Can the world quench China’s bottomless thirst for milk?
- The Guardian
- Science & Environment
China’s leaders have championed milk as the emblem of a modern, affluent society – but their radical plan to triple the nation’s consumption will have a huge environmental cost.
By Felicity Lawrence
Beijing-based film-maker Jian Yi, now 43, clearly remembers the arrival of fresh milk in his life. It was an image of it, not the real thing. “It was the 1990s, and I first saw it in an advert on TV. The ad said explicitly that drinking milk would save the nation. It would make China stronger and better able to survive competition from other nations.”
Like most ethnic Han, who make up about 95% of the population, Jian was congenitally lactose-intolerant, meaning milk was hard to digest. His parents did not consume dairy at all when they were growing up; China’s economy was closed to the global market and its own production very limited. Throughout the Mao era, milk was in short supply and rationed to those deemed to have a special need: infants and the elderly, athletes and party cadres above a certain grade. Through most of the imperial dynasties until the 20th century, milk was generally shunned as the slightly disgusting food of the barbarian invaders. Foreigners brought cows to the port cities that had been ceded to them by the Chinese in the opium wars of the 19th century, and a few groups such as Mongolian pastoralists used milk that was fermented, but it was not part of the typical Chinese diet.
As China opened up to the market in the 1980s, after Mao’s death, dried milk powder began appearing in small shops where you could buy it with state-issued coupons. Jian’s parents bought it for him because they thought it would make him stronger. “It was expensive, I didn’t like it, I was intolerant, but we persuaded ourselves it was the food of the future,” he said. “You have to understand the psychology here – there is a sense in China that we have been humiliated ever since the opium wars, but that now we are no longer going to be humiliated by foreign powers.”
When the People’s Republic of China was born in 1949, its national dairy herd was said to consist of a mere 120,000 cows. Yet today, China is the third-largest milk producer in the world, estimated to have around 13m dairy cows, and the average person has gone from barely drinking milk at all to consuming about 30kg of dairy produce a year.
In a little over 30 years, milk has become the emblem of a modern, affluent society and a country able to feed its people. The transition has been driven by the Chinese Communist Party (CCP), for which milk is not just food, but a key strategic tool. The party’s claim to a monopoly on power is based on the principles of socialism. As it has tempered that socialist ideology with elements of a market economy, the legitimacy of the one-party state has instead depended on delivering the capitalist promise of increasing material wealth. The fact that people can afford animal produce is a visible symbol of the party’s success. Making animal produce, particularly milk, available to everyone across the country is a way of tackling potentially destabilising inequalities that have arisen as China has developed between the big cities and some of the poorest rural areas. In the poorest regions, nearly one in five children are still stunted, or short for their age, from lack of adequate nutrition.
The party’s current, 13th five-year plan identifies one of its top priorities as shifting from small-scale herds to larger industrial factory farms to keep its population of 1.4 billion in milk. Official guidelines on diet recommend people eat triple the amount of dairy foods that they typically consume currently.
President Xi Jinping has talked in speeches about making a “new China man”. In 2014, he visited a factory owned by China’s largest dairy processor, Yili, and exhorted its workers to produce good, safe, dairy products. That new China man is expected to be a milk-drinker.
The reinvention of milk as a staple of modern China has required a series of remarkable feats, not least of which was to overcome the people’s lactose-intolerance and create a market for milk where there had been none. It has involved privatising farming, allowing processing companies to become corporations, and even converting desert areas into giant factory farms.
Now the global impact of China’s ever-expanding dairy sector is causing concern in other countries. Dairy farming requires access to vast quantities of fresh water: it takes an estimated 1,020 litres of water to make one litre of milk. But China suffers from water scarcity, and has been buying land and water rights abroad, as well as establishing large-scale processing factories in other countries.
Farmed animals are also one of the most significant causes of man-made climate change. Livestock currently account for about 14.5% of the world’s total greenhouse gas emissions, more than the entire global transportation sector. Cattle account for more than two-thirds of those livestock emissions. Ruminants have a disproportionate impact because their digestion releases vast quantities of methane, a particularly potent greenhouse gas, and their excreta produces nitrous oxide. On top of that, large areas of forest are being cleared to make more land available for crops to feed farm animals, releasing carbon dioxide. China already imports 60% of the total volume of soyabeans traded worldwide, to make the high-protein feed it needs. Its demand for soya is a major driver of deforestation of the Amazon and Brazilian savanna. Delivering milk across long distances to urban supermarkets produces yet more emissions.
According to a study by academics in China and the Netherlands, if Chinese milk consumption grows as forecast, using its current farming methods, the global emissions from dairy production alone will increase by 35% and the land needed to feed cows for China would have to increase by 32% in the next 30 years. China’s ambitions to triple its milk consumption “will have major global consequences”, according to the study’s lead Dutch researcher, Gerard Velthof. China’s own capacity to produce more is limited by its lack of resources. So, if the additional milk to meet demand in China were mostly imported, we would have to find two new countries the size of Ireland and give them over completely to producing feed just for cows milked either in or for China.
Jian believes China’s new obsession with milk took hold with the 1984 Olympic Games in Los Angeles. When he made a documentary about food in China a decade ago, he interviewed people of his parents’ generation, who repeatedly mentioned watching the games. New mass ownership of television sets had allowed Chinese people to see real foreigners, as opposed to actors, live on TV for the first time. “It made a huge impression on people,” Jian recalled. “They were amazed to see how strong and tall foreigners were. They could jump twice as far, run twice as fast. They concluded that Americans ate a lot of beef and drank a lot of milk and Chinese people needed to catch up.”
Chinese state planners were also impressed by the way the Japanese had developed. When the US defeated and occupied Japan after the second world war, they had introduced feeding programmes in Japanese schools to give children milk and eggs. Average heights increased within one generation.
By 1984, Deng Xiaoping’s market reforms, which had begun just a few years earlier in December 1978, were ushering in a period of unprecedented economic growth. GDP increased an average of about 10% a year until 2010. The first phase of reforms ended collective farming in agriculture, opened industries up to foreign investment, and allowed individuals to start businesses. A new “household responsibility programme” allowed families to farm individual plots of land and sell surplus for profit once again. These smallholders were encouraged to keep a few cattle for milk to increase their income while boosting domestic supplies. The effect was dramatic. The amount of food produced rose rapidly and, over the next two decades, would grow by an average of 4.5% a year.
As populations urbanise, they have always moved up the food chain, making the transition from diets largely based on grains and vegetable staples to ones in which meat, dairy, fats and sugars feature more prominently. China has followed the same trajectory. Dairy consumption grew rapidly through the 1980s and early 90s. The western model of retailing based on supermarkets with longer supply chains arrived in cities, too, making it possible for producers to distribute milk further and easy for shoppers to buy it.
As incomes increased, people could afford refrigerators in their homes and wanted milk to put in them. For factory employees working long hours, dairy foods represented a convenient way to get nutrients without having to cook. Technology to produce UHT milk with longer sell-by dates, imported in the late 90s, gave consumption a further boost. Since fermenting milk helps break down lactose, new yoghurt products were also marketed to overcome lactose-intolerance.
From the mid-80s on, a number of leading dairy transnationals such as Fonterra, Nestlé, Danone and Arla made major investments in China to grow their brands there. Chinese dairy processors, supported by the state and with access to new foreign capital, also spent millions – creating demand through advertising first, and then looking to meet supply second. The arrival of western-style fast foods such as McDonald’s in the early 90s brought cheese into the everyday Chinese diet. The end of the decade saw Starbucks opening in Beijing and western-style coffee-shop culture take off, making milk fashionable. Milk represented modernity, progress and the rise of China.
By the end of the 90s, the eastern cities of China were booming, and people were consuming more dairy foods, but a gap was growing between there and the interior, where people were much poorer and still drank little milk. The state began new campaigns to make farming more efficient and to speed up overall development in the less prosperous western regions. Promoting the industrial-scale farming of intensively fed cows in new hi-tech facilities in Inner Mongolia was part of that push for modernisation.
The party’s five-year plans, from the late 90s on, introduced a raft of supports for dairy businesses. The state facilitated loans to farm companies to buy cows, gave processing companies tax breaks and issued tens of millions in national debt funds to improve breeding stock and milking and packaging facilities. China’s accession to the World Trade Organisation in 2001 gave the dairy trade a further boost. The drive for dairy was highly effective. In 1990, urban Chinese were consuming about 4kg of dairy produce on average a year. By 2005, that had skyrocketed to 18kg per person per year. In the countryside, consumption lagged, but in that same period it nevertheless rose from 1kg per person per year to nearly 3kg. Inner Mongolia became the leading source of milk and now accounts for a quarter of the country’s total dairy production.
To spread the milk habit further, the state set about creating new generations of dairy consumers. Babies are born with the capacity to make lactase, the enzyme needed to digest the lactose in milk, but generally lose it when they are weaned in infancy. East Asian people are also genetically predisposed to lactase-deficiency. Older generations of Chinese, whose diet has not featured dairy produce, are mostly intolerant of lactose, but if infants never stopped drinking milk, they could maintain some capacity to produce lactase and avoid suffering the bloating that put people off it.
So health professionals in vaccination clinics were trained to tell parents to feed their children milk. The state initiated a school milk programme in 2000 to give a daily cup of free milk to urban children, and later extended it to rural areas. Premier Wen Jiabao visited a dairy farm in 2006 and wrote that he had a dream that everyone in China, and especially children, should have one jin (or 500g) of milk a day. New official nutrition guidelines were issued recommending more milk and dairy foods in the diet.
Drinking milk was deliberately associated with athletic prowess and national pride. Yili, which has its headquarters in Hohhot, where the local Inner Mongolian state is a shareholder with significant control, was designated official partner and supplier of milk to the Olympics in 2008. Its slogan was: “With me, China is strong.”
Mengniu, China’s second-largest dairy producer, is also a state-controlled private enterprise based in Inner Mongolia. It has spent millions sponsoring televised sport, as well as China’s version of Pop Idol and the Chinese space programme. It was an official sponsor of the 2018 football World Cup, and its advertisements were ubiquitous during matches, with the unforgettable slogan: “Power of nature, born for greatness.”
Jian’s parents now drink milk regularly, although he has himself become vegan. Concerned about climate change and animal welfare, he runs the China Good Food Fund, a project to promote sustainable food. “My mother has diabetes and has been told to diet, but the doctors say she must still have milk to make her strong,” he said. “The Chinese have learned to drink milk in the same way that they learned to drink Coca-Cola. Cola seemed weird at first, it tasted odd, it was brown, it had horrible bubbles … milk was the same, but we were drinking something in our imagination; we were drinking the western lifestyle, what was modern,” he told me.
It seemed as though nothing could stop the inexorable rise of milk in China, but then scandal struck. In 2008, after a decade of explosive growth, it emerged that raw milk from 22 dairy companies, including Yili, Mengniu and many other leading processors, had been adulterated with melamine, an industrial chemical used in plastics. It had been added to watered-down milk to cheat the protein tests on which the price paid to farmers was based. The melamine combined with uric acid to make kidney stones, which cause acute damage to the urinary tract, and excruciating pain, particularly in babies and young children. Nearly 300,000 children across mainland China suffered serious illness. Six babies died. Tens of millions of infants had to be checked by doctors as their parents panicked about their safety. Sales of Chinese milk collapsed overnight.
Top executives from one large processing company, Sanlu, turned out to have known about the adulteration for months but had covered it up, paying for internet search engines to censor negative reports about its products. While the 2008 Beijing Olympics was projecting a positive image of modern China, local officials delayed reporting the crime to higher authorities. It was the New Zealand dairy giant Fonterra, which had a 43% shareholding in Sanlu, that blew the whistle to its own government, eventually forcing the Chinese authorities to act. Sanlu became the focus of enforcement: its managers were prosecuted and jailed, a farmer and middleman were tried and executed. Fonterra had to write off NZ$139m (£71m) of investment. Most of the blame, however, was put on small farmers and largely unregulated middlemen who collected milk from communal milking stations.
The state has since made sweeping changes to safety regulation and tightened inspection. There have, however, been repeated food scares linked to contaminated milk and other products in recent years. Consumers remain deeply suspicious about the safety of local food, fearing adulteration, residues from the overuse of agrochemicals, toxins from the pollution of ground water and air by industrial waste and excessive use of antibiotics. Many affluent parents still only buy foreign brands of milk for their young children.
When it was imposing its one-child policy, the CCP made a social compact with the people: while family size might be limited, the state would make sure that each couple’s treasured offspring would be as strong as it could make them. In the 2000s, feeding children milk took on great importance in maintaining the policy.
In the hutong – the narrow alleys of old Beijing, with their traditional single-storey courtyard houses and communal public toilets – one often sees clusters of three or four ageing grandparents playing with a single small child whose parents are out at work. A grandmother in her 60s shopping in Jinkelong supermarket chain told us she bought milk everyday for her grandchild. The child’s parents did not drink cow’s milk, but soya milk instead, while she herself did not drink it at all because she was lactose-intolerant, but she thought it was good for the child to build his strength and physical development. Did she feel confident it was safe, after the melamine scandal? She laughed and said: “No, but I choose the bigger brands and I switch between them a lot; so if we’re being poisoned at least we are not storing up one kind.”
Since the melamine scandal, imports of foreign milk powder have soared. To stop agents buying too much milk powder for resale in China, shops in Australia imposed bans on bulk purchases of infant formula. New Zealand has also had periods of rationing formula. BHG, an upmarket Beijing supermarket in a shopping mall near an affluent residential area, had prominent displays of UHT and milk powder brands from Germany and New Zealand, along with gift packs of small cartons in luxury packaging. The fresh milk on display made much of being pure, sourced from Inner Mongolia with its bright green pastures.
To rebuild confidence in Chinese produce, the state has accelerated the industrialisation of production and investment in large-scale farms. Before the scandal, 70% of dairy farmers in China had herds of 20 or fewer cows. Six years after, the number of small herds had dropped to 43% and industrial units with more than 1,000 head of cattle accounted for nearly 20% of the dairy farms. Smallholders were encouraged to move their cattle into special designated zones – known as “cow hotels” – with expert technicians on hand. At the same time, the state imposed tough licensing on farmers, forcing many with smaller herds out of dairy production altogether.
Last October, I was taken to one model operation in Inner Mongolia that shows the trend towards hi-tech, more intensive farming. The China Shengmu Organic Dairy was first conceived in 2009 as a response to the melamine poisoning scandal, and as a pioneering experiment in tackling environmental problems. The company is an example of the close relationship between private enterprise and state that characterises the socialist country’s engagement with capitalism. Farmland was nationalised under Mao and remains in state control. The local Mongolian state allowed Shengmu to rent land and was involved in negotiating rights with nomads and local farmers, some of whom now work with its livestock, its manager Yan Shengmao told me. Its founding directors were executives from Mengniu. They were given the go-ahead by state regulators for a public offering on the Hong Kong stock exchange in 2014, and fresh capital flowed in from foreign and Chinese state banks and private equity investors. The idea was to test the market for a higher-quality, more expensive sort of home-grown production.
Despite Inner Mongolia’s pastoral image, which is a big selling point in milk advertising, the traditional nomad herder way of life has been decimated over decades by overgrazing, by policies of compulsory settlement, enclosure and relocation, and by industrial development. The region’s grasslands are now severely degraded, grazing is restricted, and the Gobi desert is encroaching. But in part of the region’s Ulan Buher desert, thanks to irrigation from the Yellow River and 90m recently planted trees, what was a landscape of giant sand dunes less than a decade ago has been turned by Shengmu into a farm for up to 100,000 Holstein cows, kept in 23 industrial units housing 5,000-10,000 each. Most of Shengmu’s cows have been bred from US stock, whose advanced genetic selection makes them very high-yielding. It is a confined animal feeding operation (CAFO), meaning the cows do not graze outdoors on pasture – even if it were available, such breeds are at the limit of their physiology and could not keep up with their energy needs by eating grass alone.
I was invited up to the office control centre where several giant screens filled one wall, some split into 36 CCTV images monitoring every corner of the unit. With no smell and no noise, the view felt more Truman show than real farming, but biosecurity rules prevented Yan from taking me around on the ground in person, he explained, so we zoomed in remotely instead.
In the centre image, a steady stream of cattle were filing on to a continuously rotating milking machine, slotting themselves into each of its bays without human intervention. A handful of workers in a pit below then checked their udders and briskly attached automatic suction teats. The computer-controlled milking machines record output per cow and release the suction when they detect that an udder is empty, at which point the cows back themselves out of the still-revolving platform and follow the bovine traffic back to their hanger-like barns. From a multi-storey watchtower outside we then surveyed the area around. Each Shengmu barn adjoins an open-air pen, and the cows were queuing up in the dry, cold air to relieve their itches on a whirring electric scrubbing brush.
Manure from the farm is collected, and then used to build soil in the desert, fertilising the surrounding new fields where fodder is grown in summer, instead of becoming the polluting slurry that is a serious problem in many CAFOs. The feed is supplemented by commodity imports from the US. When Shengmu’s founders first considered siting their project in the area, experts told them it could not be done, Yan said. “They thought it was too barren.” But now they thought they had kept the herd largely free of the disease that often affects such intensive production while changing the climate, and offering Chinese consumers premium milk they could trust.
Shengmu’s milk is processed in its own factory, where lines of gleaming imported stainless steel pipes and vats turn it into Tetra Paks of premium yoghurt and UHT milk. Its worker dormitory, amid bright green lawns, was quiet when I visited, as the factory was working at a fraction of its capacity. “We overestimated current demand for organic milk and have adjusted production,” Yan said.
In fact, Yili tried to take over the company in 2016, but failed to gain approval from the state. Then at the beginning of 2019, Mengniu made its bid for the Shengmu milk operation. Despite profit warnings, the factory serves another function. It advertises itself as a tourist centre – like several other large-scale farm businesses, it is not just a producer but also a marketing tool, and the Chinese public are encouraged to visit and see how reliably hi-tech and hygienic its dairy processes are.
Years of famine and constant food shortages are a living memory for older Chinese people, and are the spectre that still drives much of party policy today. Under Mao’s Great Leap Forward programme, which began in 1958, farmers had been forced on to collective farms and rural workers diverted away from fields into new industries and the building of infrastructure. The collectives were paid a fixed price for what they produced, but were not allowed to make a profit from any surplus. When mismanagement coincided with flood and severe drought in 1959, agricultural production collapsed. In the Great Famine that followed, at least 36 million people died. Then Mao’s subsequent decade of Cultural Revolution between 1966 and 1976 saw the relocation of millions of people. By the end of it, people in rural areas barely had enough to eat.
Maintaining the growth in prosperity from 40 years of market reform is of existential importance to the leadership, said Charles Parton, adviser on China to the House of Commons foreign affairs select committee and associate fellow of the Royal United Services Institute thinktank. “The legitimacy of the party is based on several pillars, but the first is economic. It’s the promise that the party will make you better off than you were before,” Parton told me. Meat used to be an occasional luxury; dairy was mostly not available, so if you can now afford both meat and milk regularly, you feel wealthier.
Food shortages and food prices that rise faster than wages are historic causes of civil unrest. “The CCP is obsessed with feeding this enormous population – it will go on growing until at least 2030. The reason it bangs on about food security and food safety is that it’s a potential source of instability. People come out on the streets about it. It really hits them if the milk they want to feed their babies is not safe.”
Preparing for the growth in its own demand, China has been buying up land and water resources along with dairies and processing factories across the world. The Belt and Road Initiative, Xi’s plan to build road, rail, cable, pipe and port infrastructure on an unprecedented scale to link China to resources and markets across the world, is at least in part about food security. Launched in 2013, it is expected to cost more than $1tn, and to cross more than 60 countries. It will enable China to access food resources more widely and, thanks to new digital networks, faster than ever before. The Yili group has already acquired huge dairy processing capacity in New Zealand and talks enthusiastically of being part of a Belt and Road dairy alliance, a new China-led milk road across the continents.
As the economy has slowed down, it is critical for the state to keep delivering on the promise that people will be better off than before. As Parton explained: “The message is that only the party can make China great again, putting it back in its rightful place at the centre of the world; only China has the right form of governance to deal with huge global challenges.” The party promotes “socialism with Chinese characteristics” on the basis that we face systemic crises such as climate breakdown that can only be fixed with the sort of long-term structural reform that is impossible within short electoral cycles or in unfettered markets where the profit motive trumps all else.
State ownership of the means of production and distribution has shrunk considerably; it now accounts for about 25-30% of business overall, and the party recognises that the private sector is the most dynamic. “But as good Leninists, you don’t let go of the main economic levers,” Parton said. The Chinese dairy sector is an example of the approach: leading companies such as Yili and Mengniu, and new ones such as Shengmu, are well capitalised with private shareholders and foreign investors, but the state retains control in various ways, by being a significant shareholder, giving preferential access to state-bank loans or state assets such as land or to listings on stock exchanges, and through internal party committees.
That has created tension with the west, which questions how open to the free market China really is. The leading Dutch cooperative bank, Rabobank, provides financial services to 17 of the top 20 global dairy companies, so its senior dairy analyst, Peter Paul Coppes, has an inside view of the sector. He has tracked the Chinese dairy market since the 1990s.
“It’s a very big and growing market, and the increase in dairy consumption is driven by the Chinese state. It is making sure that the essential parts of people’s expenditure, whether it’s food or fuel, are affordable,” Coppes said. “We did it in Europe. Now they want to take care of their food security, too.” He is sanguine about what this means for foreign investors. “There is a long-term interest for the Chinese state in foreign collaboration. They just won’t let you get control of production. You’ll have to settle for a minority shareholding.”
The Chinese diet has been transformed with extraordinary speed. The percentage of the population that was undernourished fell from 24% in 1990 to 9% in 2015, as per capita income soared by more than 2,000%, according to the UN’s Food and Agriculture Organisation (FAO). Now, however, like other emerging and developed economies that have adopted western eating habits, the country faces a new dilemma. Inadequate diets are still causing stunting in the poorest country areas, but now about a third of the adult population is overweight, while 6% is obese. China is having to deal with undernutrition and overnutrition at the same time.
“The sort of growth we’ve seen in just 40 years, and for a population of 1.4 billion, it’s never been seen in history. It’s tremendous,” said Shenggen Fan, director general of the Washington-based International Food Policy Research Institute. “The Chinese think that part of the reason why they are shorter th