I know someone who is in charge of production of one of the big Western brands of formula in China. Their standards are so high and their monitoring so stringent you would not believe it - it's probably better than most uranium for nuclear power plants is handled.
Sanlu is right at the bottom of the market. Western brands are very expensive (a tin would be about a day's net wages for a clerical job).
This sort of thing, while utterly tragic, does have the beneficial effect of making mothers stick to breastfeeding purely for safety reasons. As hoppybird says, breastfeeding is very much the norm in China and a catastrophe like this is not going to encourage mothers to switch to formula feeding.
If the culprits are caught, they will almost certainly be executed. I believe that that was what happened to the people caught bulking up formula with plaster dust in Anhui province a few years ago. I'm not in favour of the death penalty in principle, but it's hard to muster much sympathy for someone who would do something like this. Though I am mindful that Chinese authorities will be looking for a high-profile show trial to restore confidence, and we will never really know if the people found guilty were totally and solely responsible.