The first phase of the $400 million expansion project by China's largest dairy company will start early next year and is expected to take five years to complete.
It is expected that the completed project will create a further 150 jobs at the factory.
''This comprehensive project will add capacity to output a wide range of additional products from the Glenavy factory,'' Oceania Dairy chief executive Aidan Johnstone said.
''That will include a whole milk powder drier, an infant formula canning line and facilities to manufacture UHT milk products and lactoferrin.''
By 2019, Oceania expects to be handling more than 630 million litres of milk from local farm suppliers, generating export revenues of more than $700 million.
About 150 people turned out for the official opening of the first stage of the Glenavy factory yesterday, including the China Dairy Industry Association chairman Song Kungang, Yili president Pan Gang, Associate Minister of Foreign Affairs Todd McClay, Chinese embassy economic and commercial counsellor Zhang Fan, the China Dairy Association secretary-general Gu Jicheng and Waimate Mayor Craig Rowley.
There was also a large contingent of Chinese media in attendance.
Speeches and presentations switched between Chinese and English, with each guest able to listen to translations through headsets provided.
The first stage of the Glenavy factory was completed in September and the factory is in its first full season of production.
More then 70 jobs have been created within stage one and 48 local farmers are supplying milk for the 2014-15 season. Mr Rowley said yesterday's announcement was ''hugely exciting'' for the future.
''It's going to benefit both South Canterbury and North Otago in that there's going to be employment coming out of Waitaki, Waimate and Timaru. It's great for the region,'' Mr Rowley said.
The flow-on effects were already being seen in Waimate, particularly by businesses which were catering to staff in the construction stages.
''The accommodation was taken up around the district with the build phase ... it's all great for the economy,'' he said.
In its first season, 220 million litres of milk will be processed by the factory.
''The Oceania Dairy factory at Glenavy is Yili's first major offshore investment and the company is very focused on ensuring the success of the operation,'' Yili Group executive president Zhang Jianqui said.
''As the world's largest milk exporter, New Zealand is ideally positioned to work with China to meet the country's escalating demand for milk,'' he said.
Yili's 2013 revenue of $US7.6 billion (4NZ9.7 billion) made it the 10th largest dairy company in the world.
Yili purchased Oceania Dairy and started developing the infant formula processing plant on a 38ha block of land at Glenavy in April 2013.