June 9, 2008

China's move to trim dairy industry a boost to big players

China's recent policy to streamline its dairy industry from older and inefficient producers will boost the sector's top players in the long run, analyst Morgan Stanley said.

The National Development and Reform Commission recently announced that 2.5 million tonnes of ageing and inefficient capacity would be cut from the sector by 2010. This would further rise to 6 million tonnes by 2012.

Morgan Stanley said the move was likely to be good news for China's two biggest dairy producers, Mengniu and Yili.

However, the impact would likely be felt in the long term rather than near term as the policy mainly focuses on streamlining industry structure, which could take years, the analyst said.