New Zealand Milk, a subsidiary of New Zealand dairy giant Fonterra, has confirmed that it has been in discussions with Sanlu, one of the top six dairy companies in China, about a potential joint venture.

“We have been working on developing a local partnership to achieve growth in the China market. Our discussions with Sanlu are progressing favourably. We hope that we will have an arrangement in place next year,” said New Zealand Milk’s managing director, David Pilkington.

Pilkington said New Zealand Milk’s growth plans in China had been signalled at Fonterra’s annual meeting in September when he told shareholders the company had a big focus on the market.

“Our goal is to develop a local partnership with a strong company that will leverage local knowledge and experience in the China market. We are working steadily towards that goal,” he added.

Any potential New Zealand Milk joint venture with Sanlu would be based around consumer dairy products, the company said, adding that Fonterra’s position as a supplier to the dairy ingredients market in China would be unchanged.