State-owned China Animal Husbandry has taken a majority stake in Mataura Valley Milk in exchange for funding construction of a $200 million milk powder manufacturing plant at McNab, near Gore, starting from October.

The Chinese company will hold 71.8 per cent of the equity of Mataura Milk with Southland supplier-farmers owning 20 per cent, the company said.

Mataura Valley said the venture would create at least 100 new jobs, grow added value dairy exports, and inject "significant income" into the Southland economy.

Gore resident and Mataura director Aaron Moody said the plant was designed to tap into the growing global demand for nutritional powders, especially infant formula. "The global infant formula market was worth $57 billion in 2013, and the market in China alone is expected to reach $38b by 2017," Moody said.

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"The appetite for nutritional powders is huge with China's imports of infant formula growing by 51 per cent in the 12 months to February 2016," he said.

The price for infant formula and "growing up" milk powders was less reliant on the global commodity dairy price, he said.

The state-of-the-art pharmaceutical standard plant will produce infant formula, ultra-high temperature (UHT) cream and small amounts of skim milk powder, using locally sourced raw milk for global markets.

As part of its "gate-to-plate" supply chain strategy, many of Mataura Milk's products would be canned and distributed by BODCO, a Hamilton based dairy business with a pharmaceutical-grade blending and packaging facility. BODCO is also a minority shareholder in Mataura Valley Milk, with 5.6 per cent.

Moody said the relationship with China Animal Husbandry Group, "provides us the confidence to proceed with the plant and excellent access to the rapidly growing demand in the Chinese market".

According to corporate profile on Bloomberg, China Animal Husbandry Group produces veterinary medicines, feeds, feed additives, milk powder, whey powder, pet food, and seeds. It also produces raw chemical materials, instruments, and equipment.

Moody said 20 per cent of the company will be held by Southland dairy farmers who have the ability to meet Mataura's raw milk and quality requirements. The remainder of the company will be held by mostly New Zealand investors.

Local directors of the business include prominent Southland farmer and former Mayor of Gore, Ian Tulloch and Hamilton-based businessman Gary Mollard. Construction of the Mataura plant is expected to start in October 2016.

China Animal Husbandry Group's investment in Mataura Valley Milk has been approved by the New Zealand Overseas Investment Office as well as the Chinese Government, the company said.