Producers found dealing in tainted feed will lose their business licenses and face criminal prosecution, the China Daily newspaper reported Saturday.

Melamine-tainted eggs found last week in Hong Kong were produced in the northeastern port city of Dalian and the central Hubei province, RIA Novosti reported.

In the last two months, China has closed 238 animal feed companies for melamine-related violations and destroyed an estimated 3,682 tons of substandard feed, RIA Novosti reported.

The melamine scare began last year with tainted pet-food products and has since spread to animal feed and milk products. Several babies have died and thousands more have fallen ill from drinking melamine-tainted milk, say Chinese health officials.