Health authorities in south China said Friday they were investigating a hospital medical team for mistakenly diagnosing a stillbirth and disposing of a baby that was alive.

The probe is taking place at the Nanhai Red Cross Hospital in the Guangdong provincial city of Foshan where the incident occurred on October 26, the Nanhai district health bureau said in a statement faxed to AFP.

According to the statement, Liu Dongmei -- eight months pregnant -- had been rushed to the hospital with internal bleeding and stomach cramps.

She later had an emergency birth, but the baby was neither breathing nor crying after leaving the womb and its skin had turned purple, it said.

Believing it was dead, the medical team disposed of the child but did not follow proper hospital procedures, the statement added.

The Foshan News, a local website, reported that when Liu's sister-in-law asked to see the body around 30 minutes after birth, she was handed a yellow plastic bag containing the infant and found it was still alive.

"I opened the plastic bag and saw the baby's hands and feet moving, the stomach was going up and down and air bubbles were coming out of his mouth," the paper quoted her as saying.

She was further shocked when she saw the baby was a boy -- not a girl as the family had been told, it said.

According to the Foshan News, nurses had told the family the child was a girl in an effort to blunt the blow of its death.

In China, baby boys are often viewed as more precious than girls, as many families can have only one child as part of the nation's population policy and desire a male heir.

Following the discovery, the newborn was rushed to intensive care where he remains in a stable condition.

Officials at the hospital refused to comment on the incident when contacted by AFP.

China's healthcare system -- once widely praised for improving the health of millions -- is now panned as costly, underfunded and providing shoddy treatment, especially in poorer regions.

Liu and her husband are seeking to sue the hospital for 300,000 yuan ($45,000), the Beijing News said.

The head of the maternity ward, a doctor and two nurses have been suspended pending the results of the investigation, it added.