China One to increase Canadian dairy herd in China

China One Corporation, a Vancouver-based raw milk producer operating in China, announced Monday (Mar 30) it has signed contracts to develop five new dairy farms in China.

The contracts are between China One, operating as IND DairyTech Ltd and a variety of strategic Chinese third parties. About 11,000 dairy cows will be added to its business in China under these new agreements.

These agreements allow the company to better obtain incentives that have been introduced by the Chinese government to stimulate and improve the Chinese dairy industry following last year's milk scandal, said Jesse Zhu, CEO of China One.

Under one of the contracts, China One is to deliver 2,000 cows by the end of 2009 and another 3,000 cows by the end of 2011 to Meishan City, Sichuan Province. Under another contract with Lingbao City, Henan Province, the company is to deliver 3,500 cows by the end of 2009 and an additional 2,500 cows by the end of 2011.

The company is entitled to a loan of RMB10,000 per cow delivered for both contracts and the contract with Meishan includes RMB3,400 per cow subsidy from the local government. To date, the company has received a subsidy of RMB1.6 million and a loan for RMB6 million at an annual interest rate of 7.29 percent for three years.

Zhu added that with favourable financing facilities and terms offered by local partners and subsidies from government agencies, the company plans to increase the total herd size to 30,000 by the end of 2009 and to 60,000 by 2010.

In mid-November 2008, the Chinese government introduced new measures to reform the country's dairy industry. These measures include increasing the number of large dairy farms in China from the current 20 percent to 30 percent and dairy processors have to obtain 70 percent of their raw milk from managed sources by October 2011.

US$1=RMB6.835 (Mar 31)