China Infant Formula Makers to Enjoy Government Support to Compete Foreign Rivals

Published Date : Sep 23, 2013

In an effort to promote sector consolidation, major Chinese milk powder producers will receive official funds to the tune of 30 billion yuan (approximately $4.90 billion). According to a report on the China Business Journal, some major milk powder producers that will receive funds include Inner Mongolia Yili Industrial Group Co Ltd, China Mengniu Dairy Co Ltd, Feihe International Inc, Treasure of Plateau and Heilongjiang Wondersun Dairy Co Ltd. The report in the newspaper’s Saturday edition cited an unidentified source. 


The funding strategy is a result of authorities’ decision to consolidate China’s milk powder sector so as to enable domestic companies to compete better with their international counterparts that current enjoy a larger share in China’s $12 billion infant formula sector. However, there was no immediate comment on this matter by officials of Chinese companies slated to receive funds.


Government support to the Chinese milk powder companies will be extended by way of subsidies, business funding avenues from the China Development Bank, tax holidays and favorable policies and so on. All of these benefits would amount to approximately 30 billion yuan. 


Domestic infant formula companies’ reputation took a hit in 2008 after at least six infants died and thousands others took ill after consuming milk that reportedly had traces of melamine. With a trust deficit in domestic infant formula companies’ products, the market share of imported brands received a boost. These brands include the likes of Danone SA, Nestle SA, Mead Johnson Nutrition Co and Abbott Laboratories.


However, the international milk powder brands have had their share of hurdles in the Chinese markets with the country imposing a temporary ban on some dairy products from New Zealand and another instance where a official Chinese television air reported of French food company Danone SA allegedly bribing health care professionals in a leading China hospital to recommend its Dumex milk powder brand.