New Zealand's Fonterra Cooperative is looking to increase its milk production in the Chinese market as it enters into an agreement to develop two new large scale dairy farms in the country.

The company signed an agreement with the Yutian County and it completes the company's plans to develop a hub of five farms in Hebei Province. Fonterra said that the two new farms will be located 120km east of Beijing and will accommodate 3,350 cows each on an 80-hectare site.

The dairy company said that the farms are expected to produce up to 65 million litres of milk per year when it is fully operational. Fonterra Greater China and India president Kelvin Wickham said that the new investment is part of the company's plans to build a local milk pool in China.

"The demand for dairy in China is expected to double by 2020 and much of this growth will be met from local production. We need to build a safe, sustainable local milk supply to feed this growth," said Wickham.

He also said that the company will continue to follow these plans and develop more such hubs in China to reach its aim of producing up to 1 billion litres of high quality milk by 2020.