Chinese dairy producer Inner Mongolia Yili Industrial plans to invest around CNY2bn ($327m) in its Oceania Dairy production base in New Zealand.

The proposed investment will be used for the construction of a raw milk processing plant, a UHT milk plant, a milk powder plant and a packaging plant on the base.

Around CNY200m ($32.5m) of the total investment will also be used in the milk processing plant and CNY500m ($81.39m) in the UHT liquid milk plant.

The move comes in response to increasing demand for overseas dairy products from Chinese customers as the local brands’ reputation has been damaged due to the melamine-tainted baby formula scandal in 2008, Xinhua reported.

Launched by Yili in Waimate, South Island, the Oceania Dairy production base is expected to be the largest integrated dairy production base in the world.

Till date, the company has invested around CNY1.2bn in the production base.

Yili also signed an agreement with Lincoln University of New Zealand to carry out research on nutritional enhancement and quality assurance in dairy products.