By Ian Llewellyn of NZPA

Shanghai, April 19 NZPA - Fonterra is now able to put the poison milk scandal behind it in China, although it will not be making any major new investments in the short term, Fonterra chairman Henry van der Heyden says.

Mr van der Heyden accompanied Prime Minister John Key on his first trip to China.

It was also the first visit to China by the dairy producer's chairman since his company became entangled in the poisoned milk affair that swept through that country.

Fonterra had a 43-percent stake in Sanlu before it became the first of 22 Chinese dairy companies to reveal its products contained high levels of melamine, the chemical blamed for the deaths of six babies and health problems in nearly 300,000 others.

Mr Key took Mr van der Heyden to the top table for his meeting with President Hu Jintao, in what he described as a deeply symbolic gesture to show that the New Zealand government wanted Fonterra to play a major role in China.

Mr van der Heyden said he had been overwhelmed at the welcome he received from everyone in China, from the top leaders through to local officials.

He and Mr Key both believed the Chinese authorities saw Sanlu as an "incident' that was now in the past.

Indeed, the Chinese are keen to work with New Zealand and its businesses to develop food safety standards and generally improve agricultural practises.

Despite its involvement, Fonterra's exports to China have boomed since the poisoned milk scandal because Chinese households have been seeking safe food, while Chinese farmers are in crisis because of a lack of public confidence in their produce.

Mr Key said New Zealand would work with the Chinese to see if New Zealand's food safety expertise and technology was exportable.

Mr van der Heyden said that in the short term, Fonterra would not be making any new investments.

Capital was hard to come by and the company was still considering the lessons it had learnt from the ill-fated investment in Sanlu. However, in the medium to long term it would be seeking to expand in China.

This has the backing of Mr Key.

"From our point of view we want to play a long term role in the development of the agricultural sector. So if we can become a significant partner with China that gives us a big advantage," Mr Key said.

"They see New Zealand as the big player."

(Ian Llewellyn travelled to China with the assistance of the Asia New Zealand Foundation)

NZPA PAR il pw mfc