The Infant Formula Exporters Association says new rules set set by China will probably see some smaller infant formula companies fail.
The new regulations, requring all such manufacturers exporting to China to be registered, start on Thursday.
The association's chair Michael Barnett says the Chinese are over-reacting to past problems, which include the mass-poisoning of babies by milk powders contaminated with melamine and sold by the Sanlu company - in which Fonterra had a 40 percent stake - and 21 other companies.
The rule changes mean that initially up to 50 New Zealand companies won't be able to export to China.
Mr Barnett says this will have as harmful an impact as last year's botulism bungle by Fonterra, in which customers for Fonterra whey powder were worried about the safety of infant milk powders.
Mr Barnett says the survival of some companies will depend on how quickly the Ministry for Primary Industries can get access re-opened for their product.
Nine out of 10 may fail
And an agriculture professor expects nine out of ten infant formula companies to fail to make the list of approved exporters that China releases on Thursday.
Lincoln University professor of agribusiness Keith Woodford said it was 'game over' for most exporters who did not also manufacture the formula themselves, and so could not guarantee the sort of food safety traceability that Beijing was now demanding.
Separately, the Labour Party says it's concerned some manufacturers could be locked out of China for many, many months.
China carried out an audit of New Zealand's infant formula market in March and told 12 out of 13 manufacturers they need to make improvements to their systems if they want to keep exporting there.
The Ministry for Primary Industries is refusing to publicly release the audit, which details the required changes, saying it's commercially sensitive.
But it says the changes range from minor to large capital investments and that it doesn't know when the manufacturers will be allowed to start exporting formula produced from May.
Damien O'Connor Photo: RNZ
The Labour Party's primary industries spokesperson Damien O'Connor says the infant formula industry has been let down by the Government and the Chinese are now dictating how it should be run.
"This whole thing makes MPI look like the Dad's Army of diplomacy. The Minister doesn't know what the companies have to do, MPI can't provide the technical advice and the companies are left in the dark."
But chief executive of Westland Milk Products, Rod Quin, told Radio New Zealand that it's confident of achieving registration and expects to be back in commercial production of infant formula within two weeks.
