Has China's dairy market recovered from the 2008 melamine scandal? Quantitative evidence and policy implications

This study assesses the 2008 melamine scandal's impacts on China's dairy market and derives policy implications. Specifically, time-series data from 1995 to 2024 are used to assess the changes and trends in China's milk production, dairy product imports, total dairy product consumption, and self-sufficiency ratio through graphical analysis and then to assess the melamine scandal's impacts on China's milk production and dairy product consumption via regression analysis. This study suggests 3 major findings: First, while China's total milk production increased steadily by an average of 2.31 mmt per year from 1995 to 2008, it fluctuated around a flatline from 2009 to 2018 and the major factor for the 10-year stagnation was very likely the melamine scandal. Second, the melamine scandal's impacts on China's total dairy product consumption were relatively limited and the significant gaps between domestic consumption and production were met through increased dairy product imports, from 3.15 mmt in 2008 to 16.47 mmt in 2018 and reached a record high of 22.65 mmt in 2021. Third, the rapid increase in China's imports reduced its dairy product self-sufficiency ratio steadily from 91.12% in 2008 to 62.52% in 2021, resulting in significant policy concerns about whether China depended too much on dairy product imports. While the melamine scandal severely damaged consumer confidence in domestic dairy products and it took 10 years for China's milk production to recover to the 2008 level, China must take serious measures to improve its food safety and avoid safety scandals and outbreaks. Also, China is likely to remain as a large dairy product importer and continue to use international trade as an effective way to balance its domestic demand and supply of dairy products.