Jan. 26 (Bloomberg) -- Zhang Yujun, a cattle farmer in eastern China, made almost $1 million selling a toxic concoction that milk buyers used to doctor dairy products and boost profits, killing six infants. Now Zhang will pay with his life.

Zhang was one of three people sentenced to death Jan. 22 for their roles in a scandal that panicked Chinese parents and further damaged the nation’s reputation for food safety. In a workshop on his farm, Zhang used a blender to make 776 tons of “protein powder” containing the industrial chemical melamine and malt dextrin, prosecutors say.

“The Chinese government is obviously sending a message to their own people,” says John S. Eldred, Shanghai-based managing partner of Keller & Heckman LLP, a law firm whose practice includes food and drug regulations. “They are trying to tell the international community that they have clearly recognized the seriousness of this.”

China is struggling to rebuild confidence in the safety of its exports after contaminated milk sickened at least 296,000 children in China. International companies including Nestle SA, H.J. Heinz Co. and Cadbury Plc were forced to recall products because of concerns about melamine, and contamination was found in countries from the U.S. to Britain and Australia.

China has announced plans to overhaul the $19 billion dairy industry, where 69 percent of farmers have fewer than 20 cows and unregulated middlemen buy milk from producers before selling it to dairies for processing and packaging. The government says it will revise safety standards and develop a “mass-producing dairy industry” by Oct. 30, 2011.

Middleman Convicted

One middleman, Geng Jinping, was convicted of adding Zhang’s powder to watered-down milk, according to state-run China Daily. Geng was sentenced to death by the Shijiazhuang Intermediate People’s Court for adding 434 kilograms (957 pounds) of the mixture to about 900 tons of fresh milk, the newspaper said.

Normally used in plastics manufacturing, melamine makes protein levels appear higher, helping disguise diluted milk.

Zhang said at his December trial that putting melamine in milk “became an open secret” in the dairy industry and “was very popular.”

Zhang and his workers produced the mixture from October 2007 through August 2008, netting 6.83 million yuan ($998,600) in sales, authorities say. His workshop near Jinan, capital of Shandong province, was the largest source of melamine used to doctor milk.

“This will have a very big impact on the whole dairy industry and send out certain warnings that they have to be extra careful now,” said Chen Lianfang, an analyst at Beijing Orient Agribusiness Consultant Ltd., which advises the government and industry. “This hasn’t just affected the domestic market but also the international markets.”

Execution Capital

China executes more people than any other nation, with at least 470 people put to death in 2007, London-based Amnesty International said in November.

The nation’s former chief drug regulator, Zheng Xiaoyu, was executed in July 2007 after he was convicted of taking bribes to approve medicines.

Lau Yui-siu, who teaches China affairs at Hong Kong University and Baptist University in Hong Kong, says the melamine sentences are meaningless because the government isn’t taking responsibility for its role in the scandal.

“The problem is the lack of political accountability in the government,” Lau said. “They don’t get punished. If things don’t start from the top, I can’t see any change in the future.”

At least 22 dairies -- including Sanlu Group Co. -- sold products contaminated with melamine. Sixty people have been arrested, with 21 sentenced last week.

Rising Milk Demand

Former Sanlu Chairwoman Tian Wenhua was sentenced to life in prison and fined more than 20 million yuan for continuing to sell tainted products after she found out about the contamination, China Daily reported. Sanlu shut down production in September and filed for bankruptcy.

Another defendant, Gao Junjie, received a death sentence, suspended for two years, for making more than 70 tons of melamine-laced powder with his wife. That sentence typically is commuted to life in prison.

China has been developing the dairy industry to satisfy increasing demand for milk after the growing middle class adopted a protein-rich diet and the state tripled the recommended daily intake of calcium. Milk consumption rose 9.3 percent last year.

The industry must undergo fundamental changes to ensure quality and supply, dairies and the government say.

The nation’s two biggest suppliers, Inner Mongolia Mengniu Dairy (Group) Co. and Inner Mongolia Yili Industrial Group Co., say they have either stopped buying from middlemen or have taken control of milk depots in their supply chains since the melamine poisoning was reported in September.

‘Grave Impact’

Mengniu will build 20 new farms, each with more than 10,000 cows, in the next few years, vice president Yao Haitao told China Daily. It now has seven. The dairy also plans to install cameras at collecting stations and put global-positioning system devices on all vehicles transporting raw milk.

Wang Yong, who became China’s top quality supervisor after his predecessor resigned in September, said the scandal “shows the loopholes in the government’s surveillance system.”

“The tainted milk powder incident severely hurt the public’s interests, greatly shook social stability and had a grave impact both in China and overseas,” Wang said in a Jan. 11 speech in Beijing.

To contact the reporter on this story: Stephanie Wong in Shanghai at swong139@bloomberg.net

Last Updated: January 26, 2009 05:29 EST