CHINA is growing as a prime market and importer of dairy and other food and agriculture from the European Union, especially since the 2008 tainted milk powder scandal still impacts Chinese consumers.

Ireland, the Netherlands, Poland and Slovenia will expand dairy and meat production to meet increasing demands from China, according to representatives of those countries' consulates general in Shanghai. They addressed a briefing on China-EU trade on April 29.

EU countries are known for high-quality food standards and food security.

The EU is the third largest export market for China in agriculture and food and China is the fifth largest export market for the EU, said Austin Gormley, consul general of Ireland in Shanghai, who presided at the briefing. Ireland produces around 10 percent of the world's infant formula, he said.

In 2008, six babies died and an estimated 300,000 were sickened by Chinese infant milk powder deliberately laced with the industrial chemical melamine to fake its protein content. Although people were punished and reforms implemented, consumer confidence in China's food safety has not been restored.

Gormley said Ireland will expand dairy and pork production by 50 percent by 2020 in its Harvest 2020 Plan. Two large dairy companies, Kerry and Glanbia, have links with Chinese dairy companies.

"Ireland will not account for a large market proportion, but certainly for high quality as a supplier," Gormley said.

EU efficiency

The Netherlands is the EU's second largest exporter of agriculture products because of high efficiency, said Peter Potman, consul general of the Kingdom of the Netherlands in Shanghai.

Last year, the Netherlands reached 2 billion euros (US$2.6 billion) in exports to China, half of which was generated by milk powder. "It's one of the drivers to our exports to China," said Potman.

Andrzej Pieczonka, first counselor of Poland's consulate general in Shanghai, said many Polish companies are turning to East Asian countries such as China. Dairy and dairy-related products are at the top of the trade list.

"We will present Polish food to Chinese consumers through international channels such as Tesco and Carrefour that are familiar to local consumers and meanwhile are owned by companies of EU countries to achieve a win-win situation," Pieczonka said.

Slovenia is dedicated to developing food security systems that can provide quick reaction and ensure consumer safety if poisoning cases occur.

"With the security system, some food can be announced and moved off the shelves in a few hours not only in Slovenia but also in other countries," said Drago Napotnik, consul general of the Republic of Slovenia in Shanghai.

While the EU countries want to sell high quality food to China, Chinese companies are looking to overseas production since resources are being exhausted and costs are rising on the mainland.

Chinese dairy giants have purchased overseas land and foreign companies to produce high-quality raw milk. It is transported back to China to produce infant formula and milk powder to compete with local and international companies in quality.

Investing overseas

The companies include Shanghai-based Bright Food Group with a plant in New Zealand, Yili Group that received approval last month to invest in a new plant in New Zealand, and Synutra International Inc that recently announced it would build a drying facility in France.

The four consular representatives said EU countries welcome Chinese dairy sector investment but emphasized that Chinese companies should first rebuild domestic consumer confidence.

"As far as I know, a large Xi'an (Shaanxi Province) investment company, which has nothing to do with production of milk powder, bought a factory for milk power in the Netherlands. They don't buy land but they buy production facilities to get into that market," said Potman.

"This is a more straightforward business proposition, which we welcome as investment if it brings jobs," he said.

The Netherlands also sees many Chinese individual investors studying or working to start dairy business, since the milk powder industry in China is at a very challenging stage, Potman said.

"There is such a loss of confidence. Chinese consumers think everything that comes from abroad is considered to be better. In the long run, this is not a healthy situation because there will not be enough supply," he said.

Representatives of Ireland, Poland and Slovenia also welcome Chinese investment in their dairy sectors but said Chinese dairy companies should get back on track producing quality products that Chinese consumers trust.

Irish dairy company Kerry has already cooperated to produce infant formula with Beingmate, a Chinese infant formula producer based in Hangzhou City in Zhejiang Province. The Chinese company also has some Dutch cooperation.

Pork exports to China from Ireland, Slovenia and Poland are growing rapidly. Ireland expects a 50 percent growth in pork production and a doubling in seafood production by 2020.

As a major beef exporter in the northern hemisphere, Ireland is making progress in efforts to gain access to the China market, Gormley said. EU beef is banned in China because of concern over mad cow disease.

By 2018, China will be the biggest global importer of food, according to the US Food Industry Association.

"There will be an expanded middle class, at about 40 percent of China's population by 2020. This group will create huge demand for high-protein and high-nutrition food, and EU countries will play an important role to supply their need," Gormley said.