2017年CRI China's infant milk powder industry set for major reshuffle

China's infant milk powder sector 1 is set to undergo a major reshuffle in the new year when tougher new industry regulations take effect.

Tomorrow will see, what many call the "tightest rules" ever launched by China, come into force.

Under the new rules, infant formula makers 2 have to obtain registration 3 certificates for their formula from China's food and drug watchdog.

Uncertified producers will not be allowed to sell their product in the Chinese market.

Rules also stipulate 4 that one factory will only be able to produce nine different products under three brands.

With around 2-thousand domestic formula products currently being sold without licences, its estimated around two-thirds of the producers could end up being shut down.

Infant formula which has been produced ahead of tomorrow will be able to remain on the shelves until their expiration 5 date.

In a push to clear inventory 6 ahead of the new rules, many milk formula manufacturers have been offering discounts of up to 50 percent in China since August.

The new rules have also seen a number of manufacturing facilities ramp-up to full capacity in a bid to produce as much as possible.

Chen Guanghui is the manager of a Heilongjiang based dairy producer.

"Normally, we're only putting out around one-third of what we're currently producing. They will be sold once they pass the inspection 7. We basically have no surplus these days," said Chen.

As of this week, 33 Chinese infant formula makers have yet to obtain their certificates.

But instead of being shut down, many of these producers are now ripe for potential acquisitions by larger infant formula makers.

Lu Guang is the vice 8 president of Heilongjiang Feihe Dairy.

"Feihe will not rule out acquistions, provided there are manufacturing and processing factories that we deem suitable for our needs," said Lu.

The new rules have prompted major producers like Yili Group to consider expansion both at home, and abroad, as a new factory would mean a potential addition of nine additional products.

Zhang Jianqiu, Yili Group's vice president.

"We have been expanding overseas to grow our global presence, with a focus on natural and intellectual resources. By establishing the world's largest integrated dairy production base in New Zealand's South Island, we have further strengthened our products and reduced any risks that could impede 9 Yili's development," said Zhang.

The upcoming rules also require infant formula manufacturers to specify 10 where the milk originated from, as well as where the formula and the additives 11 were produced.

They also ban any marketing 12 which claims unrealistic health benefits.