22 Nov 2013

NZ dairy industry tipped to receive boost in China

8:37 am on 22 November 2013

The New Zealand dairy industry will probably receive a further boost from reforms in China in the future.

Beijing has promised the most sweeping economic and social reforms in nearly three decades.

The 60-point plan includes land and residency reform to make it easier for rural Chinese to migrate to urban areas, a relaxation of the country's one-child policy and allowing markets to play a greater role in the economy.

Harbour Asset Management analyst Oyvinn Rimer has looked at Fonterra's dairy farms and visited domestic dairy players on recent trips to China.

He said welfare reforms known as Hukou will allow rural migrants to settle into cities and give them access to welfare like health care and education which could boost consumption and benefit New Zealand.

Mr Rimer said the welfare reforms could free up money that people may have saved for areas like healthcare, which may be paid for by the state in the future.

As people become wealther, he said, they seem to consume more dairy products and there are opportunities across the whole range, not just infant milk formula.

Mr Rimer suspects the new policy will cause a medium to sharp rise in births in the short-term which could cause high demand for infant formula.

He said that in the past, in some cities, both parents needed to be only children themselves if they wanted to have more than one child. But that is changing so that only one parent will need to be an only child to allow the family to have a second.

Mr Rimer said the reforms are scant on detail and there is no clear timeline for them.