The Chinese Government is set to issue a formal proposal to prompt consolidation among domestic infant formula firms, a state-run newspaper said, naming Inner Mongolia Yili Industrial Group as one of the likely beneficiaries.

The proposal is part of the Government’s drive to slash the number of domestic infant formula manufacturers over the next five years to 50 from about 200 now, the China Securities Journal said, citing an unnamed source.

By 2018, China expects the top 10 local companies to account for 80 per cent of the domestic market, with the largest three-to-five firms targetting annual sales of over five billion yuan (€613 million), the report said.

The newspaper said Feihe International and Wondersun Dairy were also likely to gain from the consolidation plan, but gave no further details.

Analysts said the consolidation drive is part of a broader plan to boost consumption of local product and allay fears about food safety following a 2008 scandal, when formula tainted with melamine killed at least six infants and made thousands ill.

Last week, the country’s price regulator also handed down record fines to foreign milk powder makers, including Mead Johnson, Danone and New Zealand dairy giant Fonterra, for anti-trust behaviour. (Reuters)