Who is going to supply the milk to China's South?

China's dairy industry has experienced rapid expansion in recent years, with an average annual growth rate of 23.8 percent from 2000 to 2006. However, there exists a serious geographical distribution imbalance in milk production and consumption. Approximately 85 percent of China's milk is produced in northern China, where 40 percent of the country's population reside. In contrast, only about 15 percent of the milk is produced in China's south, where 60 percent of China's population reside. This has resulted in a significant gap between milk production and consumption in southern China and this gap is expected to rise. This paper considers China's milk demand and supply situation, analyzes the likely potential for China to expand its milk production and explores options for meeting milk demand—supply shortages. Policy and trade implications are discussed