HARBIN - Swiss food giant Nestle will invest 2.5 billion yuan ($396 million) to build a fresh milk supply base in Northeast China's Heilongjiang province.

Nestle and the government of Shuangcheng city signed a memorandum Wednesday, which specified that Nestle will invest 2.5 billion yuan to build the city into the biggest fresh milk supply base of Nestle in China within five years.

According to the memorandum, Nestle will set up a training center in Shuangcheng to offer training on the management of diary farms. Self-employed diary farmers in the city will also be assisted to improve their farms.

"The establishment of the base shows that Nestle has the determination to build a long-term and sustainable dairy industry in China," said Roland Decorvet, chairman and CEO of Nestle China.

Shuangcheng, home to more than 20,000 milk farmers, produces 1,200 tonnes of milk every day.

In October local milk purchasers working with Nestle in Shuangcheng were blamed for paying farmers below government-mandated prices in addition to using a rounding system for weight on the point of sale device that favored the company.

Nestle later promised to improve its operations and boost the development of the dairy industry in Shuangcheng.