnamed.
In China, Fonterra confirmed both Hangzhou Wahaha and Coca Cola China received some of the affected protein, but both companies are confident none of their products have been contaminated.