China will revise current industrial policies and improve market access standards for dairy production, Li Yizhong, minister for industry and information technology (MIIT), said on Friday.
"We will clearly require dairy enterprises to enhance management on source milk bases and intensify supervision on source milk production and purchase," Li said in a press release.
A market access management system will be established, he said. Qualified dairy enterprises will be notified publicly and disqualified ones will be ordered for rectification within a specified time limit.
New dairy production projects including the expanded ones must be reported to relevant departments under the State Council for approvals.
"We encourage dairy enterprises to improve industrial concentration through assets regrouping, mergers and acquisition," Li added.
China's milk product quality has been under fire recently, as 13,000 infants nationwide were hospitalized with kidney problems and at least three died after drinking baby milk formula tainted with melamine.
On Monday MIIT sent a letter to the Hebei provincial government and required the restructuring of Sanlu Group, the dairy giant at the center of the tainted milk powder scandal.
After the exposure of the Sanlu formula's problem, 22 firms' formulas of baby milk powder were found tainted nationwide.
Li said the ministry would also further improve quality standards as well as testing systems for source milk and dairy products.
The country's dairy industry has grown by an average of 20 percent in recent years. Nationwide there are 743 dairy makers with annual sales value above five million yuan ($730,000) each.
Last year, the total output of dairy products stood at 17.87 million tons, with sales income surpassing 131 billion yuan.
Li said in general the quality of domestic dairy products is good. However, the tainted baby formula milk powder accident indicated that there are still loopholes in testing standards and enterprise quality management.
In Beijing, the sales of liquid milk have dropped to only one-fifth of the amount of the average in the past. Data suggests that the country's top two dairy producers, Mengniu Group and Yili Group, have taken back and held down dairy products valued at 5 billion yuan and 5.8 billion yuan, respectively.
In another development, authorities have decided to strengthen supervision efforts to prevent defective dairy products from entering rural markets.
Zhou Bohua, minister of the State Administration for Industry and Commerce, said the ministry will continue to work with related departments to take all defective dairy products off the shelves and seal them up on the spot.
"The tainted dairy products must not be transferred by lawbreakers and sold to rural markets," Xinhua quoted Zhou as saying on Friday.
"More coordinative efforts will be made to help consumers in remote countryside and suburban areas return defective dairy products and get refunded," Zhou added.