Multi-Million Aid for China's Dairy Industry

By Wei Chengwu
Published: 2008-09-26

Translated by Liu Peng
Original article
: [Chinese]

Chinese government has intoduced relief measures to help the local dairy industry, which is reeling from the melamine-contamination scandal.

On Sept 25, the Agriculture Ministry released a statement urging dairy enterprises to continue buying milk from dairy famers, so as to stabilize the domestic milk production market.

The call had come after several local governments extended financial subsidies to affected dairy farmers.

Just a day before the ministry’s public statement, the Inner Mongolia autonomous government extended aids to affected dairy farmers and milk collection stations.

The local government neither specified the given amount nor the applicable timeframe, only stated in a notice posted on its website that the financial support would be in place until a "good turning point" dawned on the industry.

In Hebei, the provincial government came up with a 316-million-yuan reflief package, subsidying dairy farmers with 200 yuan for each cattle they owned.

The Tangshan municipal government in Hebei province also introduced incentive measures to encourage milk processing enterprises to purchase milk from dairy farmers.

Between Sept 16 and Oct 18, the municipal authorities would give 4,500 yuan for each ton of milk powder produced by the enterprises using milk collected from dairy farmers.

The Chinese dairy industry encountered a confidence crisis following official confirmation that babies had developed kidney stones after drinking melamine-tainted infant milk power.

For the past two weeks, some 20% of the milk powder producing companies were found to have used melamine in their products; in addition, the toxic industrial chemical was also detected in other liquid milk products, such as packaged fresh milk and yogurt.

The melamine-scare had kept consumers at bay and sales of local milk products plunged. For instance, Mengniu and Yili, two industry giants, had reportedly saw their sales order dropped by some 80%. Therefore, the two companies had also collected less milk from dairy farmers.

The two dairy giants provided jobs to about one million workers through direct and indirect employment and affiliated industries. If the two collapsed, it would trigger massive job losses and other social problems.

Therefore, the Inner Mongolia autonomous government decided to spend 100 million yuan in aid of milk production and collection stations in the province. Further more, the local government would assist the two dairy giants in obtaining tax relief and bank loans if needed.

The melamine-tainted milk scandal, orginally discovered in the Hebei province, was widespread and among the affected provinces included Shanxi, Inner Mongolia and Shandong; and some dairy farmers had resorted to discarding milk collected after failing to sell the supplies due to diving demand.