After a furore over toy giant Mattel recalling some of its merchandise made in China after they were found to contain lead, reports now say cheap clothes made in China contain high levels of formaldehyde.

Cheap woollen and cotton clothes made in China and exported abroad have been found to contain 500 times the amount of the chemical considered safe.

Formaldehyde, used on fabrics for decades to keep them wrinkle-free and stain-resistant, also serves as protection against mildew for consignments that have to travel long distances.

This week, New Zealand's media reported that tests on children's and adults' woollen and cotton clothes from China had found formaldehyde concentrations up to 900 times above the safety limit.

New Zealand's ministry of consumer affairs said it was investigating the "nature and size of the problem".

A British website subsequently said that the alert has been passed on to trading standards officials in Britain.

Britain's trading standards departments were expected to carry out tests to establish formaldehyde levels, Thisislondon.co.uk quoted Bryan Lewin, chairman of the Trading Standards Institute, as saying.

"The details will re-ignite concerns over the safety of cheap merchandise imported into Britain from China," the website said. If China's imports to the West are found to be violating the safety standards, its merchandise to Nepal would prove immensely more harmful.

Nepal's markets are flooded with cheap Chinese goods that are smuggled in, causing a loss to both the Nepal government and consumers. Nepal, one of the poorest countries in the world with the weakest law enforcement, is used as a dumping ground for inferior Chinese goods that meet no standard requirements, have no warranty and pay no taxes.