The din of euphoria and the self-congratulatory mood following the China's first ever spacewalk was considerably low-key as China's mandarins embattled a dubious and incriminating dairy scandal.

The dairy scandal -- of infant formula laced with industrial addictive, melamine -- claimed three infant lives and rendered an estimated 53,000 infants sick.

This has taken some of the shine off China, reveling and basking in post-Olympic laurels. The scandal has raised critical questions regarding the credibility of one-party control and China's repeated systemic weakness to provide appropriate, adequate regulatory safeguards.

It also brings to the fore the missing role of a free press and opposition. It also puts a spotlight on the manufacturing ethics of the 'factory of the world' and on the underside -- the human costs of doing business with China.

This scandal is yet another in an unfortunate series of scams occurring with alarming regularity -- one which has made 'Made in China' suspect. At home, China has been riddled with scams and scares -- ranging from pork scare, to contaminated toothpaste and even

life-saving and essential drugs. Last year, almost 200 Chinese cancer patients were found to have been treated with spurious leukaemia drugs.

Recently, pet-food for the US market, made by two Chinese animal feed companies was found contaminated with melamine (an ingredient which fakes protein content) and which in turn triggered off 4,000 pet deaths in US.

The adulteration was done to meet prescribed protein requirement to increase profit margins. Other recent cases have been an estimated 100 deaths in Panama after patients took an adulterated cold medicine, manufactured in China.

There have also been two recent high profile cases involving a 3 million toy recall as toys made for the Fisher-Price and Thomas & Tank Engine Products label were found tainted with excess level of toxic lead paint.

Ironically, just a year ago, when China was reeling under the spectre of scams and ensuing cover-ups, Prime Minister Wen Jiabao pledged to get at the root of the serial scandals.

The government authorised $1.1 billion and sent 300,000 inspectors to examine quality control. Besides, it also took the unprecedented step of issuing a White Paper on "Quality and Safety of Food in China" in August 2007 and another on the "Status Quo of Drug Supervision in China" in July 2008, ostensibly to smoothen and assuage ruffled business feathers.

On paper, China boasts of a stringent licence system, compulsory inspection system, the China National Accreditation Service for Conformity Assessment with various other safeguards thrown in.

However, China's specific laws, administrative regulations and specific departmental rules create a virtual maze.

While the government claims that integrated food supervision and safety is through departmental cooperation such as between the State Food and Drug Administration, Health Ministry, Agriculture Ministry, Commerce Ministry and the General Administration of Quality, Supervision, Inspection and Quarantine, in reality jurisdiction is overlapping and blurred.

Thrown in for good measure, into this milieu are eager local officials (at the provincial level) riding the economic boom and who stop at nothing in the name of growth. Enterprises without adequate safeguards or expertise sprout up ready for business.

China's intensely competitive economic milieu where the buck stops at the cheapest manufacturer has led not only to dismal working conditions but also ingenious cost cutting methods with both eyes on the profit margin.

Also in a social culture where guanxi or networking plays an important role, laws, licenses and loopholes have come to be navigated with a few yuans here and there.

The public outrage is palpable given that the dairy scandal comes months after China's top food quality watchdog SFDA, rated dairy companies as the safest -- and gave them a clean chit saying that 99 per cent of them passed safety inspections for infant formula.

As the matter stands, almost 22 dairy companies, including export companies such as Yili Industrial Group (a sponsor of the Beijing Olympics) and Mengniu Dairy Co. stand incriminated, tangled in a web of questionable manufacturing practices. Reports suggest that a slew of dairy companies were exempted from mandatory inspections.

Countries such as Japan, Singapore, Hong Kong and Taiwan have recalled dairy products � ranging from cheese, baby formula, non-dairy creamer amidst increasing food scare.

The scandal has left a trail all the way across Asian markets to the US which has recalled a few instant coffee and tea drinks containing Chinese made non-dairy creamer. Health experts are speculating whether the contaminated dairy products have seeped into other food products, fanning food fear.

The scandal initially centred on the Sanlu Group, a joint venture with New Zealand dairy giant Fonterra, which owns a 43 per cent share. Sanlu headquartered in Hebei province (surrounding the Beijing municipality) was chaired by a Communist Party official, appointed by the provincial party authorities.

What also appears to be the case is that the complaints regarding the baby formula began filtering in by December 2007. Sanlu, the worst offender, did not take adequate steps to investigate and inform the public. In fact, the company made a high profile $1.25 million donation of baby food, presumably toxic, to the Sichuan earthquake infants.

China's public information system is now working on an overdrive by way of censoring the internet and toning down the scam in the official news, as well as assuaging an anxious public that the dubious dairy products are off the shelves.

The cabinet, the State Council, has stepped in, vowing to punish lawbreakers. Given the events, President Hu Jintao's conceded that 'some leaders lacked a sense of responsibility and had a loose governance' and called for cadre 'self-improvement'.

But the damage has been done. According to the Financial Times, the Prime Minister of New Zealand Helen Clark has said that local officials knew about the contamination, but did not act until her government took it up with Beijing.

What has also surfaced is the accusation that China's leadership, obsessed with a seamless and harmonious Olympics, contributed indirectly towards the accident. The Central Propaganda Department in the run up to the Olympics had issued broad reporting guidelines -- intended at filtering out seamy domestic news -- which worked as a de-facto clampdown on unsavoury news.

China's recurring scandals are clearly not stray incidents anymore, but systemic. This is in spite of China professing that it has adequate regulatory safeguards.

The lack of transparency and suppression of information is increasingly becoming an issue. China needs to get its act together to improve safety norms, monitoring processes and surveillance.

Prime Minister Wen Jiabao's call to pay attention to 'business ethics and social morality' is welcome. With China's reputation as a reliable factory of the world at stake, and other competing countries offering quality and catching up with China, there is no guessing as to who the loser would be.

This time around, an increasingly wary world is watching China carefully.

The writer is a Sinologist