The world's biggest milk supplier is teaming up with a Chinese partner to meet growing demand for infant formula in China's NZ$18bn market.

Auckland-based Fonterra announced a tender offer to acquire a 20 per cent stake in Hangzhou-based Beingmate, which produces and sells baby foods. The companies also plan a joint venture to increase distribution to China. In total Fonterra is investing NZ$615m, in what CEO Theo Spierings called a "game changer."

The proposed partnership comes after a rough year for Fonterra due to a false safety alert. Last summer it recalled some of its milk shipments after identifying bacteria that can cause botulism, but later tests revealed no traces of the bacteria and the company was blamed for causing "immediate grave concerns for consumers."