# Yili

China’s Dairy Sector Hits a Cold Snap: Subsidy Gambles, Channel Fights and a Race to ‘Functional’ Milk

China’s dairy market experienced broad declines in 2025 as liquid‑milk consumption and core categories cooled, pressuring corporate profits and prompting market leaders to spend heavily on infant‑formula subsidies to lock in future users. The sector is pivoting toward higher‑margin functional and lifecycle nutrition products, but faces high R&D costs, channel friction and the risk of rapid homogeneity.