Shanghai has shut a factory of US food producer OSI Group for selling out-of-date meat to restaurant giants including McDonald's and KFC, authorities said Monday, in China's latest food safety scandal.

A Shanghai television channel, which reported the original allegations, said that workers at the plant mixed expired meat with the fresh product and deliberately misled quality inspectors from McDonald's.

City officials closed the Shanghai Husi Food Co. factory on Sunday and seized products which allegedly used the expired meat, the Shanghai food and drug administration said in a statement.

Police were investigating, it said, threatening "severe punishment" in future.

Television footage showed workers in white suits picking up meat and hamburger patties from the floor before putting them back into processing machinery, and one employee handling out-of-date beef and calling it "stinky meat".

McDonald's said in a statement it had "immediately" stopped using the factory's products while restaurant operator Yum separately said its KFC and Pizza Hut establishments had also halted use of its meat.

KFC has faced food safety issues in China before, when authorities found excessive levels of antibiotics in chicken it sourced from local suppliers in 2012.

OSI Group apologised to its customers and said it was "appalled" by the report on its factory, adding that it was "dealing with the issue directly and quickly" in a statement posted on its Chinese website.

"The company has formed an investigation team, is fully cooperating with inspections being conducted by relevant, supervising government agencies, and is also conducting its own internal review," the statement added.

Other customers of Husi Food included Burger King, Papa John's Pizza and coffee chain Starbucks, the Shanghai Daily newspaper reported Monday.

Furniture maker Ikea, which had been named by Chinese media as serving the factory's meat at in-store restaurants, said it stopped using the company's products last year, and sandwich maker Subway also denied it uses meat from the firm.

China has been rocked by a series of food and product safety problems, due to lax enforcement of regulations and corner-cutting by producers.

One of the worst occurred in 2008 when the industrial chemical melamine was found to have been illegally added to dairy products, killing at least six babies and making 300,000 people ill.

US retail giant Walmart said early this year that it would tighten inspections of its suppliers in China after it was forced to recall donkey meat products that had been found to contain fox.

Last year, China detained hundreds of people for food safety crimes, including selling rat and fox meat disguised as beef and mutton, following a three-month crackdown, police said.