fbpx ADB Private Sector Loan Promotes Higher Standards in PRC Dairy Industry | Asian Development Bank

ADB Private Sector Loan Promotes Higher Standards in PRC Dairy Industry

News Release | 19 August 2016

BEIJING, PEOPLE’S REPUBLIC OF CHINA — The Asian Development Bank (ADB) and Inner Mongolia Saikexing Breeding and Biotechnology Group (Saikexing) signed a $125 million loan to help reduce environmental pollution, improve food safety, and expand the domestic supply of quality milk in the People’s Republic of China (PRC). 

ADB will provide a yuan loan equivalent to $62.5 million and will act as a lender of record for a participation by selected commercial banks equivalent to up to $62.5 million in yuan. The project will be implemented over 2 years through to the end of 2018.

The funds will enable Saikexing – the fourth largest dairy farming company in PRC – to invest in state-of-the-art technologies that will halt the harmful discharge of untreated animal waste and increase the use of waste for fertilizers, irrigation, and energy. It will also allow the company, which currently owns about 100,000 cows across 27 farms, to develop at least another 4 new farms with 20,000 cows in total.

“Food security and food safety are major concerns for the PRC and this project will promote modern, sustainable dairy farming practices to minimize pollution and improve product safety,” said Martin Lemoine, Agribusiness Investment Unit Head in ADB’s Private Sector Operations Department. “It will also help set environmental and food safety benchmarks for dairy farming that will have great potential for replication elsewhere.” 

Demand for processed milk in the PRC is growing fast with the gap between domestic production and consumption seen rising from 9.7 million tons in 2014 to 15.4 million in 2024, according to the Ministry of Agriculture. But safety concerns have spurred a consumer shift toward imported dairy powders. Providing consumers fresh, safe, domestically produced milk is seen as an effective long-term step forward to meet rising demand. 

Dairy farming generates high levels of waste, a serious threat to groundwater and farmland, so the loan will help Saikexing build modern treatment and processing facilities. These technologies will enable solid and liquid waste to be treated and recycled in uses such as organic fertilizer, irrigation, and cleaning water. Captured methane will be used to produce energy for cooking and heating. Funds will also be used to buy modern sterilized milking and healthy feed processing equipment to boost the quality and safety of milk. 

Headquartered in Hohhot, Inner Mongolia, Saikexing has farms located across some of the PRC’s relatively poorer provinces and autonomous regions, including Hebei, Henan, Inner Mongolia, and Ningxia Hu. The project is expected to provide new jobs in rural areas, with the company’s workforce seen rising from 2,000 in 2015 to over 2,600 by 2020. The company employs a large proportion of ethnic minorities (31%) and is committed to increase the proportion of women employees from 30% in 2015 to 35% by 2020. In addition to direct jobs, the number of smallholder farmers supplying forage food to Saikexing is projected to grow from about 15,000 in 2015 to at least 17,500 by 2020.
 
The project is a first for ADB, marking its initial direct nonsovereign assistance to a livestock company and its first private sector agribusiness investment with a specific focus on both environmental protection and food safety. The structure of the financing ensures that the project’s positive impacts are spread widely to farms across seven provinces and autonomous regions. 

ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, ADB in December 2016 will mark 50 years of development partnership in the region. It is owned by 67 members—48 from the region. In 2015, ADB assistance totaled $27.2 billion, including cofinancing of $10.7 billion.