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Stir together 1/4 cup warm water with yeast and pinch of sugar. Let stand until foamy, 5 to 10 minutes. (If mixture doesn't foam, start over with new yeast.) Whisk in dried milk and remaining 3/4 cup warm water.
Stir together flour and remaining 3 tablespoons sugar in a bowl, then stir in yeast mixture (do not add baking powder yet) with a fork until a dough forms. Knead dough with your hands in bowl until all of flour is incorporated. Turn out dough onto a floured surface and knead, dusting surface and hands with just enough flour to keep dough from sticking, until dough is elastic and smooth but still soft, about 5 minutes. Form dough into a ball.
Put dough in an oiled large bowl and turn to coat. Cover with plastic wrap and let dough rise in a draft-free place at warm room temperature until doubled, about 2 hours.
Punch down dough, then transfer to a lightly floured surface and flatten slightly into a disk. Sprinkle baking powder over center of dough, then gather edges of dough and pinch to seal in baking powder. Knead dough with just enough flour to keep dough from sticking until baking powder is incorporated, about 5 minutes. Return dough to bowl and cover with plastic wrap, then let dough stand 30 minutes.
Cut 16 (3- by 2-inch) pieces of parchment paper.
Form dough into 2 equal rounds. Cut each round into 8 equal pieces. then lightly dust the dough with flour and roll them into balls. Place the dough balls on a baking sheet and cover loosely with plastic wrap. Let the dough rest for 30 minutes before continuing.
Roll out 1 piece of dough into a 6- by 3-inch oval, lightly dusting surface, your hands, and rolling pin. Pat oval between your palms to remove excess flour, then place one of the small pieces of parchment paper over half of the bun and fold the other half over the parchment. Place bun on a piece of parchment paper on a large baking sheet and cover loosely with plastic wrap. Make more buns with remaining dough, then let stand, loosely covered, until slightly risen, about 30 minutes.
Line a steamer rack or bamboo steamer (that will fit inside your pot or wok) with parchment paper to prevent sticking.
Set a large steamer rack (bamboo steamer) inside a pot (or wok) and add enough water to reach within 1/2 inch of bottom of rack, then bring to a boil. Reduce heat to a steady simmer. Place buns in steamer rack (do not let buns touch). Cover tightly and steam until buns are puffed and cooked through, about 3 minutes. Transfer buns to a plate with tongs, then discard wax paper and wrap buns loosely in kitchen towels to keep warm. Steam remaining buns in batches, adding boiling-hot water to skillet as needed.
Notes: Buns can be steamed and cooled completely, then chilled, wrapped tightly in a double layer of plastic wrap, up to 1 day or frozen up to 1 week. (Thaw wrapped frozen buns in refrigerator.) Reheat buns, wrapped in a dampened kitchen towel and wrapped tightly in foil, in a 350°F oven until soft and heated through, about 15 minutes.