Chinese government on Wednesday launched a major campaign to reform its dairy industry in an attempt to restore consumer confidence.

The State Council wants to upgrade the entire industry from cow breeding to final sales.

The tainted milk powder scandal was a major food security incident. It not only damaged the health of babies and children, but also hurt China's national image, said an official with the National Development and Reform Commission (NDRC).

"The crisis has put China's diary industry in peril and exposed major problems existing in the quality control and supervision of the industry," said the official.

According to the campaign, the Ministry of Health will revise the quality and safety standard of dairy products, and the Ministry of Agriculture will draft an examination standard for checking of melamine and other poisonous elements in animal feedstuff. The two tasks are required to be finished within a year. An interim quality standard was set up shortly after the scandal.

Before the new standard take effect, dairy producers and sellers should follow existing national standards or the requirement of Codex Alimentarius Commission (CAC) and International Diary Federation (IDF).

The State Council asked local governments to supply necessary instruments and devices to quality control and agricultural departments, so as to ensure regular examination of dairy products.

Subsidies would be paid to cow farmers and loans be granted to dairy companies, to help them weather the current crisis.

A tracking system will be established to record the flow and delivery of dairy products. Dairy companies are also required to meet the production standard GB 12693 within three years, or risk stopping production.

The guideline also set periodical target that the operation of the industry be recovered to normal production by the end of 2008.

The production and sales of the industry has been damaged severely after the crisis. As an example, Sanlu Group's Daily sales has lost 20 percent, averaging 50 tonnes, compared with before the scandal, said Cao Zhanwu, marketing director of Xingtai Sanlu Dairies Co. Ltd.

By the end of October next year, related laws, regulations and quality standards should be established, and measures be taken to push forward standard production in the industry, said the State Council.

The goal is to have well-bred cows and a mass-producing dairy industry by the end of October, 2011.

The guideline was formulated collectively by the NDRC, the central bank and 11 other ministries, commissions and departments.

Editor: Yan