Academic journal article Asian Social Science

Critical Impact of Latest Quality Issues and China Dairy Market Economic Overview: Comparative Analysis

Academic journal article Asian Social Science

Critical Impact of Latest Quality Issues and China Dairy Market Economic Overview: Comparative Analysis

Article excerpt

Abstract

Although general Chinese economy now is growing fast and takes leading positions in the world, its dairy industry comes across several difficulties. It sustained a number of losses after a series of well-known incidents involving food safety. It is certain that paramount mission of the current market conditions requires extensive studies of critical impact caused. The situation with different dairy products varies, and that's why the author describes in details the milk, cheese, and yoghurt markets. Also it is compared to the markets of Western Europe, Russia, India, New Zealand, Australia, America and Canada. This work attempts to analyze contemporary market situation in a retrospective contemplation of the corresponding dynamics and course of economic and public events, including basic trends, business analytics and adjacent studies in an endeavor to discover and situate a better economic mechanism for the given field. The most considerable result is development of economic and business recommendation that are bound to improve the problematic situation.

Keywords: China, dairy industry, market comparative analysis, quality issues, loss estimation, safety measures and standards, critical impact

1. Introduction

China currently has one of the largest economies, its sustained rapid growth drives it to the 2nd place in the world measured by major indexes such as purchasing power parity, nominal GDP and growing pace (CAGR and other relative methods) (Report, 2013). Since the very moment this country fully joined the world's open market, it started intensively develop all kinds of industries and dairy was no exception from that.

Most of domestic dairy products in China originate from ten provinces that provide roughly 70% of dairy output: Inner Mongolia, Heilongjiang, Henan, Shaanxi, Shandong, Hebei, Jiangsu, Sichuan, Liaoning and Anhui. In a pursuit to increase national dairy production, the government has aggregated these provinces into five dairy regions based on their local conditions and opportunities.

Northeast and Northern areas target to develop milk powder production, cheese, butter and UHT milk; mainly this production is planned to be carried out from large private farms. Western area is designated to production of local specialties such as donkey, goat, yak and camel milk that is not accessible regularly elsewhere in China. Southern region is going to provide pasteurized milk, cheese and yoghurt, as well as protein powder. Large-city surrounding regions, though being geographically separated (Shanghai, Beijing, Chongqing etc), tend to produce pasteurized milk and yoghurt as long as these products are easier to produce in the given conditions (Woolsey, 2010).

Currently the course of dairy industry in China (as well as government politics in this field) is related to increase its outputs up to 48-55 million tons by doubling number of cows and increasing yield per animal (KKR's, 2013). This task is planned to be carried out through increase of cow farms; according to median data, the estimated increase is supposed to be at average 30% higher than today's numbers.

After a number of dairy-related scandals, a lot people in China seem to lose trust in local products, resulting in increased consumption of imported milk, cheese and yoghurt. Dropped revenues made Chinese domestic producers raise prices to the level of imported products.

This was followed by government introduction of tougher regulations on import of dairy products (Wang, 2013).

Foreign producers were given a one-year grace period from the moment of introduction to maintain necessary measures and comply with new standards. However, some sources state that detailed registration procedures and formalities were not released in a timely manner, and currently there is no sustainable information available on the quantity of firms and enterprises that eventually complied.

The history of Chinese dairy standards evolution since early 2000s includes a number of measures, all having direct economic effects to the industry. …

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