Chinese Dairy Farm Performance and Policy Implications in the New Millennium

China has significantly expanded its dairy cow numbers and increased its dairy processing capacity over the last five year in an attempt to meet increased demand for dairy products. China’s net imports of dairy products, however, has expanded at a growth rate in excess of 30% during the same period. To consider why China is still struggling to meet rising dairy product demand in China in the new millennium, this paper employs a new set of farm-level survey data and stochastic input distance functions to empirically estimate Total factor Productivity (TFP) on China’s dairy farms. The results show that the TFP growth has been positive on and this rise in productivity has been mostly driven by technological change. However, the new results show that on average, the same farms have been behind the advancing technical frontier. We also find one of the drivers of the dairy farms’ productivity advances is the relatively robust rate of technological change. The results suggest that efforts to achieve increased adoption of new technologies and better advice on how to use the technologies and manage production and marketing within the dairy farm sector, will likely further increase TFP growth in China.