Zhang Hui, manager of Shanghai Husi Food Co Ltd's quality department, confessed during investigations that the company has been conducting the malpractice for years under tacit approval of senior managers.
The quality manager of the company was among the five detained by the Shanghai police, state-run Xinhua news agency reported.
The company produced 5,108 crates of meat products, including McNuggets, pork patties and beef steaks using out-of-date or mouldy materials, according to the bureau and Shanghai's food and drug administration, which are jointly investigating the case.
About 100 tonnes of the Husi products have been sealed up, said Xu Wei, a spokesman for the Shanghai municipal government.
Shanghai-based Dragon TV aired a news programme on Sunday claiming that Shanghai Husi, a unit of US-based OSI Group LLC, had supplied products tainted with reprocessed expired meat to a string of fast food chains and restaurants across China.
The TV report prompted Shanghai authorities to suspend production, while cities and provinces across China on Monday moved to seal Husi supplies at local fast food chains.
Meanwhile, Starbucks has also withdrawn products from its shelves in the wake of the scandal that has shaken China's fast food industry.
Mainland fast-food chain Dicos also said it had taken breakfast sandwiches off its menu because its 'Ham' had been sourced from the meat processing firm.
Other provincial-level regions, including Guangdong, Guangxi and Inner Mongolia, have also reported sealing the products and ordered companies to stop selling products supplied by Husi.
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