A scandal-plagued Chinese zoo has been shut down after the starvation of 11 Siberian tigers and allegations that it has been illegally supplying brewers of tiger-bone tonics.

The authorities have launched an investigation into the Shenyang Forest Wildlife zoo, a semi-private operation that slashed rations for its animals after running into financial difficulties.

They will also examine the structural problems facing the country's massive captive-breeding business, in which – the Guardian has discovered – more than 1,000 other tigers are at risk of malnourishment. The Shenyang zoo, which is partly owned by local government, came into the spotlight after 11 Siberian tigers starved to death in the space of six months. It emerged that the keepers were feeding the animals cheap cuts of chicken because the zoo was short of money.

While ostensibly founded to secure tourist income, the zoo is accused of providing tiger parts for Chinese traditional medicine despite a ban on the trade. An unnamed zoo official, quoted by The Beijing News, claimed 40 to 50 tigers may have died since 2000 and production of tiger-bone wine for human consumption was an "open secret". Bottles of the illicit tonic were reportedly given to police and senior forestry officials, who are supposed to be on the frontline of conservation efforts in China.

Unable to openly sell the valuable carcasses, bones and penises, the zoo reportedly spent large sums on refrigerator units. Money that should have gone on food went on electricity for the freezers.

Far from being a one-off case, the case highlights the dire conditions in which 6,000 to 10,000 tigers and other rare animals are kept by captive-breeding centres that were actually set up to farm parts for traditional medicine. The biggest of them, the Guilin Xiongsen Tiger and Bear Mountain Village crams 1,400 tigers into an area smaller than Regents Park. It too is cutting beef rations for live animals rather than the electricity bill for carcass freezers.

A source at the park told the Guardian that several tigers have died of malnourishment in recent months. "Our costs are higher than our revenues and it costs 100 yuan (£9.50) a day to feed a tiger. So we have been giving them chicken and duck instead. The animals only get half full," said the source, who asked to remain nameless.

The park has halted a show for tourists in which tigers are let loose on live cows, though it is not clear if this is because of budget pressures or negative publicity. Staff at Xiongsen say they have not been paid by the owner – Zhou Weisen – for six months. "The big boss hardly comes to visit anymore because he's afraid the staff will give him a hard time," said the source.

Yet the freezers – thought to contain hundreds of carcasses – continue to run and the park has a website promoting tiger-bone wine from "animals that died of old age". It claims to have the permission of the local forestry bureau, although such a trade is supposed to be illegal.

The park's management refused the Guardian's requests for an interview. The Guangxi Forestry Bureau, which is supposed to regulate the business, did not respond to requests for information about the number of tiger deaths at the park.

Secrecy is part of the problem, along with unrealistic hopes for a resumption of the tiger trade and dire government supervision. "Anyone with money is allowed to build a zoo or wildlife park without proper facilities, professional breeders or veterinarians. When they later discover, they cannot afford to raise the animals, this leads to deaths and labour disputes," said Hua Ning, the project director of the International Fund for Animal Welfare in China.

According to studies carried out by her organisation, four of the five registered captive breeding centres in China were established after the ban in tiger parts.

Because there is no law forbidding cruelty to animals many are maltreated. "Some animals have their teeth or claws pulled out. Others are forced to do circus tricks," said Hua. "This treatment damages the physical and psychological health of the tigers."

The government said it may re-evaluate the captive breeding system if the investigation into the deaths at Shenyang zoo proves widespread abuse. "We are closely following the development of the incidents," said Liu Xiongying, a senior official with information office at the State Forestry Administration, told The China Daily. "If it proves such bad practices are happening on a large scale, the administration will release nationwide measures to stop such actions."

The starvation scandal, which comes at the start of the Chinese Year of the Tiger, is expected to prompt discussion at an international tiger conference in Vladivostok later this year. China has previously defended its captive breeding programme as a means to save the animal from extinction.