China Pours On State Support For Milk Powder Industry
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The Chinese government is set to provide nearly 30 billion yuan ($4.90 billion) in state funding to domestic milk powder makers, in order to support sector consolidation and increase the ability of companies to compete with international competition, according to local media reports over the weekend.
The Chinese government is set to provide nearly 30 billion yuan ($4.90 billion) in state funding to domestic milk powder makers, in order to support sector consolidation and increase the ability of companies to compete with international competition, according to local media reports over the weekend.
The official China Business Journal on Saturday reported that two of the largest Chinese milk powder makers, namely Inner Mongolia Yili Industrial Group Co. Ltd and China Mengniu Dairy Co Ltd, had been chosen to receive funding from the state, while the other companies set to benefit included Feihe International Inc, Heilongjiang Wondersun Dairy Co Ltd and Treasure of Plateau.
The China Business Journal added that the state support would likely come from government subsidies, funds from China Development Bank as well as favourable tax policies; with the total cost to the state said to be about 30 billion yuan.
Two Chinese milk powder makers, reportedly included in the group of companies, also confirmed to the Global Times on Sunday that they were set to receive official funding support, but were still waiting for official confirmation.
They told the Global Times on condition of anonymity that industry authorities were expected to have a meeting over the weekend before publishing the results later.
Foreign milk producers, such as Danone SA, Nestle SA, Mead Johnson Nutrition Co and Abbott Laboratories, presently dominate the domestic market, cornering the premium end of the $12.4 billion infant formula sector.
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The dominance of foreign importers arose after 2008, when the reputation of the local milk powder industry took a hit, following a major scandal when milk tainted with melamine led to the deaths of at least six infants and sent around 50,000 babies to the hospital.
New Zealand’s milk industry has been the main beneficiary of the scandal, exporting nearly $2.5 billion of baby-formula milk to China annually. However this month, the discovery of botulism causing bacteria in infant formula-milk by New Zealand’s Fonterra Co-operative Group Ltd caused the Chinese government to force an immediate ban on all imports of milk powder from New Zealand.
Furthermore, state Chinese television also claimed last week French food group Danone SA had bribed doctors and nurses to recommend its Dumex milk powder brand at a hospital in northern China.
The crackdown on foreign milk producers would coincide with China’s new plan to support its local industry. Recently, China’s Ministry of Industry and Information Technology released a plan to slash the number of domestic infant formula firms in the over the next five years to 50, from about 200 now, as it looks to create stronger sector leaders.
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