domestic dairy gets six more months
retaliation, yes; but a standards-first reset at home, too
Beijing pushed its anti-subsidy probe on EU dairy citing case complexity.
The case covers EU cheese (HS 040610–040690) and high-fat milk/cream (HS 04015000).
The extension lets two new domestic standards take effect in September and bed in through the Spring Festival 2026 peak season.
Any EU re-entry faces tighter equivalence and a market that has had a full season to adjust on Beijing’s terms.
retaliation frame
Coming immediately after the EU confirmed extra tariffs on most PRC EVs, the dairy probe joins parallel actions on pork (extended to 16 December 2025) and brandy (five-year duties with undertakings from 5 July 2025).
EU dairy exports to the PRC were worth €1.7 bn in 2023, roughly 15 percent of the bloc’s total.
The retaliatory angle ought not be downplayed. But that’s only half the story.
the domestic lever: standards, sequencing
From 16 September, two new rules will reshape the dairy market.
The first bans the use of reconstituted milk in UHT products, closing a loophole that long favoured cheap powder fillers.
Smaller private-label players that leaned heavily on imported powder will be squeezed, while majors like Yili and Mengniu had already shifted away. The result will be portfolio clean-ups and stricter labelling that narrows the SKU (Stock Keeping Unit) mix.
The second is a new fermented-milk standard (GB 19302-2025) that raises the bar on labelling and expands permitted raw materials.
The inclusion of concentrated milk improves the feasibility of long-haul transport and helps processors hit protein targets, while also creating scope for more innovation in chilled and pasteurised segments.
Together these moves extend supply chains, imrpove consumer clarity, and shift the market toward chilled and pasteurised innovation rather than powder work-arounds, argues Zhong Kai 钟凯 China Food Information Centre director.
This is the 2025 No. 1 Document’s ‘production–trade coordination mechanism’ in play: using TBTs/standards, inspection and labelling as much as trade defence to give space to domestic upgrades.
Any EU re-entry in 2026 will face stricter equivalence checks and narrower SKUs.
ingredient risks - and opportunity
At stake is not just cheese and cream but the ~C¥100 bn ingredients market, still 70–80 percent import-reliant. The chokepoints are whey, skim milk powder and caseinates that feed bakeries, tea chains and infant formula.
This dependency is the sector’s biggest vulnerability, argues Shi Yudong 史玉东 Mengniu Dairy R&D director. Firms must expand deep processing capacity, strengthen core R&D, and secure key raw materials.
Industry leaders show the way. Junlebao is signing partnerships with major tea and coffee chains and localising high-end cream production.
Policy points the same way.
Chinese Nutrition Society advises 300g of dairy equivalents/day; MARA officials flag cheese as a sink for seasonal milk surpluses; while consumption is up 120 percent in five years on foodservice demand.
EU cream/cheese exposure (≈US$572.5 million in 2023; France 37 percent) is squarely in the line of fire.
domestic reality
The sector remains in a prolonged downturn, now in its third year.
In Q1 2025, Yili posted C¥32.94 bn in revenue (up 1.46 percent) but saw net profit fall 17.71 percent y-o-y. Bright Dairy’s revenue dropped 0.76 percent, with net profit down 18.16 percent.
Regional producers fared worse, with Yantang Dairy reporting a 11.8 percent Q1 revenue decline and Western Pasture posting a 20.9 percent drop.
Breaking the dairy sector free from cyclical crises requires confronting misconceptions about milk supply, demand and market structure, argues Le Yongjun 雷永军, Putian Shengdao Strategic Consulting chair.
Le characterises the current situation not as genuine surplus, but as 'relative excess' caused by weakened consumer demand and misaligned market strategies.
Culling dairy herds, a frequent short-term response, is strategically counterproductive, Le says, worsening long-term import dependency and pricing instability.
But herd reductions continue: Holstein cow stocks fell 4.2 percent y-o-y in June. An example of stability returning to the sector claimed MARA at a July presser.
In truth, prices are highly regional: ~¥1.1 per kg spread between surplus heartlands (NE/NW, cheapest) and high-cost provinces (e.g., Gansu, Hainan).
That gap explains the policy push for GI/regional milks as a value bridge.
the spectre of imports
On a strict HS 0401–0406 basis, 2024 dairy imports were ~2.6 million tonnes, down from the 2021–22 peak; H1 2025 was about 1.39 million tonnes.
Early-2025 shows the same tilt seen in official breakdowns: whey and cheese up double digits, packaged/long-life milk softer.
On the composite ‘乳制品’ dataset (HS 04 plus infant formula HS 1901.10; see note below), Jan–May 2025 shows
whey up about twenty-three percent y-o-y
butter up about twenty-two percent
cheese up about thirteen percent
packaged milk down about four percent
big-bag powder roughly flat after a ~twenty-three percent decline in Jan–Nov 2024
Industry scenarios bracket 2030 imports anywhere from 8 million tonnes to 18 million tonnes (LME), depending on domestic yields, substitution policy and demand growth.
Even at the low end, the PRC will remain the world’s largest dairy importer.
Overall PRC dairy import reliance will continue long term, argues Song Liang 宋亮 Xinhua senior dairy industry analyst.
But the composition will matter more than the headline: more premium, more chilled/pasteurised, fewer powder work-arounds.
note: HS-04 mass ≈ 2.6 mt (2024). MARA ‘dairy products’ (乳制品: HS-04 + HS 1901.10) ≈ 15–16 mt LME on MARA’s dry×8/liquid×1.
Different LME methods (FAO/Rabobank) can read lower but show the same mix shift.
leveraging a half year
The extension is only six months, but it lands at a decisive point.
By running the clock past the standards reset and CNY-2026, Beijing lets domestic firms compete a full season under tighter GBs while customs/labelling practice beds in.
Away from home, international suppliers (Australia, New Zealand, UK) stand to benefit.
When (or if) EU lines return, they face narrower SKUs, stricter labels and better-embedded rivals in whey, butter/AMF (Anhydrous Milk Fat) and selected cheeses.
In short: tariffs are the headline risk. Non-tariff equivalence is the bigger hazard.
This connects directly with the subsidy story: what began with state support for beef and dairy production is now being carried downstream into consumption.
The full picture more than just farmers or processors, but about how state levers are being pulled across the whole chain, from inputs to end-markets.
