At the heart of this shift lies a decade-long policy push for dairy self-sufficiency, accelerated in the pandemic era. Beijing’s emphasis on large-scale industrial “mega-farms,” advanced genetics, imported high-yield cattle and automated systems helped lift China’s milk output to nearly 42 million tonnes in 2023 — surpassing government targets ahead of schedule. Smaller backyard farms have been eclipsed by these operations, which now dominate the country’s dairy landscape.

However, domestic consumption has not kept pace with rising supply. Per-capita dairy use in China has slipped in recent years as economic headwinds, shifting dietary habits and demographic headwinds — including record-low birth rates — weaken demand for liquid milk and products such as infant formula. This imbalance has created a structural surplus that pushes raw milk prices below production costs and forces producers to consolidate or exit.

The domestic surplus has also dampened China’s reliance on imported dairy. In 2023, overall dairy imports dropped about 12%, and whole milk powder shipments plunged nearly 38%, as New Zealand, the EU and Australia saw volumes to the Chinese market contract. Simultaneously, China is modestly expanding its own dairy exports — around 70,000 tonnes in 2024 — with powdered milk reaching markets in Southeast Asia, Africa, the Middle East and Central Asia, signaling a nascent export ambition.