China's dairy crisis: impacts, causes and policy implications for a sustainable dairy industry

Abstract

The dairy industry is an important part of the global economy, and the rapidly developing dairy enterprises in China have become increasingly important to the rest of the world. Due to increasing demand for dairy products and support from the government, China's dairy industry has thrived in recent decades. But rapid growth has been accompanied by a suite of industry/structural problems associated with raw milk supply, processing enterprises, product retailing and profit allocation. Thus, a major dairy crisis took place in 2008, triggered by a notorious melamine-contaminated milk event. The dairy crisis has had devastating impacts on China's dairy industry, negatively affecting farmers, consumers, processing enterprises and even government agencies. The Chinese government has developed rigorous measures to prevent future incidents of this sort, including the enactment of the Food Safety Law and reinstatement of the no-exemption quality inspection of food products. In this paper, we analyse the wide-ranging impacts and root causes of the recent dairy crisis in China. We also examine how the crisis has been handled and what measures have been put in place in its aftermath. Then we discuss policy implications for promoting the sustainability of China's dairy industry. Lessons learned from this crisis, as well as implications for policy improvements, should be valuable for the development of a sustainable dairy industry in other regions of the world.