China's dairy industry took deadly short cuts to growth

The fact that Wang now spends his days tending 400 cows on a farm near Beijing says a lot about the way China created a dairy industry out of thin air. But in their haste, the Chinese made mistakes that left six babies dead and hundreds of thousands ill from tainted milk.

Milk is not part of the traditional Chinese diet. Most Chinese adults are lactose intolerant and many are repelled by the smell of dairy products. Chinese sometimes complain, sotto voce, that Westerners smell like cheese.

But in the 1990s, economic planners decided that dairy cows were a quick way to improve rural incomes, particularly in northern provinces such as Hebei, Inner Mongolia and Heilongjiang with cool climate, flat terrain and lack of other economic prospects. To encourage consumption, the propaganda machine spread the word that children needed to drink milk to grow as strong and tall as Westerners.

In a landscape that looks more rust belt than dairy belt, people opened farms in patches of land between derelict factories and villages.

"Cows have been good for us," said Wang, as he whistled for his herd to come in for milking last week in Xingtang County, 170 miles southwest of Beijing. "The business is bad right now because of the scandal, but it was great before."

The now-bankrupt dairy producer Sanlu Group, headquartered in Shijiazhuang, capital of Hebei, was a big reason for the success. Company Chairwoman Tian Wenhua was a Communist Party official, but also a reformer. She now faces life imprisonment for covering up the scandal over Sanlu's tainted milk.

To make the dairy industry more efficient and spread the wealth, she encouraged peasants to raise cows. A dairy cow costs about $1,200, and those who couldn't afford them got loans. If they didn't qualify for a loan, they acquired their cows on a rent-to-own plan.

At the time of Communist China's founding in 1949, the country had about 100,000 dairy cattle, many of them descendants of cows introduced by Christian missionaries. By last year, there were an estimated 14 million. Most were in the hands of small-scale dairy farmers who kept only a few, milking them by hand and selling the product at a milking station, which resold it to large dairy companies.