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2009-03-19 | All chapters
The Death of Coke-Huiyuan Deal, A Rebirth of Protectionism
ChinaStakes.com, 18th March 2009
China’s decision to reject the Coca-Cola’s $2.4 billion bid for China Huiyuan Juice Group Ltd.may trigger a tide of protectionism not only between the country and America, but also among developing countries.
Ministry of Commerce says the biggest foreign takeover of a Chinese company would have been “negative for competition” in the country’s drinks market.
Coca-Cola might have used “its dominant position” in the carbonated drinks industry to push up prices and limit choices for consumers, the Ministry of Commerce said in a statement on its Web site today. The deal would have also made it more difficult for smaller rivals to survive, the agency added.
As chinastakes.com wrote earlier today, Coke's recently announced $2 billion additional investment in China may be at stake. Such regulatory niggling would also add to Coke’s major frustration in China's non-carbonate beverage market.
The US has in the past made Chinese acquisitions difficult on its home ground, and rejection of the Huiyuan deal would certainly be interpreted as a revenge move.
And the rejection may cause political backlash just two weeks before the G20 London conference. The World Bank said 17 of the Group of 20 developing and industrial nations have introduced restrictive trade practices since pledging in mid-November to avoid protectionism.
Australian lawmakers today began an inquiry into investment laws amid a backlash from politicians and shareholders over Chinalco’s planned $19.5 billion funding deal with Rio Tinto Group.
The block of the deal has also shocked international investors. European Union Chamber of Commerce in China abruptly issued a statement, saying “the Chamber believes that this goal can best be achieved by welcoming more international investors into the Chinese market through eased restrictions and greater transparency, and by lowering any existing barriers to market entry and expansion.”
The Chamber urges that the detailed findings of the investigation, and the reasons behind the decision to reject the bid, will be made publicly available in the near future.