Fonterra may raise funds for San Lu, its dairy Chinese joint venture, through an initial public offering, chief executive Andrew Ferrier has said.

According to the Agricultural Letter, Ferrier said: "There's a lot of growth potential so you will see San Lu capital and Fonterra capital going into this JV and you may see outside capital coming in through an IPO."

Last month, the Chinese Government approved Fonterra's acquisition of a 43% stake in San Lu. Fonterra aims to tap the rapid growth of China's dairy sector through its stake in China's largest milk powder producer. Highlighting the markets potential, Ferrier observed: "Consumption of dairy products is going up at 10% a year in China."