A staff member for a factory of the China Mengniu Dairy Co collects milk samples from a milk cart in Maanshan, Anhui province, in March for quality checks. LONG WEI / FOR CHINA DAILY

With increasing domestic demand for dairy both in quantity and quality, more companies are looking abroad for secure sources, a move hailed by industry insiders as a necessary step to increase competitiveness of China's dairy industry.

"Excellent dairy sources in New Zealand are a major incentive for us to invest there," Lin Jinlin, spokesman for Yashili International Holdings Ltd, told China Daily. "The project is expected to provide steady, high-quality products to our consumers."

The company merged with China Mengniu Dairy Co, the country's largest dairy producer, according to a joint announcement on Tuesday.

China Mengniu Dairy Co will acquire a more than 75 percent stake in Yashili after the merger.

The factory, being built in Waikato, New Zealand, with an investment of 1.1 billion yuan ($180 million), will produce 52,000 tons of milk powder annually, Lin said.

Yashili is one of the increasing number of dairy enterprises expanding production overseas to meet increasing demand from domestic consumers.

"Making use of international sources is a requirement for the development of our company. It can also increase the competitiveness of China's dairy industry", Lin said.

Yili, another major producer, announced in April that its New Zealand project, with an annual production capacity of 47,000 tons of baby formula, had been approved by both countries.

"The increasing consumption demand for dairy and the limited domestic supply has created a huge gap, which is a major reason producers are looking to the international market to secure sources," said Wang Dingmian, executive council member of the Dairy Association of China.