According to Caijing.com, a website about China’s finance and economics sector, the sales of all China’s milk enterprises continued to decline rapidly in the first three quarters of 2015. Even the highly profitable baby formula industry entered the “cold winter” of sales. The major reason is that Chinese consumers prefer to buy milk produced overseas.
Reporters of China Economic Weekly conducted a survey in which they found that those mothers who were born in the 1980s do not trust the quality of domestically produced milk.  Not only do the big-brand milk products produced overseas have a good reputation; their prices are also competitive. For example, the U.S. produced Mead Johnson milk is priced at 150 yuan per box, while China produced Mead Johnson milk is priced at 250 yuan per box.
Many milk enterprises expected to see their sales of milk products increase after the two-child policy became effective in China. It was estimated that the two-child policy would bring China 35 percent more newborn babies, which would result in an expansion of the baby-formula market that would be worth 24 billion yuan. However, the dividend from the two-child policy is nowhere to be seen. Instead, China’s milk industry faces an overcapacity problem, frequent occurrences of tainted milk scandals, a mixture of good and bad brands, and the impact of a large-scale importation of milk powder.
 China’s tainted baby formula scandal broke on July 16, 2008. Six babies died and 300,000 became ill. The World Health Organization explained that melamine helped the watered-down product to pass the testing procedure. It referred to the incident as one of the largest food safety events it has had to deal with in recent years, and stated that the crisis of confidence among Chinese consumers would be hard to overcome. A spokesman said the scale of the problem proved it was “clearly not an isolated accident, [but] a large-scale intentional activity to deceive consumers for simple, basic, short-term profits.”
According to a BBC article published in 2010, Chinese food safety officials seized 64 tons of raw dairy materials contaminated with the toxic industrial chemical melamine in 2010, two years after the 2008 scandal. Test samples showed that the milk carried up to 500 times the maximum allowed level of the chemical. This means traders may have bought tainted milk that should have been destroyed in 2008 with the intention of processing it and reselling it.
Caijing.com, December 1, 2015
BBC: China dairy products found tainted with melamne, July 9, 2010
Wikipedia: 2008 Chinese milk scandal