Dairy Products China News

This week’s Third Plenum was the 3rd meeting of the 18th Central Committee under Xi Jinping. It became the subject of particular interest when a senior Communist Party official indicated that it would involve discussion of “unprecedented” economic and social reforms. Expectation has also been stoked by a report from the state think tank, the Development Research Centre of the State Council, which has called for 3 broad areas and 8 key sectors for reform (the “383 plan”). Was it wise to allow such a build up of expectation?

The Communist Party leaders are understood to have indicated that markets must play a more “decisive” role in the economy. This seems entirely in tune with the fact that it is entrepreneurs who are overwhelmingly driving China’s economy. They do so in the face of restricted access to capital, as state owned banks are still highly inefficient in allocating funds, with a remaining bias to state owned enterprises which are rarely the engine of growth – in dairy or any other sector. Yet whilst details remain elusive, shrouded in the usual opaque official wording, reforming the banks and the SOEs seems to have been ducked as an issue. This makes the words about the role of markets and the need to “accelerate the perfection of modern market systems” hard to reconcile with the results – although the timeframe for change driven by the new central team is up to 2020, so patience will be necessary as ever.

This wider environment will continue to provide a barrier to change in China’s dairy industry for some time, it seems, precisely when the government is requiring major change and increased efficiency in the industry. How this contradiction is resolved will be fundamental to the shape of China’s dairy industry of the future.