Private equity firms Yunfeng Capital, founded by Alibaba Group Holding Ltd's Jack Ma, and CITIC Private Equity Funds Management (CITIC PE) have agreed to invest at least 2 billion yuan ($320 million) in a unit of Inner Mongolia Yili Industrial Group Co Ltd, the dairy products company said in a statement.

Yunfeng and CITIC PE, a unit of China's CITIC Group Corp, will buy 60 percent of Inner Mongolia Yili Livestock Development Co Ltd, Inner Mongolia Yili Industrial said.

The investment is Yunfeng's first in China's food sector, according to S&P's CapitalIQ database. Its past investments are focused in technology, media and telecommunications.

The deal underscores a trend for private equity investors buying into China's food industry as the government works to improve food safety.

Inner Mongolia Yili Industrial is one of China's biggest milk powder makers, and operates in a sector where China has announced moves to support domestic "champions" who will be able to compete against global rivals.

Milk powder has been a sensitive topic since 2008 when milk tainted with the industrial chemical melamine killed at least six infants and left thousands ill.

CITIC PE is headed by Liu Lefei, the son of politburo member Liu Yunshan.

Yunfeng recently closed a new investment fund after raising $1.1 billion.