China will subsidize loans to dairy producers in an effort to promote raw milk purchases following the tainted milk powder scandal.

Lending costs from October to December will be reduced by 3.1 percent, or half of the six-month lending rate, the Ministry of Finance said on Saturday.

The move aims to help dairy farmers recover losses.

Some dairy farmers started to dump raw milk due to decreased demand as customers lost some confidence in local dairy brands in the wake of the scandal.

The ministry also want to restore confidence in the dairy industry.

Dairy products, including baby formula and liquid milk, produced by Sanlu and other leading producers have been found contaminated with melamine. The tainted milk powder has caused the deaths of at least three babies and sickened about 53,000 others.

(Xinhua News Agency september 28, 2008)