New Hope Liuhe Co suffered falling shares Wednesday after its Shandong-based subsidiary Liuhe Group was reported Tuesday to have released tainted chicken into the domestic market.

Shares of New Hope Liuhe Co, the Shenzhen-listed arm of China's largest private agricultural conglomerate, New Hope Group, dropped over 4 percent during trading Wednesday, then saw a slight rebound to close at 1.43 percent down.

Liuhe Group's slaughtering plant in Pingdu, East China's Shandong Province, has been ordered to shut down for a livestock safety investigation by a local regulatory agency after a reported failure to examine chickens before killing them, an anonymous staff member from New Hope Liuhe told the Global Times Wednesday.

The chickens, of a breed known for its short breeding period and tasty meat, were fed prohibited antiviral drugs like Ribavirin by breeders in Shandong in attempts to prevent sickness, according to a report on China Central Television Tuesday.

The report added that some of the processed raw chicken products went to the Shanghai warehouse of Yum! Brands Inc without being inspected.

Yum! runs many fast food brands in China, including KFC and Pizza Hut.

"All the raw chicken products from the Pingdu factory have been recalled and contained. We are actively cooperating with this investigation," the New Hope Liuhe staff member said, but could not say who had received the chickens.

The scandal will likely have a negative effect on the sales of New Hope Liuhe products or even the whole livestock industry, Wang Xiaoyue, an analyst at Beijing Orient Agribusiness Consultants, told the Global Times Wednesday.

New Hope Liuhe's domestic peers, including Haikou Agriculture & Industry & Trade Co and Shandong Yisheng Livestock & Poultry Breeding Co, also saw their shares drop Wednesday.

"My biggest concern is whether other livestock like pigs and cows were also given forbidden drugs," a Beijing resident, surnamed Liu, told the Global Times Wednesday.

Wang noted that this may indeed be the case, given that supervision over the livestock sector is not strong enough.

Most domestic livestock, especially chickens, can legally be given various kinds of antibiotic drugs or even herbal additives in response to diseases caused by overfeeding, Guo Huiyong, an independent industry analyst, told the Global Times Wednesday. He noted that overfeeding aims to shorten the breeding period in the industrialized farming system.

European countries and the US also breed livestock this way, and while a change will not likely come soon in China, domestic governments and relevant enterprises should strengthen controls on the use of drugs, said Guo.

The local police station has started an investigation into the owners of the poultry yards in Pingdu, according to an announcement posted Tuesday by the Qingdao Bureau of Animal Health and Production.

The Shanghai Food and Drug Administration also spoke out Tuesday on its Weibo account with a pledge to examine the chicken products in Yum!'s Shanghai warehouse.

Yum! could not be reached by press time, while KFC said Tuesday it had ended its relationship with Liuhe Group in August.