(Yicai Global) Dec. 23 -- China has ramped up its supervision of imported food, with a large amount of foreign milk powder inspected testing substandard. Analysts said this will also weaken its impact on Chinese domestic milk powder brands.
The General Administration of Quality Supervision, Inspection and Quarantine of the People's Republic of China (AQSIQ) announced the list of food and cosmetics which were barred from entry to China in Oct. 2016. Holle, Lebenswert, Allmilk and Berex milk powder were on the list. Also, among the more than 30 overseas milk powder brands spot-checked by Zhejiang province regulatory authorities, 19 fell short of China's national standards, and 60 percent were found to contain banned whey protein.
In addition to the quality problems published, several foreign milk powder brands have also encountered operating difficulties due to bad publicity. Bellamy's Australia Ltd. [ASX:BAL] -- once the top Australian milk powder brand -- logged a lower-than-expected performance and suffered a steep fall in its share price.
In the past five years, China set almost no threshold on imported milk powder, and this resulted in a quality imbalance among imported milk powder in the Chinese market and also exerted a great impact on the Chinese domestic dairy industry. The latest regulations prescribe that unified registration administration applies to both Chinese and foreign milk powder enterprises, thereby raising the bar for the entry of many foreign milk powder brands into China. With the implementation of relevant policies, the once-towering foreign milk powder brands in the Chinese market now face a turning point, and their impact on Chinese domestic brands will also weaken, senior dairy analyst Song Liang told Yicai Global. Chinese brands took a pounding following the 2008 Sanlu Group Co. infant formula scandal, in which domestic melamine-tainted baby formula claimed the lives of six babies and injured hundreds of thousands more, sweeping Chinese parents in droves toward foreign brands, which they perceived as safe. Revelations such as these latest findings therefore leave many Chinese consumers feeling caught between the devil and the deep blue sea.