The contamination scares that have hit New Zealand's two biggest dairy co-operatives this month will cause Chinese consumers to "think twice" about shelling out cash on expensive imported milk products, says ANZ's chief China economist Li Gang Liu.
But Hong Kong-based Li-Gang believes New Zealand's reputation for high quality milk will be restored in the minds of consumers in the world's second biggest economy.
"In the long term most Chinese consumers will still trust the goods provided by New Zealand," he said. "I think that has not changed fundamentally."
On Monday Westland Milk Products revealed it had found elevated levels of nitrate in two batches of lactoferrin powder - a protein product - that had been exported to China. That came after Fonterra announced earlier this month that 38 tonnes of whey protein it supplied to customers in seven countries, including China, was suspected of being contaminated with a bacteria that can cause botulism.
The Chinese Government is looking to rebuild its domestic milk powder industry that was hit hard by the 2008 melamine scandal, in which six babies died and hundreds of thousands more were sickened by tainted dairy products. Premier Li Keqiang has said the Government will consolidate the number of manufacturers, nurture key industry players and standardise the breeding of dairy cattle.
