The Chinese government has suspended all exports of a toy found to have been coated with a toxic chemical, China's official Xinhua news agency says.
The toy has proved extremely popular in both the US and Australia
The move comes after the authorities in the United States, Australia and a number of other countries removed the Bindeez and Aqua Dots toys from sale.
The toy has been blamed for causing illness among a number of children.
The Chinese authorities are reported to have sealed stocks where they were produced, and ordered an investigation.
It is the latest in a number of scandals which have questioned the quality of Chinese-made products.
Date rape drug
Seven more children in the US are reported to have fallen sick after swallowing the toy's bead like parts - which have been found to contain a substance linked to the date-rape drug GHB.
That brings the total of US children needing treatment after swallowing the product to nine. Four children in Australia and two in New Zealand have also fallen sick.
The victims all suffered from dizziness and drowsiness and two of the US children slipped into comas. They have since recovered.
The craft toy has proved extremely popular in both the US and Australia. In 2007, Bindeez was named Australia's Toy of the Year.
It consists of hundreds of brightly-coloured beads that can be arranged into a piece of art and sprayed with water to set.
The beads are meant to be coated in a non-toxic glue, but a batch in Australia was found to be covered with a substance that did not match the approved formula.
Tests showed they were coated with the industrial chemical 1,4-butanediol - which transforms into the banned drug GHB when swallowed.
About 4.2 million units of the toy will be recalled in the US, officials said, and about one million in Australia.
Neither the toys' maker, Australia-based Moose Enterprises, nor the Chinese government have identified the factory or factories where the toys were produced.