China will foster up to 10 leading domestic baby formula makers by 2015, each with annual sales of at least 2 billion yuan (US$332.25 million).
These companies are expected to account for 65 percent of the market, rising to 80 percent by 2018.
By that time, China would have three to five baby formula firms with annual sales of 5 billion yuan or more, according to guidelines issued by the State Council Friday.
The government will tighten entry thresholds for new players and will not license unqualified firms.
Companies not up to standard will be given a period within which to improve their processes or suspend production. Failing that, their permits will be revoked, according to the guidelines.
Also, the government will simplify approval procedures for mergers and acquisitions to encourage industry consolidation.
Companies doing such deals will receive tax breaks or exemption from stamp duty, land appreciation tax and other levies.
The central government will provide fiscal support for eliminating outdated capacity, shutting down inefficient plants and upgrading technology.
In addition, eligible firms will be encouraged to issue preferential shares and convertible shares to finance their M&A activities. Listed firms will not be restricted to a minimum float.
China’s food and drug watchdog ordered 51 baby formula makers to stop production after they failed to renew their production permits, Xinhua reported last month.
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