The Engle and Granger two-step method was used in this paper to construct the ECM model to study the impact and recovery of food safety incidents in China’ dairy industry. The long-term relationship model is established in the paper to reflect the dairy industry’s different stages of development in China during 2007-2010; in the meantime, this paper introduces sets of food safety shock variables to make a comparative analysis of the impact of the severe dairy safety incidents with “melamine” event as a representative. And then it mainly focuses on “melamine” event and establishes short-term dynamic relation by expanded ECM model to predict that the dairy market needs more than two-month adjustment before returning to equilibrium after this crisis. However, the development of dairy industry has experienced structural changes due to the serious impact of crisis, thus China’s dairy market hasn’t returned to pre-crisis levels two years after the crisis.