BEIJING (AP) — Investigators believe dairy farmers added a dangerous chemical to milk that has been linked to kidney stones in dozens of babies and one death in China’s latest product safety scandal.
    The government vowed ‘‘serious punishment’’ on Friday after China’s biggest milk powder producer recalled 700 tons of baby formula. The official Xinhua News Agency said the powder was tainted with melamine, a toxic chemical used in plastics that contaminated pet food last year.
    U.S. authorities warned American consumers to avoid all Chinese infant formula. Although Chinese formula is not approved for import into the United States, it might be sold at ethnic grocery stores, the Food and Drug Administration said.
    A New Zealand company that owns a stake in the Chinese producer said it believed none of the powder was exported from China.
    The producer, Sanlu Group, knew about the contamination Aug. 6 but refrained from telling the public, said a company manager, Su Changsheng, quoted on the Web site of Caijing, a leading Chinese business magazine. Su said Sanlu kept silent because some grocers refused to return tainted powder.
    A separate Xinhua report said investigators believed dairy farmers were to blame. People who answered the phone at Sanlu said managers were not available to comment.
    Authorities are questioning 78 people suspected in the contamination, Xinhua said.
    ‘‘The suspects added water to the milk they sold to Sanlu to make more money,’’ Xinhua said, citing deputy mayor Zhao Xinchao of Shijiazhuang, the city where Sanlu is based. ‘‘They also added melamine so that the diluted milk could still meet standards.’’
    Su, the Sanlu manager, said the chemical might have been added to make the milk’s protein content appear higher, according to Caijing. Melamine is nitrogen-rich, and standard tests for protein in bulk food ingredients measure levels of nitrogen.
    ‘‘Those responsible will face serious punishment,’’ said a Health Ministry spokesman, Mao Qunan, quoted by Xinhua.
    The tainted formula sent 59 babies in northwest China’s Gansu province — most less than a year old — to the hospital and one baby died, Xinhua reported. Other cases were also being reported across the country.
    Investigators found melamine in the urine and kidney stones of the sick babies, Xinhua said, citing a government investigation team.
    Lu Yuan, a urologist with the No. 1 Hospital of the Chinese People’s Liberation Army, told Xinhua that 14 sick babies were brought into her facility in Lanzhou, capital of Gansu province.
    ‘‘Most of the babies looked worn-out and had a fever when they arrived at the hospital. Some didn’t produce any urine for two to three days and were in very serious condition,’’ she was quoted as saying. She said eight babies remained hospitalized, while six had been treated and released.
    It was the second prominent case involving harmful baby formula in China in recent years. In 2004, more than 200 Chinese infants suffered malnutrition and at least 12 died after being fed phony formula that contained no nutrients. Some 40 companies were found to be making phony formula and 47 people were arrested.
    The reputation of Chinese exports was battered last year by deaths and injuries blamed on tainted toothpaste and other products. The incidents damaged faith abroad in Chinese goods and sparked an overhaul of its regulatory system.
    Sanlu has 18 percent of China’s market for milk powder, according to government data. The company says it produces 6,800 tons of milk a day and buys milk from suppliers that include 60,000 farming households.
    Sanlu became the dairy supplier to China’s space program in June and might provide milk for astronauts on the country’s upcoming third manned space flight.
    The Health Ministry said Friday it was launching a nationwide investigation. It told local officials to report all possible cases and said it is ‘‘is urgently organizing experts to conduct research and treatment.’’
    The milk powder is sold in China under the name Sanlu Bei Bei Infant Powder.
    ‘‘We understand that the product involved is only sold in China,’’ Fonterra Co-operative Group, a New Zealand dairy farmers’ group that owns 43 percent of Sanlu, said in a statement e-mailed to The Associated Press.
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    Associated Press researcher Bonnie Cao in Beijing contributed to this report.