The number of children sickened by the milk has now topped 53,000. Four babies have died.
Beijing authorities also said that China's biggest producer of powdered milk had known for months that its baby formula was tainted with the industrial chemical melamine. There were complaints about infant formula sold by the Sanlu Group Co. as early as December, 2007, China Central Television reported, citing an investigation by the State Council, China's Cabinet.
"During these eight months, the company did not inform the government and did not take proper measures, therefore making the situation worse," CCTV said.
Melamine, which can cause kidney stones and kidney failure in babies, has since been found in infant formula and other milk products from 22 of China's dairy companies.
Baby formula and other milk products have been pulled from stores around the country and Chinese goods including liquid milk, instant coffee mix and milk-based candy have been banned around Asia.
The resignation of Li Changjiang, who headed the General Administration of Quality Supervision, Inspection and Quarantine since 2001, comes a year after he and the government promised to overhaul the system.
New regulations and procedures were introduced in an attempt to restore consumer confidence and preserve export markets after a string of recalls and warnings abroad over tainted toothpaste, faulty tires and other goods.
Today, Taiwan suspended imports of all Chinese milk products and vegetable-based proteins until China clears up the contamination of its milk supplies.
Health Minister Lin Fang-yu also urged Taiwanese on Monday not to consume locally made puddings, instant coffee and ice cream containing Chinese-made protein additives.
Officials say at least seven Taiwanese companies have imported contaminated proteins from China. They say the proteins are made from corn or other vegetables but may be mixed with tainted milk products to improve their flavor.
The latest crisis indicates problems were still slipping through the cracks.
On Monday, the World Health Organization urged stricter monitoring of the industry.
Sanlu and several other leading companies found to have produced tainted milk had been given inspection-free status by China's product quality watchdog.
That privilege has since been rescinded, but WHO China representative Hans Troedsson stressed it was only a first step and that quality issues can crop up at any point in the supply chain, from the farm to the store.
"It's clearly something that is not acceptable and needs to be rectified and corrected," he said.
The number of sick children reported by the government jumped Sunday from 6,200 to nearly 53,000.
More than 80 percent of the 12,892 children hospitalized in recent weeks were 2 years old or younger, the Health Ministry said. It said 104 were in serious condition.
Another 39,965 children received outpatient treatment and were considered "basically recovered," the ministry said.
Four babies' deaths have been blamed on tainted milk powder. The ministry did not explain the sudden increase in the number of cases but it suggested health officials were combing through hospital records from May through August to trace the origins of the contamination. The deaths of the infants linked to tainted baby formula occurred in those months, the Health Ministry said.
WHO was having discussions with Chinese officials on how to strengthen its food quality system, Troedsson said. Local authorities need increased training to create a "more robust reporting system," he said.
"It is important to know if information was withheld, where and why it was withheld," he said. "Was it ignorance by provincial authorities or was it that they neglected to report it? Because if it was ignorance there is a need to have much better training and education ... if it is neglect then it is of course more serious."
Investigators say some raw milk suppliers, in hopes of making more profit, may have watered down their milk to increase volume and then added melamine, which is high in nitrogen and artificially appears to boost protein content.
The official Xinhua News Agency said Li stepped down with the approval of China's Cabinet. Wang Yong replaced Li as the director of the General Administration of Quality Supervision, Inspection and Quarantine.