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More than a fifth of all Chinese-made toys and baby clothes are substandard, according to the country's consumer safety watchdog, say Chinese media reports.
Some toys made by local factories were even potentially lethal, the Beijing News said, citing a nationwide probe by the General Administration of Quality Supervision, Inspection and Quarantine.
China is the world's largest exporter of toys - with sales of more more than US$5 billion ($6.88 billion) to the United States alone in 2005. The United States and European Union have both expressed concern about the safety of certain made-in-China toys.
Industrial waste, including dirty carpet fluff, paper and used old instant-noodle packaging was found stuffed inside some toys made by factories in the northern province of Hebei and sold at rock-bottom prices, it was reported.
The newspaper added: "These fluffy toys with bacteria - or even viruses - in them could lead children to itch if they touch them for a short time, and even cause disease over longer-term exposure."
Some toys had parts that could be easily torn off and potentially injure children, and it was not uncommon for some to get sick or die after using poor-quality toys. The watchdog found that some baby clothes contained chemicals that could cause skin problems, the newspaper said.
About 5 per cent of baby milk powder tested was found to be of poor quality, with some containing excessive amounts of nitrate - a natural occurring chemical left after the decomposition of animal or human waste.
China has been grappling with persistent consumer and food safety problems.
In one of its worst food scandals, at least 13 babies died of malnutrition in the eastern province of Anhui in 2004 after being fed fake milk powder with almost no nutritional value.
US consumers have also been alarmed by a spate of pet deaths blamed on tainted wheat gluten and rice protein exported from China, and by reports of toxins in other Chinese exports.
- Reuters
