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China hopes to boost its dairy industry over the next 10 to 15 years, thanks to the growing consumption of milk and other dairy products in the world's most populous nation.

With 1.3 billion people but only 13 per cent of the world average milk consumption, China is very likely to increase dairy output by expanding production to meet its own demands, said Wang Huaibao, vice-director of the China Association of Dairy Products Industry.

The country's dairy production has been posting double-digit growth annually since the reform and opening-up programmes were started in the late 1970s. It presently produces 16.25 million tons of dairy products a year, said Wang.

The country also enjoys price advantages compared with many developed countries. In 2000, the most recent year that data is available, the cost per kilogram for fresh milk in China was 45 per cent lower than in North America and the European Union, he said.

But China's per capita consumption of dairy products is only 13 kilograms a year, much lower than the average 300 kilograms reported in the developed countries and the world average of 100 kilograms, according to Wang. "There's massive potential in the Chinese market," he said.

With the sustained growth of China's economy and betterment of the people's lives, Wang estimated China's per capita annual consumption of dairy products will increase to 18 kilograms by 2015.

The country's dairy production, in the meantime, will grow at 6 to 9 per cent per year to top 25 million tons in 2015, he estimated.

World milk production has seen sluggish growth between 1 to 2 per cent over the past decade and the United Nations' Food and Agricultural Organization says current production is around 594 million tons.

The UN organization has attributed the industry's slowdown to restrictions on milk production from developed countries that together produce 71.7 per cent of the world's dairy output.

Meanwhile, sustained growth reported in the dairy industry in Asia, Latin America and Oceania is mostly offset by declining production in East Europe and the Commonwealth of Independent States, say analysts with the organization.

But Wang warned domestic dairy producers to remain cool-headed and avoid hasty expansion in the current heated market. "We have to remember that many people in China are not yet ready to include milk in their diet," he said. "Most of the country's 9 million farmers never drink any because they don't like it or can't afford it."