China's Infant Formula Market Shrinks as Births Decline

China's market for infant formula is shrinking along with the number of babies. According to China's National Bureau of Statistics, the number of births fell by half between 2016 and 2023, from 18.7 million to about 9 million. Customs data show that China's imports of infant formula (HS code 190110) peaked in 2019 and fell 33% by 2023. Imports for January-August 2024 are down another 20% from the same period in 2023.

Source: China National Bureau of Statistics and Customs Administration.

Many Chinese companies import milk powder in bulk to manufacture infant formula and all kinds of other milk products in China. Customs data show that imports of bulk milk powder peaked in 2021 and fell 40% by 2023. Bulk milk powder imports are also down 20% in January-August 2024 from a year earlier. 

A January 2023 article noting the decline in dairy imports quoted a food industry analyst who blamed China's sustained decline in births for a "crisis" in the industry. The analyst surmised that a decline in dairy imports is the inevitable result of the "loss of the demographic dividend." 

Perhaps it would be more apt to describe this as payment of a demographic debt. 

An August China Business Herald article pointed to double-digit declines in infant formula imports during the first half of 2024 as an indicator that China's milk powder business is becoming increasingly difficult. This article contrasted positive growth reported in financial reports of European dairy companies with the shrinking volume of China's infant formula imports. According to an industry analyst quoted by China Business Herald, the Chinese infant formula market is consolidating as leading foreign companies do well while medium and small companies--both domestic and foreign--are struggling. 

However, it will still be a crowded market for a while. Chinese authorities recently required infant formula manufacturers to pass a second round of registration audits to certify compliance with China's unique standards for infant formula. China Business Herald reported unofficial data showing that 409 infant formula products manufactured by 93 companies were registered by July. Twenty percent of the registered facilities were overseas.