ADB contributes to $125m China dairy loan

The Asian Development Bank has committed $62.5 million in debt capital to Saikexing, China’s fourth-largest dairy, to increase the country’s domestic fresh milk supply.

The debt forms part of a $125 million loan facility set up between ADB and Saikexing’s parent company, Inner Mongolia Saikexing Breeding and Biotechnology Group.

The two year facility will help the dairy reduce environmental pollution and increase the domestic supply of safe dairy products.

A milk scandal in 2008 eroded trust in domestically produced dairy, particularly baby milk and fresh dairy products, and spurred demand for imported milk.

The loan will also add 20,000 cows to the dairy’s 100,000-cow herd, while increasing the number of farms from 27 to 31.

Saikexing will also use the financing to increase the amount of fertiliser made from its herd’s waste, in an effort to reduce pollution.

“Food security and food safety are major concerns for [China] and this project will promote modern, sustainable dairy farming practices to minimise pollution and improve product safety,” said ADB’s private sector operations department agribusiness investment unit head, Martin Lemoine. “It will also help set environmental and food safety benchmarks for dairy farming that will have great potential for replication elsewhere.”

Saikexing also provides employment opportunities to Chinese ethnic minorities and uses smallholder farmers to supply some of its forage, according to the ADB.

Saikexing, headquartered in Hohhot, Inner Mongolia, is a subsidiary of one of China’s best known dairy companies, Mengniu. The listed business has several state-owned companies as minority investors, and owns a series of subsidiaries in China and abroad.

In 2015, ADB assistance totalled $27.2 billion, including co-financing of $10.7 billion, according to the bank.

The project is the development bank’s first direct non-sovereign assistance investment into a livestock company and first private sector agribusiness investment with a specific focus on both environmental protection and food safety. Japan, the US, China and Australia are ADB’s top shareholders.