News of the policy change comes from comments made at a conference in Beijing by the director of a government agency responsible for food safety.
Xinhua News Agency said Zhi Shuping of the General Administration of Quality Supervision, Inspection and Quarantine warned that dairy firms must obtain new production licenses this year or be closed.
The measure is designed to improve quality and safety in the domestic dairy industry. Confidence in the industry plummeted in 2008 when melamine-tainted milk products killed six children.
Since then the Chinese government has sought to restore trust in the dairy industry, cracking down hard on the perpetrators of the melamine scandal and implementing new safety regulations. Despite this batches of melamine tainted products have continued to appear over the past two years.