| Nowadays along with the process of "two-child policy", population of China increases with a number of ten million newborns every year, which has stimulated a high demand for milk powder. At least800,000tons of baby formulas are needed every year, which generates output about30billion RMB.It seems Chinese dairy demand remains robust driven by an increasingly population. However, because of a continuing distrust of the quality of Chinese sourced supplies, foreign dairy products have been grabbing Chinese market share since2008.Before2008, when the Sanlu melamine scandal was exposed, Chinese brands accounted for70%of the dairy market, while foreign brands accounted for only30%. However, in2010, Chinese and foreign brands split the fifty-fifty and moreover, in the next four years foreign brands occupy over half of the market.At the year, tens of thousands of infants and children around China were sickened after consuming Sanlu produced milk powders which were added with a chemical additive named melamine by dairy farmers for exploring higher profits through faked protein counts. It was reported that tainted milk powder killed at least six. Moreover, in2010, it was reported that some processors added industrial gelatin (some was abstracted from abandoned leather shoes) into the yogurt to make it look sicker. Since then, shocked Chinese consumers shifted their choice to foreign dairy brands. During the years the Chinese government makes every endeavor to enhance the domestic dairy industry’s reputation and compete with dairy companies in Australia, EU, and New Zealand. However, are foreign dairy products really safe? The scandal of Fonterra in2013gave the public an answer with no. Thus, enhancing our Chinese dairy industry and reforming related regulations is of the most importance, not only to take back the Chinese market share, but also to assure the public food safety.Before the melamine scandal, China had20,393milk collection stations scatter across numerous regions. In only eight years Chinese dairy industry had almost quadrupled the production. While considering economics growth, the government at all levels actively encouraged greater expansion of the dairy industry without concerning the national standards for dairy products. Most of the big dairy processors were given permission to set their own standards and carry out their own inspections. Some of them were also labeled as companies with exempt of inspection, which meant that there was no need for regular inspections after they were inspected at the outset of their businesses. The government did not intervene in the inspection of these exempted companies until the tainted milk scandal was reported.In the long term, melamine scandal of2008will likely be remembered mainly for leading a comprehensive reform in the food safety system of China. However, reforming the Chinese food sector is not a small undertaking due to the country’s size. Clearly, China should choose a suitable reform pathway which not only ensures the best results in food safety sector but also takes the country’s economic development course into consider. This paper aims to contribute to this reform process by providing a systematic overview of the Chinese dairy sector and food regulatory system comparing with the situation within the European Union. These are taken as benchmarks, against which China can take its bearings and measure the progress of its reforms.This paper contributes to the existing studies and literatures in three convincing points. First, it provides a better understanding of competitiveness of Chinese dairy industry at various levels in global market. Second, it deeply analyzes Chinese dairy industry supply chain and identifies the problems existing in the industry. Finally, it analyzes and compares the food safety regimes in the dairy sector of both China and EU, which covers the newest policy enlargements in2014.The paper is structured as follows:In the first chapter, the introduction part contains the research background, the significance of the thesis and literatures review of the paper, which paves the way for the following chapters of discussion. Dairy industry is one of the most important food sectors and dairy products can become tainted with a wide range of microbial and chemical hazards. Especially, the quality of milk dairies has been among the country’s top concern on food safety part. The Chinese dairy industry has seen its reputation destroyed after a series of quality scandals. Thus, from the food safety point of view, to improve the dairy safety is of significance both to improve Chinese dairy industry and to strengthen international performance of dairy trade.The second chapter entitled "Status Quo of Chinese Dairy Products" is divided into two parts. Firstly, it introduces both international and Chinese export and import in dairy sector. World dairy exports are dominated by New Zealand, EU and USA, which account for eighty percent of the total global exports. Major import countries are:Japan, China, Mexico, Algeria, Brazil, Saudi-Arabia, Russia and a wide range of Southeast Asian countries. In the second part, it deals with the status of Chinese dairy in the global market. Market Share, Trade Competition Index, Revealed Comparative Advantage, these indexes are usually used to reflect international competitiveness for a certain industry. It is found that the competitiveness of Chinese dairy product is very weak in the international market.In the third chapter, international dairy trade policy is explored with import tariff, non-tariff barriers, and export subsidies. These policies are often used as the tools by countries to protect their domestic industries. Moreover, EU and US’dairy trade policies are discussed respectively. The trade protection instruments of EU are based on Common Agricultural Policy (CAP) while that of US are based on the Dairy Export Incentive Program (DEIP). However, as free trade is promoted by WTO in recent years, these protection measures are removed gradually. Thus trade protection is not an important excuse for Chinese net import in dairy trade.Chapter Four and Chapter Five explored the safety problems existed in Chinese dairy industry both from the inner dairy supply chain and from the comparison with EU countries. Processing and consuming dairy products in China had a short history. The living standard of Chinese people, absence of refrigeration, long periods of food shortages in the first half of20th century led to a very small dairy industry. China had been one of the lowest levels of per capita milk consumption countries all over the world. China’s dairy industry really started after the founding of new China and had gone through five stages-the start-up period, the fast growth period, the adjustment period, the high speed development period and the sound development period.Entering the new century, the Chinese dairy industry developed rapidly and vigorously. Some mega dairy processing companies were established, most modern equipments were introduced, and most advanced managerial ideas and methods were used in the dairy operations. These huge dairy companies fostered their regional monopolies to produce and sell their dairy products. The dairy supply chain has become much more complex with many more firms and institutions. For the supply chain part, several roles and the relationship between them are deeply discussed in the forth. These roles are retailers or wholesalers, milk processing firms, milk collection stations, dairy farmers, research institutions and government agencies. The nature of these different roles and the financial pressures and problems they had are discussed in the forth chapter. During the last decade, the dairy industry was encouraged to grow rapidly from small, locally-based production and consumption to a modern industry with huge processing plants and country-wide wholesaling and retailing. However, Chinese government did not put enough attention to inspection and safety issues at the same time. When the melamine scandal was first disclosed, the government did not even know which of its departments should take charge of it. Some have criticized the government of negligence for the obvious lack of adequate inspections on food safety sector including dairy industry; however, it was not an easy problem to solve. In the fifth chapter, it uses the way of comparison China-EU from various aspects including legislative framework, official controls and dairy industry standards. As a result, it is found out that Chinese legislation has to put more emphasis on specific sub-areas and more importantly, official controls.In the end, all the studies in this paper are summed in the sixth chapter. It is suggested that the co-regulation or co-ordination of both public and private sectors is the most sustainable for reforming the Chinese dairy safety system. Ways need to be found so that all participants in the supply chain have financial incentives to provide clean, safe and healthy products. With China’s economy transitioning from peasant-based to massive commercial production, the clear divisions of different sectors and efficient functioning of them are crucial for the long, stable and sustainable development of the economy. It hopes that this study can help China’s dairy industry to overcome the difficulties in the course of products safety, with which can the Chinese dairy industry make more and more contributions to the growth of China economy. |
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