A vaccine scandal in China, which has hit a nerve in the country and prompted quick reactions from leaders in Beijing, is sending ripples across the wider domestic drug market while threatening to dent Chinese ambitions to play a larger global role.

Shares in Chinese vaccine makers and biotech firms fell across the board on Monday after Premier Li Keqiang slammed Changsheng Biotechnology Co for having crossed a moral red line and called for swift action.

The case erupted a week ago when Changsheng was found to have violated standards in making rabies vaccine.

While there have been no apparent reports of people being harmed by the vaccine or having contracted rabies after receiving it, the regulator has already ordered Changsheng to halt production and recall all its vaccines.

The case has gone viral in China, where sensitivity over food and drug safety is extremely high after a series ofscandals over the last decade. Changsheng's shares, which have lost 40 percent since mid July, were suspended on Monday.

The scandal has sparked anger on social media and dealt a blow to China's drug regulator, which has been struggling to clean up the world's second-biggest drug industry and promote domestically made vaccines.

It is also a setback for the country given it is looking to play a bigger role globally in the production and export ofvaccines and other medicines.

In a statement posted on the government's website late on Sunday, Premier Li called for an immediate investigation and urged severe punishment for the companies and people implicated. He added the public needed clear information.

"We will resolutely crack down on illegal and criminal acts that endanger the safety of peoples' lives, resolutely punish lawbreakers according to the law, and resolutely and severely criticise dereliction of duty in supervision," he said.

The China Food and Drug Administration said in a statement that its investigation had found that Changsheng fabricated production records and product inspection records, and arbitrarily changed process parameters and equipment, in "serious violations" of the law.

PUBLIC HEALTH CRISIS

Changsheng said in a regulatory filing that the suspension of its rabies vaccine production would have a significant impact on its finances and that some regional disease control agencies had suspended some of its other vaccines.

An editorial on Monday in the China Daily warned the case could become a public health crisis if it is not handled "in a reasonable and transparent manner".

"The government needs to act as soon as possible to let the public know it is resolved to address the issue and will punish any wrongdoers without mercy," it said.

Late on Sunday, the state news agency Xinhua ran an editorial calling for strict punishment for any violations, big or small, in the vaccine industry and for regulators to close loopholes and tighten oversight of the industry.

The China Securities News also weighed in, saying listed companies have a duty to the public and to conduct business with integrity.

"Cases like Changsheng Biotechnology, where laws and regulations are ignored and internal controls exist only in name bring a painful price," it said.

State media have said Changsheng made a public apology and recalled all their rabies vaccine available on the market.