S$6b boost for Chinese milk powder makers

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Policy lending is always there in China...

S$6b boost for Chinese milk powder makers

SHANGHAI — The Chinese government is injecting 30 billion yuan (S$6 billion) into the embattled milk powder sector to help local companies compete with international rivals who have dominated the US$12.4 billion (S$15.5 billion) market following the 2008 melamine scandal.

Chinese milk powder makers, including Inner Mongolia Yili Industrial Group and China Mengniu Dairy, are set to receive funds the government is disbursing to support sector consolidation.

As well as Yili and Mengniu, the first group of firms to benefit would include Feihe International, Heilongjiang Wondersun Dairy and Treasure of Plateau, the official China Business Journal said in its Saturday edition, citing an unidentified source.

The authorities have said they want to consolidate the domestic milk powder sector to increase the ability of companies to compete with international rivals.

Officials at Yili, Mengniu and Feihe were not immediately available for comment.

Chinese milk powder firms would gain the support in the form of government subsidies, funds from China Development Bank and favourable tax policies, the newspaper said.

Milk powder is a sensitive topic in China after the 2008 scandal involving milk tainted with melamine led to the death of at least six infants and made many thousands ill.

That hit the reputation of domestic dairy firms and boosted the market share of imported brands such as Danone, Nestle, Mead Johnson Nutrition and Abbott Laboratories.

But international milk powder has recently come under the spotlight, with the country temporarily banning some dairy products from New Zealand’s Fonterra Co-operative Group following a scare.

Last month, China’s price regulator handed down record fines to mostly foreign milk powder makers.

Last week, official Chinese television said French food group Danone had bribed doctors and nurses to recommend its Dumex milk powder brand at a hospital in northern China, and said the practice was widespread in the sector.

China’s Ministry of Industry and Information Technology previously released a plan to slash the number of domestic infant formula firms in the highly fragmented market over the next five years to 50 from about 200 now as it looks to create stronger sector leaders.

According to data from market research firm Euromonitor, Yili and Wondersun were the two leading Chinese milk powder producers by retail value last year. Feihe and Mengniu were in the top 10. Reuters
http://www.todayonline.com/business/s6b-...der-makers
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