Inner Mongolia Yili Industrial Group, one of China's largest dairy providers, and the U.S. milk cooperative Dairy Farmers of America (DFA) have signed a deal to put up a production plant for powdered milk in Kansas.
The joint venture has a registered capital of $100 million, of which $70 million will be DFA investment and $30 million will come from Inner Mongolia Yili Industrial Group.
The joint venture's new dairy plant has a capacity to produce 80,000 tons of milk powder a year for the Chinese market.
China is the world's top dairy importer. Its import of milk powder accounted for 38 percent of the total global market last year. The sale of infant-formula reached 60 billion yuan ($9.79 billion) in 2013.
Parents in China who depend heavily on powdered milk for their infants and young children are still wary of domestically produced formula, following the 2008 scandal in which milk laced with melamine killed at least six children and sickened 300,000.
The deal between Yili and DFA was first formalized with a memorandum of understanding signed back in July 2013 with a view to establishing a long-term strategic partnership.
On finally closing the deal with Yili, the president and CEO of DFA said in a statement: "When we entered into a strategic partnership nearly two years ago, we were certain we would find ways to work together to maximize value for both organisations. Today, we have committed to a historic initiative to bring DFA and Yili even closer together."
Since 2011, the DFA, a national cooperative based in Kansas City, Missouri, has been floating the idea of building a milk-powder factory in the area for exports.
According to the cooperative, it represents nearly 13,000 producers across 48 states and accounts for one-third of raw-milk output in the United States. It buys raw milk from its members which it processes into dairy products for wholesale.
Zhang Jianqiu, CEO of Yili, told Xinhua that the joint venture was a win-win deal by "bridging American dairy farmers with Chinese consumers." For Yili, "it improves dairy making technology and quality management."