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The discovery came as authorities pursue a crackdown on dairy products that should have been destroyed after the melamine scandal but have been illegally resold -- reviving concerns about food safety and inspection standards.
Two dairy firms in the northern Ningxia region were closed down Saturday for selling tainted milk powder, and candies made with contaminated powder were found in the northeastern province of Jilin, the China Daily said.
Police in Ningxia found that a company outside the region gave one of the dairy firms around 170 tonnes of tainted milk powder left over from the 2008 scandal as debt payment in July last year, the report said.
The firm involved -- the Ningxia Tiantian Dairy company -- then repackaged nearly all of the powder and sold it to five factories in provinces and regions in northern and southern China, the report added.
Only 72 tonnes of powder have been recovered and authorities are tracking down the rest.
It was unclear whether the dairy firm knew the product was contaminated.
"As a small company, the Tiantian dairy company doesn't have a machine to test melamine," Zhao Shunming, secretary general of the Ningxia Dairy Industry Association, was quoted as saying.
"Such a machine can cost up to one million yuan (about 145,000 dollars)... But their repacking of the products is illegal," he added.
At least six babies died and another 300,000 fell ill in 2008 after consuming dairy products with melamine, which was added to give the appearance of a higher protein content.
In a sign of growing official concern, the government has dispatched inspectors to 16 provinces to check if melamine-tainted products have slipped on to the market, state media have reported.
Police have arrested at least three people as part of the new crackdown.
"Flaws in the previous system led to the current chaos," Zhao was quoted as saying.
"What if companies with tainted milk also hold back their stocks for this round of checkups and re-use them later, just like what's happening now?"
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