June 6, 2008

China's NDRC unveils dairy industry policy

 

 

In a document issued on Wednesday (Jun 4), the National Development and Reform Commission, China's economic think tank, officially outlines its plans and guidelines for the country's booming milk and dairy industry.

 

This is the first time that the Chinese government had stated systematically its policy objectives for the industry, including industrial expansion, geographical focus based on competitive advantage, entry requirements for investors, raw milk supply, production technology, organisational structure, investment funding, environmental issues and product quality, among others.

 

Containing 67 clauses, this policy will serve as the reference guideline for future industrial expansion of the milk and dairy product sector in China.

 

Salient points of the policy

 

Target:

 

For 2012, NDRC has set its target for average dairy production per capita in China at 42 kg.

 

Total milk and dairy production in 2010 is fixed at 23.5 million tonnes (divided into 3 million tonnes for dry dairy products and 20.5 million tonnes for liquid milk and dairy products).

 

For 2012, NDRC is targeting total milk and dairy production at 28 million tonnes (divided into 3.5 million tonnes for dry dairy products and 24.5 million tonnes for liquid milk and dairy products).

 

By 2012, utilisation of industrial production capacity should exceed 75 percent and areas with competitive advantage such as the northern, north-eastern regions and north-western regions. 

 

Geographical focus:

 

Region	Provinces	Production  focus	Other products	Remarks
North-east	Heilongjiang, Jilin, Liaoning, Inner Mongolia	Milk powder, dried cheese, cream, UHT milk	Pasteurised milk	Expedite closure of small producers which are technologically and energy inefficient.
North	Hebei, Henan, Shandong, Shanxi	Milk powder, dried cheese, cream, UHT milk, pasteurised milk,  yoghurt		Closure of small scale producers that are inefficient in this region.
North-west	Xinjiang, Gansu, Qinghai, Shaanxi, Ningxia, Tibet	Milk powder, dried cheese, cream, casein	UHT milk, yoghurt, pasteurised products
South	Hubei, Hunan, Jiangsu, Zhejiang, Fujian, Anhui, Jiangxi, Guangdong, Guangxi, Hainan, Yunnan, Guizhou, Sichuan	Pasteurised milk, dried cheese and yoghurt	Condensed milk, UHT milk and milk powder
City suburbs	Beijing, Tianjin, Shanghai, Chongqing	Pasteurised milk, yoghurt and other low-temperature milk products	Dried cheese, cream and other functional milk products	In principle, no new dairy processing projects may be approved

 

Investors' entry requirements

 

Current net assets of potential investor must not be more than twice of the capital requirements of the proposed dairy industry project. Total assets must be more than thrice of the capital requirements of the proposed project.

 

The company's asset-liability ratio should not exceed 70 percent and its must be profitable for the past three financial years. The company's credit ratings by provincial or above provincial-level financial credit rating agencies should be above AA grade.

 

For projects in the northern China regions as well as those and city suburbs, the proposed dairy project should be able to process at least 300 tonnes of raw milk on a daily basis (based on two shift work schedule). For proposed liquid milk projects, processing capacity should be above 500 tonnes of raw milk daily (based on a two-shift work schedule).

 

As for projects in the southern China regions, the dairy production plant should be able to process at least 200 tonnes of raw milk on a daily basis (based on two shift work schedule). For proposed liquid milk projects, processing capacity should be above 100 tonnes of raw milk daily (based on a two-shift work schedule).

 

Newly constructed dairy production plant's existing raw milk supply (either from their own ranches or through their invested cattle rearing areas) should be not be less than 30 percent of processing capacity. For proposed projects, existing raw milk supply (either from their own ranches or through their invested cattle rearing areas) should be not be less than 75 percent pf processing capacity.

 

For liquid milk producers, the source of raw milk should wholly supplied by cattle and goats from the dairy cattle production areas. For formula milk powder producers, at least 50 percent of raw milk must be supplied by cattle and goats from the dairy cattle production areas.

 

All new dairy production plants are to strictly comply with existing industry regulations. As for plant location, new projects in the north should be located at out of the 100 km radius from existing dairy plants. In the south, the corresponding distance is 60 km or above.

 

Technology

 

Processing technology that are traditional and lacks economic efficiency will be phased out, which includes spray dryers with capacities of less than 250 kg per hour. Manual or semi-automatic liquid milk production tank with a handling capacity of less than 200 kg per hour will also be phased out.

 

Product quality and safety

 

NDRC will continue to look into enhancing dairy product standards. Guidelines on production of dried cheese, whey, cream and other products as well as standardised designs for milk extraction and collection centres will be issued. Standard operating procedures for milk extraction and collection will also be released. By 2012, the NDRC is targeting mechanised milk extraction rate at 80 percent in the major milk production regions. Milk and dairy production capacities of traditional and less efficient methods are to be reduced by 2.5 million tonnes in 2010 and by a further 6 million tonnes by 2012.