China to set aside funds to support dairy industry

China is planning to invest about 30 billion yuan ($4.9 billion) to promote consolidations in milk powder industry, Guangzhou Daily reported Tuesday.

The fund will be used for preferential loans for mergers and acquisitions (M&A), subsidies to enterprises that actively improve technology, the report said.

Some State-owned dairy enterprises such as Beijing Sanyuan Foods Co and

Wondersun Enterprise Group reportedly hope to be on the list of enterprises likely to receive assistance under the plan.

To regain the market confidence, regulators plan to ask four Chinese milk powder producers, including Yili Group and Mengniu Dairy (Group) Co, to release new high-end products in September or later this year.

However, the details have not been officially announced, the report said.

The M&A plan is aimed at creating a group of milk powder enterprises that customers can trust, Zhu Hongren, spokesman of Ministry of Industry and Information Technology (MIIT), was quoted as saying.

It is rare to see such strong support to the milk powder industry in other countries, such as the US and Japan, where domestic milk powder brands occupy most of the market share, market analysts said in the report.

The MIIT has reportedly submitted a draft plan for M&As in China's infant formula industry for the approval of the State Council.

The plan calls for the reduction of China's current 127 milk powder manufactures to 50 by the end of 2018.

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