China's dairy industry has finally recovered to the level it fell from during 2008's Melamine incident, but consumer confidence has yet to be fully restored, according to reports.

The industry currently has 12.6 million cows in stock and 35.75 millions of milk were produced in 2010. Milk output for 2011 is likely to reach 40 million tons. However, consumers are still lacking confidence in the local dairy products. “It has been three years since the Melamine incident happened, but consumers’ confidence has yet to recover,” said Gao Hongbin, vice minister of China's agricultural ministry.

According to statistics, the industry is fully recovered in output and price, but for areas such as baby milk powder, the numbers still have a long way to go before they reach 2008 levels. China imported almost 300,000 tons of baby milk powder in the first half of 2011, according to Hongbin, and a lot of families went to Japan, New Zealand and Australia to buy milk powders. Such a move leads to sky-high prices in the domestic market, and it is difficult for consumers to find confidence back if the same incidents happen again and again, said Hongbin.