By staff reporter Wang Shanshan

From Caijing Online

The State Council released a new plan for China’s ailing milk industry on November 19. Although the guidelines include provisions for financial support from the government, it also contains a fair measure of candid criticism.

The main problem in milk industry is that it neglected quality control in its single-minded pursuit of sales. Blind expansion resulted in over-production, insufficient resources, and negligence that was at times criminal. Governmental regulator also failed to exercise the proper oversight, according to the guidelines.

With many of China’s largest dairies tottering on the edge of bankruptcy in the wake of September’s milk scandal, much of the State Council’s new plan focused on how to bailout the industry. Options included government loans for struggling enterprises; waiving punishment fees for overdue payments; tax subsidies for the purchase of milk; assistance with issuing bonds and listing on stock market; and funding for milk farmers having in Inner Mongolia, Hebei, Shandong, Shan’xi, Liaoning, and He’nan provinces.

Professionalization was also stressed. One problem made salient by the milk scandal was the conditions of China’s dairy farms. The new guidelines encouraged the construction of modern cow farms and the establishment of organization to promote professional cooperation between dairy farmers. These measures would ensure a higher degree of quality and safety, although they won’t be cheap. It costs several hundred million yuan to run a modern, large-scale cow farm.

Currently, cows in China are typically raised by independent diary farmers who work autonomously. There are very few organizations or co-ops to bring these farmers together. The vice president of Inner Mongolia’s Dairy United Li Zhaolin said to Caijing staff that it was very hard to change this model.

Besides modern facilities, the State Council urged the dairy industry to modernize its business model by adopting large-scale raising, integrating sales and production, improving processing allocation, and by establishing industry-wide standards. The timetable set for these reforms is three years.

Deputy Director of Guangdong Milk Association Wang Dingmian said the new plan shows the government’s resolve to solve the milk industry’s problems, but it’s hard to tell how fast, or effective, the impact of the suggested measures will be.

The biggest challenge is integrating sales and production, said Wang. The government’s plan does not mention how to bring these currently disparate spheres together. The guidelines require future dairy producers to process 70 percent of their output in their own facilities. The capital required to do this might set an impossibly high bar for many independent dairy farmers to clear.