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Chinese domestic milk producers get state subsidy

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September 22
9:32 AM 2013

Two of the largest Chinese milk powder makers, namely Inner Mongolia Yili Industrial Group Co. Ltd and China Mengniu Dairy Co Ltd have been formally chosen to receive CNY30 billion in official funds for the purpose of sector consolidation.

Other firms included are Feihe International Inc, Heilongjang Wondersun Dairy Co Ltd and Treasure of Plateau. This was reported by the official China Business Journal in its edition last Saturday. The report cited an anonymous source.

The Chinese authorities have long ago desired to consolidate the domestic milk powder sector to increase the ability of companies to compete with international competition. The foreign milk producers now dominate the market, cornering the premium end of the USD12.4 billion infant formula market in China.

The support would be in the form of government subsidies, including funds from China Development Bank and other favorable taxing policies. Overall, the said support would reach CNY30 billion.

Milk had become one of the testier issues in China after a scandal in 2008 of milk tainted with melamine had resulted in the death of six infants and thousands of other babies ill. This gave the opportunity for foreign brands such as Danone SA, Nestle SA, Abbott Laboratories and Mead Johnson to get the lion's share of the market.

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