The tainted-milk scandal in China has gone far to damage the positive image so carefully cultivated by China’s leaders at the Beijing Olympics. And it is a powerful reminder of how poorly capitalism, as well as socialism, blends with repressive one-party rule.

The facts are horrifying. Formula adulterated with melamine, an ingredient used in plastics and fertilizers, has sickened some 54,000 Chinese infants, killing at least three. Presumably added to cut costs, melamine can falsely inflate the protein content of watered-down milk. The Chinese pet-food ingredients that sickened so many U.S. dogs and cats last year contained melamine. Other recent, unhappy encounters here with the Chinese “product-safety” system include tainted seafood, toothpaste, toys and the blood-thinner heparin. And now we learn that melamine has been detected in Blue Cat Flavor Drink, which is imported from China. The Food and Drug Administration has begun a recall.

The United States bars importation of Chinese dairy products. Yet U.S. inspectors recently discovered melamine in a popular Chinese-made confection, White Rabbit Creamy Candy. The product has turned up in California and Connecticut, and may still be on some shelves. (While the Food and Drug Administration says that ingesting small bits of melamine is not harmful, except for infants, it prohibits the sale of foods to which it has been added.)

Perhaps because it wanted no negative reports during the Olympics, China was slow to admit to any milk problems. Though consumers had been complaining for months, it was not until mid-September that the government declared an emergency. It now seems likely that milk dealers, local officials and party propagandists conspired in a cover-up. Meanwhile, more and more babies were exposed to excruciating and even mortal illness. (Melamine attacks the kidneys.) Chinese journalists say they were ordered not to investigate.

The scandal spread from one large dairy, Sanlu Group, in a northern province, to some 30 others. Though headed by a local Communist Party official, Sanlu is partly owned by a New Zealand company, and pressure from New Zealand appears to have been instrumental in getting out the story.

Now China is going through its usual get-tough motions: Several officials have been fired or arrested. But without true political reform, little will change. Corruption is rampant, and the press is stifled by party rulers.

In response to these failures, Taiwan, Singapore, Japan, Malaysia, Brunei, Gabon, Vietnam, Russia and the Philippines have either banned or recalled Chinese milk products, threatening what had been an $18 billion (and growing) Chinese dairy industry.

Their children’s endangerment has made the Chinese rightly furious. One couple is trying to sue the dairy it says sickened their child. It will be an epic breakthrough if the court allows the case to go forward. Now that so many have wealth, the Chinese increasingly are insisting on their rights. Until they get them, the safety of Chinese products will remain questionable.