DAIRY TYCOON: A worker inspects products at Inner Mongolia Yili Industrial Group Co. Ltd., one of China's top dairy producers. Recent supervision will help eliminate small unqualified dairy producers and help stronger ones take up larger shares of the market (REN JUNCHUAN)

Nearly half of China's dairy enterprises will be forced to suspend operations or close their facilities following a watchdog inspection that found many dairy producers have been operating below quality safety standards.

Only 643 dairy producers, 55 percent of China's 1,176 nationally registered dairy companies, passed a recent inspection of the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) and the State Administration of Industry and Commerce (SAIC), said Li Yuanping, spokesman for AQSIQ. A total of 426 dairy producers will be closed indefinitely; another 107 will be suspended until they comply with the AQSIQ's standards.

The inspection was conducted in response to increasing concerns over dairy food scandals in recent years. The scandals have resulted in a consumer backlash, as many turn away from domestic producers and seek out foreign alternative dairy brands.

Scandals

The recent wave of dairy scandals started in 2008 when adulterated milk powder produced by Hebei-based Shijiazhuang Dairy Co. killed six infants and caused more than 12,000 other infants to be hospitalized. The milk powder was tainted with melamine that caused kidney stones and other complications. Several of the company's top managers were sentenced to hefty prison terms and the company was ultimately dissolved following the public's outcry.

The following year, Chenyuan Dairy Co. in east China's Zhejiang Province was closed after leather protein was found in its products. Leather milk, using leather and hair as the main source of protein, can result in heavy metal poisoning. Authorities wouldn't comment if anyone was sickened in that case.

Distrust for mainland dairy products has caused a surge of mainlanders to flock to Hong Kong and Macao to scoop up infant formula, causing a shortage in the two special administrative regions.

Corrections

The AQSIQ issued orders in November 2010, requiring all dairy companies to reapply for production licenses by the end of last March or face penalties. To obtain the licenses the companies first had to pass the AQSIQ's inspection parameters. The AQSIQ sent 25 teams to supervise the quality testing.

Li said quality supervision departments have already cancelled production licenses to those producers who failed the inspections. Supervision over dairy producers will be handed over to local quality supervision departments following the inspections.

For local level supervisors, the AQSIQ demanded that subordinate quality supervision departments strengthen supervision over dairy makers who have passed the test to ensure they continue to follow guidelines. The quality supervision departments must also strengthen their law enforcement to crack down on unlicensed production.