China's Dairy Industry Overview

China is a significant force in the global dairy industry, producing approximately 36 million tons of milk annually. The country's processing capacity reaches about 60.18 million tons per year, underpinned by stringent regulatory frameworks that ensure the quality and safety of dairy products.

Dairy Cattle Management

Advanced genetic technologies, including genetic chips, are pivotal in modernizing dairy cattle management in China. These innovations enhance milk production capabilities and improve disease resistance, reflecting a commitment to modernization.

Milk Production and Processing

The infrastructure for milk production and processing in China adheres to rigorous quality standards. A notable regulation is the prohibition of dried milk powder in drinking milk, emphasizing a commitment to high-quality dairy products.

Cheese and Milk Powder Production

China's cheese sector is experiencing rapid growth due to increasing consumer interest. Whole milk powder production is on the rise, while exports of skimmed milk powder have decreased by 11%. Imports of high-protein whey from the U.S. have surged by 225%, indicating shifts in consumer preferences.

Key Enterprises

Prominent companies in China's dairy industry include Junlebao Dairy Group Co., Ltd., Bright Dairy Holdings, Yili Group, and Mengniu Dairy. Notable corporate activities, such as Junlebao's IPO and Bright Dairy's investment in Synlait, highlight active strategies within the sector.

Export and Import Dynamics

China's dairy imports are projected to reach 17.18 million tons, with the average import price per ton increasing by 10% to $4,428. The volume of dairy imports has grown by 6%, with a significant increase of 11.4% in June. The value of these imports rose by 20.6% due to rising international prices.

Market Dynamics and Challenges

The industry faces challenges such as overproduction and shifting consumer preferences. Strategies being adopted to address these issues include strategic alliances and increased imports. There is growing interest in alternative dairy sources, including sheep milk.

Regulatory Developments

New regulatory standards are set to take effect from September 19, 2025, influencing dairy exports. Additionally, infant formula manufacturers are required to test for the toxin cereulide, underscoring the emphasis on product safety.

International Trade Relations

Trade dynamics include Canadian tariffs impacting farmers and Arla Foods Ingredients expanding in collaboration with Zhongbai Xingye Food Technology. Agreements with Hong Kong for dairy and meat exports illustrate active international trade involvement.

Innovation in the Dairy Sector

Innovation is a driving force in China's dairy sector, with developments like genetic chips enhancing milk production. The National Center of Technology Innovation for Dairy leads initiatives, showcased at international forums like the 2025 IDF World Dairy Summit.

Significant Market Events

Significant events include Junlebao Dairy's stock offering and Bright Dairy's alliance with Synlait. The UHT milk market is projected to reach USD 15.2 billion by 2034, indicating substantial growth potential.

Inner Mongolia's Contribution

Inner Mongolia significantly contributes to China's dairy output, exceeding 7.76 million tonnes in 2024 and accounting for 19% of the national production. The region effectively merges traditional practices with modern innovations.

Fonterra's Investment in China

Fonterra's Chinese market generates 30% of its income, with a $1 billion investment aimed at meeting the growing demand for fats and proteins, highlighting China's strategic importance in the global dairy market.

Research and Development

Nanjing Agricultural University is advancing research on dairy calves' gut microbiota, contributing to the R&D landscape and reinforcing the role of scientific research in developing the dairy sector.

Domestic Milk Production

China's domestic milk production decreased by 6.0% in April due to internal restructuring efforts, highlighting challenges within the domestic production landscape.

Market Competition and Opportunities

Second-tier companies like Bright Dairy, Junlebao, Feihe, and New Hope Dairy are vying for market dominance, striving to secure a strong market position behind industry leaders Yili and Mengniu. Opportunities to broaden collaboration in dairy beyond milk production, such as China-Pakistan dairy cooperation, could shift from traditional livestock development towards modern breeding, processing, and higher-value products.

Environmental Initiatives

A project in Shanghai utilized over 6,000 discarded plastic milk bottles in road construction, showcasing innovative recycling efforts.

China-Netherlands Dairy Trade

China is the leading destination outside the European Union for Dutch dairy manufacturers. China-Netherlands dairy trade reached $2.03 billion in 2025, with the Netherlands identified as China’s second-largest overseas dairy supplier, and infant formula among the main products in the trade flow.

Nestlé’s Modern Cuisine Platform

China is one of the first markets chosen for Nestlé’s Modern Cuisine platform, offering tiramisu and cheesecake solutions. The programme combines a global innovation platform with country-specific adaptations.

Sales of Ultra-High-Temperature Long-Life Cream

Sales of ultra-high-temperature long-life cream are increasing in China and South-East Asian markets. China is identified as an important market for infant formula and premium products, among the rapidly expanding markets in Asia-Pacific, with increasing demand for infant formula and sports nutrition.

Chinese Buyers and Procurement Strategies

Chinese buyers are adjusting procurement strategies, with industrial recombination plants and bakery manufacturers favoring spot purchases from regional suppliers instead of making long-term forward commitments for American milk powders. The contrasting movements in dry whey and milk powder shipments have left physical availability as a central consideration in sourcing decisions, alongside tariff terms.

Regulatory and Safety Standards

China restricts dairy imports from countries with uncontrolled diseases and requires evidence of sanitary safety before granting market access for dairy products. China was mentioned as a potential market for ingredients derived from whey, with market potential rather than confirmed demand. China's purchases of whole milk powder grew rapidly between 2009 and 2014. Imports then fell as inventories built up and demand weakened. New Zealand's farmgate milk price declined during that period.

Cheese Exports

Cheese exports to China increased by 1,000 tonnes, with shipments growing significantly outside the EU.

Brand Value

China’s Yili leads in brand value, while Mengniu takes third place. China's GDP growth is expected to be about 4.3%, below the rates recorded in earlier years. The meeting discussed Danone's operations in China and economic and trade ties. China is expanding high-level opening up, creating opportunities for foreign-invested companies. The country aims to stabilize business expectations and enhance economic and trade relations with the EU and France.

International Market for A2 Milk Products

A2 Milk's products are distributed internationally, including in China. China’s dairy producers are expanding overseas sales as domestic consumption fails to absorb rising output. China's dairy industry is turning to international markets as production growth outpaces domestic demand. The sector exceeded its official production targets for 2025 two years ahead of schedule, contributing to excess supply and pressure on dairy prices.