The Chinese police have arrested 19 people for repackaging and selling expired dairy products originally from New Zealand giant Fonterra Co-Operative Group Ltd, a Shanghai regulator said on Monday (Oct 24), in the latest food scare to hit the country, a report by Reuters said.

The bust, which initially took place in March, uncovered the gang who had cut 276 tonnes of expired dairy goods into small packages to resell at cut-price rates for use in the baking industry, the Shanghai Municipal Food and Drug Administration said.

China is trying to improve a poor record on food safety, which has seen scandals from decades-old "zombie" meat to recycled "gutter oil" for cooking. The dairy sector is particularly sensitive after milk tainted with the industrial chemical melamine led to at least six infant deaths in 2008.

A spokesman for Fonterra said the company supported the action taken by Chinese authorities and that it believed the case was a one-off.

"We support the enforcement steps taken by Chinese officials. While we believe this is an isolated criminal incident, we are reviewing the case internally," spokesman Phil Johnstone said in comments emailed to Reuters. "Food safety is our top priority and we are committed to providing safe and high quality dairy products."

Fonterra is one of the biggest suppliers of dairy to the Chinese market, but issues of over-supply and high inventory levels have pushed down prices and led some producers in China to dump stock, the Reuters report pointed out.

New Zealand accounted for 40 per cent of China's imports dairy products during the first seven months of this year, official China customs data show. China imported 550 thousand tons of dairy products in that period, an increase of over 27 per cent year-on-year.