Baby formula gets new import rules

China's authorities released a policy Thursday to further strengthen the quality and safety of baby milk products, a move intended to restore consumer confidence in the domestic dairy sector.

The policy, released by nine ministries and commissions including the China Food and Drug Administration (CFDA) and the Ministry of Industry and Information Technology (MIIT), prohibits repackaging imported baby formula from large bulk packages into small packages and says that baby formula must be labeled in Chinese before being imported to the mainland.

Companies exporting baby formula to the mainland must register with the authorities before May 1, 2014, Lin Wei, an official with the Administration of Quality Supervision, Inspection and Quarantine, told a media briefing Thursday.

The strict rules for imported baby formula products are the highlight of the new policy, which targets a market that is currently in chaos, Song Liang, an analyst

with the Distribution Productivity Promotion Center of China Commerce, told the Global Times Thursday.

Because the profit margin on baby formula is high, many domestic firms repackage imported products into smaller sizes or produce goods in their own overseas plants and claim they are imported.

Only 20 out of the 200 "New Zealand" baby formula brands sold in China are genuine, the New Zealand Infant Formula Exporters Association said in April.

Online purchases of imported products are also growing quickly, which can lead to quality problems as the sector has yet to see any regulatory laws, Wang Dingmian, former director of the Dairy Association of China, told the Global Times Thursday.

China has 127 baby formula producers, but more than half the market is held by foreign brands, Wang said.

The newly released policy also requires that baby formula be managed in accordance with pharmaceutical rules, and that baby formula producers own and control their own milk sources.

The moves, which aim to enhance the safety of domestic baby formula products and promote scaled production, came after the MIIT said Tuesday it expects that within two years, 70 percent of the sector will be dominated by 10 large domestic baby formula producers with revenues exceeding 2 billion yuan ($326.4 million).

Song Kungang, secretary-general of the China Dairy Industry Association, suggested Thursday that the CFDA rule out producers with quality problems and tighten verification for baby formula production licenses.

China Mengniu Dairy Co announced Tuesday that it will acquire milk powder firm Yashili International Holdings Ltd, and analysts said the sector would see an increasing number of takeovers in the near future due to government policies and market competition.

Song said there are currently over 120 domestic baby formula brands, but two-thirds will exit the market in three to five years.

However, Wang said that because milk products have a short shelf life, it is better to use local resources to make the products, and then sell them to local consumers.