Control of the Chinese venture into which New Zealand dairy farmers have ploughed nearly $200 million is now passing to a receiver.

Fonterra said today that a court in Shijiazhuang, China, has issued a bankruptcy order against Sanlu, in response to a petition from a creditor.

Sanlu will now be managed by a court-appointed receiver who will assume responsibility for an orderly sale of the company's assets and payment of creditors.

The receiver will have six months to conclude this process.

"This bankruptcy order is not a surprise to us. We were aware that Sanlu was in a very difficult situation and faced mounting debts as a result of the melamine contamination crisis," said Fonterra chief executive Andrew Ferrier.

Last month Mr Ferrier told the cooperative's 10,724 farmers it was likely Fonterra would have to write off their entire investment in the Chinese joint venture.

Thousands of Chinese children fell ill and some babies died after being fed milkpowder deliberately adulterated with melamine -- much of it ending up in Sanlu's Beibei infant formula.

Fonterra has written down the investment in Sanlu by $139m. It holds a 43 percent stake.

It was expected to write off the remaining $62m in book value.

Fonterra last season made $9.3 billion for its farmers -- the equivalent of an average $867,213 for each of them -- after soaring commodity markets pushed the payout up to $7.90/kg.

Chinese media has reported that Sanlu face d compensation claims totalling 700m yuan (about $NZ188m) to consumers whose infants became sick or died after drinking its tainted baby formula.

Fonterra is the world's largest dairy exporter, with annual revenues of about $17b.