Subsidies for domestic milk brands

Some domestic up-market dairy brands are set to receive a government subsidy to promote merging and acquisition within the industry, a senior official of the Ministry of Industry and Information Technology said on Tuesday.

Gao Fu, an assistant inspector of MIIT's consumer goods department, told National Business Daily the government will promote dairy sector consolidation focusing on some high-end powder brands, but declined to give details on the brand names.

But earlier reports revealed that five Chinese dairy companies - Yili Industrial Group Co Ltd, China Mengniu Dairy Co Ltd, Feihe International Inc, Heilongjiang Wondersun Dairy Co Ltd and Tibet Treasure of Plateau Yak Milk Co Ltd - are likely to become the first batch to benefit from the government's 30 billion yuan subsidy package to help them compete with international rivals.

Wang Lirong, director of the general affairs department of the China Dairy Industry Association, did not deny the names and said it is a sensitive period, when China Daily contacted her.

MIIT will hold a news conference this Saturday to release the draft that includes loans from banks, provincial subsidies and tax benefits to foster the growth and merger and acquisitions of infant formula companies over the next five years and to cultivate three to five companies, each with an annual sales revenue exceeding 5 billion yuan ($806.5 million) by the end of 2018, according to a report by Chongqing Economic Times.

Yu Ningjiang, the deputy general manager of Wondersun Dairy, said the government has strict standards to decide which companies will receive the subsidy.

He was quoted by Chongqing Economic Times as saying: "First, it has to be domestic brands and second the companies must have a complete industrial chain that includes their own brands, farms to control the quality of raw milk and a strong ability in research and development."