Five of China's major dairy companies met in Beijing on Friday to discuss the fate of the company at the centre of the country's tainted milk scandal.

The five companies — Wahaha Group, Wondersun, Inner Mongolia Yili Industrial Group Co., Sanyuan Foods Ltd. and Heilongjiang-based Feihe Dairy — discussed purchasing Sanlu Group Co., according to the state media agency.

Sanlu, a majority state-owned company, whose products were found to be the most heavily tainted with melamine, is now largely defunct, with companies looking to scoop up its assets. The company is 43 per cent owned by New Zealand's Fonterra Group dairy.

Any buyer would likely have to take on Sanlu's debt and the possibility of compensation to consumers.

Finding a buyer for the company is part of the Chinese government's effort to revive its dairy industry and contain the fallout from the tainted milk scandal, reported the 21st Century Business Herald, a major Chinese business newspaper.

China's food exports have suffered since high levels of the industrial chemical melamine were found in milk powder and dairy products.

More than 30 countries have restricted Chinese dairy products and in some cases all Chinese food exports.

Facility still seen as valuable

Jin Biao, vice-president at Yili, confirmed a meeting was called by the government but said the main focus was on how to improve the management of Sanlu's milk collection stations and how to deal with the company's capital.

"It is too early now to talk about the acquisition," he said in a telephone interview with the Associated Press.

Lianfang Chen, an analyst at Beijing Orient Agribusiness Consultant Co., said the meeting discussed resuming milk production at Sanlu's factories, keeping its workers employed and buying raw milk to keep farmers employed.

"Though Sanlu does not have any value as a brand, its processing facility, raw milk bases, production capacity and experienced workers and managerial expertise still have great value. That's what makes a selling point," Chen said.

Fonterra chief executive Andrew Ferrier said that discussions around Sanlu "include the possibility of Sanlu being acquired by a third party."

Fonterra is involved in a number of the discussions, Ferrier said, but added the long-term future of Sanlu "and Fonterra's stake in the company" remained uncertain.

A spokesman for Fonterra said they did not send anyone to the meeting but expect to be briefed by representatives of Sanlu, who are taking part.

Infants vulnerable

Melamine, the chemical at the centre of the tainted milk scandal, is used to make plastics and fertilizers. It is high in nitrogen and when added to food products can mask low nutrient levels in standard tests.

Some experts have said some of the contamination could come from the environment during food processing, but others speculate Chinese producers may have added melamine to watered-down milk.

Consuming it can cause kidney stones and kidney failure. Infants are particularly vulnerable

Baby formula contaminated with melamine has been blamed for the deaths of four infants and has been accused of causing sickness of about 54,000 other children in China.

Chinese officials said on Wednesday that about 5,800 children are still in hospital as a result of ingesting melamine; six of them are said to be in serious condition.