Page 150 - 2020 White Paper on the Business Environment in China
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0 White Paper on the Business Environment in China
Dairy Products war. The US is losing out at a time when Chinese
consumers are eating more cheese and drinking
China unveiled guidelines in 2018 to modernize more milk. China is an important market for the
its dairy industry, aiming to reach world-leading dairy industry. And it was probably a market that
levels in milk supplies, dairy processing and quality, had a lot of growth potential. In 2018, the US was
and industrial competitiveness by 2025. China’s milk headed to a record year for the first five months of
production is mainly concentrated in the north and dairy exports to China for whey, protein concentrate,
includes four major milk production areas. Among cheese. That all began to change in June 2018 when
them, Inner Mongolia is the largest milk production Beijing retaliated against President Trump’s tariffs
area in China with an inventory of about 2.5 million on Chinese imports. US dairy exports to China sank
head and annual milk production of 7 million tons. 54 percent in the first half of 2019. Part of that was
The dairy cattle inventory in southern China makes a sharp drop in whey, which is used as feed for
up around 12 percent of China’s total dairy cattle hogs (Northam).
inventory, accounting for 10 to 15 percent of milk
production. Consolidated dairy farms operations Baby Formula
now account for a larger portion of overall milk
production in China. Large scale farms are using The quality of domestic baby formula is expected
more sophisticated feed management techniques to keep improving to meet the demand from
to control milk production, reducing the surplus domestic consumers, according to a plan released
created during the winter and increasing output in 2019 by seven central government departments
during the summer. In 2019, China’s fluid milk including the National Development and Reform
production increased about 2.3 percent due to Commission. Authorities will adopt strict standards
higher profits earned by the dairy farmers due to the to supervise the sector, and will urge producers to
increased profitability of these modern farms. Small adopt even higher standards than the minimums.
farms continue to close, relocate, or consolidate Meanwhile, enterprises and institutes will be
operations due to stricter environmental protection encouraged to work together on the research and
regulations. Converting domestically produced fluid development of new baby formula products to meet
milk into whole milk powder is not profitable due market demand. Increased competitiveness in the
to the availability of lower priced products from industry will help in the promotion of large scale
the international market. The consumption growth and automated production, the merger of small
will continue to outstrip domestic dairy product companies, and encourage domestic companies
supply in China, driving increased imports of fluid to buy or develop farms overseas to reduce costs,
and skim milk powder. As their incomes rise, for example for improved technology or land.
Chinese consumers are seeking higher quality milk Authorities will also encourage foreign enterprises
products. Pasteurized milk and yogurt consumption to set up ventures in China to help increase supply
will maintain double digit growth rates over the to the domestic market. With the adoption of
next three years. High input and production costs the plan, baby formula produced domestically is
limit domestic production of both cheese and expected to account for more than 60 percent of the
butter. Chinese imports in 2020 are expected total supply. Public faith in domestic dairy brands
to reach a record high 119,000 metric tons. The slumped in 2008, after a major domestic producer
market potential is high for imports. Less than 30 of baby formula was found to have adulterated milk
percent of the population in China consumes the with melamine, an industrial plastic, which made
recommended amount of dairy. It is not part of the the products appear to have more protein. It led to
traditional Chinese diet. However, urbanization, the deaths of several babies, and tens of thousands
health initiatives and growing incomes will drive the of others became sick. Following the incident, the
rise of consumption especially in third and fourth government intensified supervision over the sector,
tier cities (Byrne). including inspecting every batch of baby formula
before they could be sold. About 99.8 percent of
Exports of US dairy products to China have baby formula available on the domestic market
dropped more than 50% because of the trade meets national standards, according to a survey
conducted in 2018 by the State Administration for
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Dairy Products war. The US is losing out at a time when Chinese
consumers are eating more cheese and drinking
China unveiled guidelines in 2018 to modernize more milk. China is an important market for the
its dairy industry, aiming to reach world-leading dairy industry. And it was probably a market that
levels in milk supplies, dairy processing and quality, had a lot of growth potential. In 2018, the US was
and industrial competitiveness by 2025. China’s milk headed to a record year for the first five months of
production is mainly concentrated in the north and dairy exports to China for whey, protein concentrate,
includes four major milk production areas. Among cheese. That all began to change in June 2018 when
them, Inner Mongolia is the largest milk production Beijing retaliated against President Trump’s tariffs
area in China with an inventory of about 2.5 million on Chinese imports. US dairy exports to China sank
head and annual milk production of 7 million tons. 54 percent in the first half of 2019. Part of that was
The dairy cattle inventory in southern China makes a sharp drop in whey, which is used as feed for
up around 12 percent of China’s total dairy cattle hogs (Northam).
inventory, accounting for 10 to 15 percent of milk
production. Consolidated dairy farms operations Baby Formula
now account for a larger portion of overall milk
production in China. Large scale farms are using The quality of domestic baby formula is expected
more sophisticated feed management techniques to keep improving to meet the demand from
to control milk production, reducing the surplus domestic consumers, according to a plan released
created during the winter and increasing output in 2019 by seven central government departments
during the summer. In 2019, China’s fluid milk including the National Development and Reform
production increased about 2.3 percent due to Commission. Authorities will adopt strict standards
higher profits earned by the dairy farmers due to the to supervise the sector, and will urge producers to
increased profitability of these modern farms. Small adopt even higher standards than the minimums.
farms continue to close, relocate, or consolidate Meanwhile, enterprises and institutes will be
operations due to stricter environmental protection encouraged to work together on the research and
regulations. Converting domestically produced fluid development of new baby formula products to meet
milk into whole milk powder is not profitable due market demand. Increased competitiveness in the
to the availability of lower priced products from industry will help in the promotion of large scale
the international market. The consumption growth and automated production, the merger of small
will continue to outstrip domestic dairy product companies, and encourage domestic companies
supply in China, driving increased imports of fluid to buy or develop farms overseas to reduce costs,
and skim milk powder. As their incomes rise, for example for improved technology or land.
Chinese consumers are seeking higher quality milk Authorities will also encourage foreign enterprises
products. Pasteurized milk and yogurt consumption to set up ventures in China to help increase supply
will maintain double digit growth rates over the to the domestic market. With the adoption of
next three years. High input and production costs the plan, baby formula produced domestically is
limit domestic production of both cheese and expected to account for more than 60 percent of the
butter. Chinese imports in 2020 are expected total supply. Public faith in domestic dairy brands
to reach a record high 119,000 metric tons. The slumped in 2008, after a major domestic producer
market potential is high for imports. Less than 30 of baby formula was found to have adulterated milk
percent of the population in China consumes the with melamine, an industrial plastic, which made
recommended amount of dairy. It is not part of the the products appear to have more protein. It led to
traditional Chinese diet. However, urbanization, the deaths of several babies, and tens of thousands
health initiatives and growing incomes will drive the of others became sick. Following the incident, the
rise of consumption especially in third and fourth government intensified supervision over the sector,
tier cities (Byrne). including inspecting every batch of baby formula
before they could be sold. About 99.8 percent of
Exports of US dairy products to China have baby formula available on the domestic market
dropped more than 50% because of the trade meets national standards, according to a survey
conducted in 2018 by the State Administration for
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