Earlier this year, Yili allocated 1.1 billion yuan to build up an infant dairy production base in New Zealand, which will make baby formula for the Chinese market.

The company has also entered into a strategic partnership with United States-based Dairy Farmers of America Inc, the largest dairy organization in the US, for collaboration in procuring raw material and managing dairy farms.

Joining forces with foreign peers will reduce the risk of going abroad for Chinese dairy producers, said Song.

Yili's Chief Executive Officer Zhang Jianqiu told a recent industry conference that the expansion of Chinese dairy producers reflects the diverse consumption demand in China.

"Chinese consumers have grown more and more similar to international consumers in terms of dairy consumption behavior," Zhang said.

The Yili group is also strengthening its domestic production capacity, with plans to invest $50 million in China Huishan Dairy Holdings Co to secure its milk supply. The move comes amid government pressure for industry consolidation.

Zhang said milk sources are the key to the quality of the Chinese dairy industry. Since 2007, Yili has invested 8.9 billion yuan to establish standardized dairy farms.