China’s dairy sector is undergoing a major transformation. Over the past decade, the government has pushed hard for dairy self-sufficiency. This effort accelerated during the pandemic, when food security became a national priority. As a result, China rapidly expanded domestic milk production.
At the centre of this strategy is the rise of large-scale industrial dairy farms. These “mega-farms” use advanced genetics, imported high-yield cows, and automated milking systems. Consequently, national milk output climbed to nearly 42 million tonnes in 2023, surpassing official targets ahead of schedule. Meanwhile, small backyard farms have steadily disappeared, as large operations now dominate the industry.
However, demand has not kept pace with rising supply. In recent years, per-capita dairy consumption in China has declined. Economic pressures have reduced household spending, while changing diets have slowed growth in liquid milk consumption. In addition, demographic challenges, including record-low birth rates,s have weakened demand for products such as infant formula.
This mismatch between supply and demand has created a structural surplus. Raw milk prices have fallen below production costs in several regions. As a result, many smaller and less efficient producers are consolidating, while others are exiting the sector altogether.
The surplus has also reduced China’s need for imported dairy products. In 2023, total dairy imports fell by about 12%. Whole milk powder imports dropped even more sharply, declining by nearly 38%. Consequently, key suppliers such as New Zealand, the European Union, and Australia have seen lower export volumes to China.
At the same time, China is beginning to test its potential as a dairy exporter. Although volumes remain modest, exports are gradually increasing. In 2024, China is expected to ship around 70,000 tonnes of dairy products abroad. Powdered milk is finding markets in Southeast Asia, Africa, the Middle East, and Central Asia. Therefore, China is slowly moving from being purely import-dependent to becoming an emerging export player.
Overall, China’s dairy industry now stands at a turning point. Strong production growth has improved self-sufficiency, but weak domestic demand has reshaped trade flows. If this trend continues, China could play a more active role in regional dairy export markets in the coming years.
