Study Of New Policy’s Impact On Chinese Infant Formula Milk Powder Industry

China is the world’s most populous nation, its corresponding number of infants are also enormous. According to the National Bureau of Statistics, the current Chinese0-3years old infants number has reached69million, with an annual increase of15million or so. Breast milk is the natural and optimal infant food. But not all infants can get breastfeeding, and in China the proportion of infants receiving breastfeeding is on the low level, with shorter feeding period. This will inevitably lead to a huge demand for infant milk powder.On the occasion of this opportunity, it is a good time for our milk powder companies to develop vibrantly and flourish. But our infant formula milk powder market development has experienced many ups and downs. From2004to2008, the "Poor Quality Milk Powders Event" in Fuyang City and the "Melamine Incident" stung people’s most sensitive nerve every time. Although our milk powder industry has really achieved undeniable success, but it has deviated from the correct way several times in its development process.In these incidents, domestic consumers suffered so much damage that their confidence in domestic milk powder fell to a very low level. The imported milk powders were being popular during the depression of domestic ones. They expanded their market share and increased prices, resulting in the fact that Chinese consumers are facing the most expensive milk powder in the world now. In accordance with the announcement, the highest price increase of foreign milk powder accumulated more than60%. In such a temptation of high profits, many fake foreign milk powder entered the Chinese market to fish in the troubled waters.Faced with this chaotic situation, the Chinese government will not sit idly by. Food and Drug Administration Office, the Ministry of Industry and Information Technology and other seven ministries jointly submitted a "Advice on the Work of Further Strengthening the quality and safety of infant formula milk powder" to the State Council, and it was approved and forwarded. The Advice proposed many requirements on the behavior of production, sales, regulatory and the development of this industry. Since the policy has been introduced, these requirements are bound to have a profound impact on the industry. Along with more stringent regulatory, enterprises are facing greater pressure on security operations. And to improve the informationization level of management is an inevitable trend, will this develop a win-win situation for businesses and consumers? There are requirements for the limits of production, and compliant businesses can continue to run while non-compliant enterprises are faced with the situation of rectification or even out of the industry. The number of enterprises may possibly reduce, and to encourage and support merger of corporates will exacerbate this trend. The impact of the policy on infant formula milk powder industry is becoming an urgent subject to study.Firstly, this paper reviews the existing studies on the industry, quality, brand, products traceability system and consumer behavior of infant formula milk powder, providing a certain theoretical basis for the analysis of the New Policy. Next, historical review and definition are given to this industry. This paper also uses the empirical analysis to compare the changes of Chinese dry dairy production, milk powder production and import volume vertically, thus illustrating the status quo of our infant formula milk powder industry.The study on the effects of the New Policy is mainly in the following aspects:First, infant formula milk powder is going to be managed in accordance with "Good Manufacturing Practice of Drugs". And this can enhance the safety and production standards of the whole industry including existing enterprises and new entrants.Second, electronic informationization management system would help consumers and regulators get relevant information about the production chain of infant formula milk powder. This can reduce information asymmetry and help restore domestic consumers’confidence in domestic milk powder.Third, limiting infant formula milk powder production methods helps to clear the existing speculative and profited believers in the industry. However, this may add barriers to the new entrants.Fourth, to encourage and support merger and reorganization of corporates will reduce the number of enterprises and increase market concentration, which helps produce "efficiency gains" and conduct technology progress. But increased market concentration will cause corporate market power increases.Fifth, strengthening the supervision and regulation helps regulate behavior of enterprises. The announcement lists of producers, importers and products also helps consumers distinguish the authenticity of products, thus promoting the formation of social supervision mechanism.If the New Policy can get in-depth implement, it would greatly enhance the products’quality and safety of whole industry, and it would also help to restore consumers’confidence in domestic milk powder brand. But the policy formulation and implementation is not no-cost and sometimes it can be relatively low efficient. Furthermore, this paper proposes several measures to ensure the products’quality and safety and to help the industry develop towards a more orderly, standardized, healthy direction:First, strengthen professional ethics education of production and supervisory staff; Second, strengthen scientific research and technological development; Third, establish our own brands and enhance their competitiveness.This paper mainly uses the asymmetric information theory, the price discovery process models, industry barriers and other theories to study the impact of the New Policy. In relative to this industry, such research is still relatively scarce. Therefore, it would be innovation of this paper. However, due to the difficulties of data collection in the industry, this paper does not establish a quantitative analysis of econometric models, making the research not very deep, which is regret for this article. Since the time interval between paper writing and policy launch is short, the study of policy impact in the text is built on the basis of my analysis. Whether the reality will be like this or not has to be observed in the future. I will continue to track the impact of the New Policy and keep studying, in order to verify the analysis. Furthermore, in the future development of the industry, whether the proposed recommendations can play a role or not will take time to verify.