Hot on the heels of getting a green light to buy Bellamy's Organic for $1.5 billion, China Mengniu Dairy Company has struck a deal to buy Lion's dairy and drinks business for $600 million.

Mengniu, one of the world's biggest dairy companies, will acquire major Australian brands including Big M, Dairy Farmers, Pura, Berri and Daily Juice under the deal.

Pura and a range of other big name Australian dairy brands would be sold to China Mengniu Dairy under a $600 million deal. Credit:Ben Rushton

The Chinese government-owned food company COFCO holds about a 16 per cent stake in Mengniu, which itself is listed in Hong Kong.

But the proposed deal, which needs approval from both the Foreign Investment Review Board and the competition regulator, comes at an extremely delicate time in the relationship between Australia and China and will be a test of Australia's attitude to Chinese investment.