Executive Briefings

What's Really Behind China Blocking Coke's Acquisition Try?

Last August, after 14 years of debate, the Chinese government at last imposed what was informally referred to as its "economic constitution," a broad anti-monopoly law for a country rife with state-imposed monopolies. Since then people have wondered how the law would be applied, and whether it would advance China's transformation into a market economy, or serve as an impediment to genuine competition. On March 18th an answer emerged with the rejection of the largest outright acquisition by a foreign firm, a $2.4bn offer by Coca-Cola for China Huiyuan, China's largest juice company.
When the deal was announced last September, it was at a price three times Huiyuan's valuation. Since then, as global markets have collapsed, it has only become more appealing. Huiyuan is a private company and juice had previously been free of government control, so theoretically it should have been available for purchase.
The most benign interpretation of the rejection being bandied about by lawyers and bankers is that it reflects a political response to critical comments by America's new administration. The more worrying interpretation is that, even as China publicly urges other countries to commit to opening their markets to Chinese investment and trade, it is imposing yet another barrier to outsiders. Worse still, the barriers are in its domestic consumer sector, one of the few global economic bright spots.
Source: The Economist

Last August, after 14 years of debate, the Chinese government at last imposed what was informally referred to as its "economic constitution," a broad anti-monopoly law for a country rife with state-imposed monopolies. Since then people have wondered how the law would be applied, and whether it would advance China's transformation into a market economy, or serve as an impediment to genuine competition. On March 18th an answer emerged with the rejection of the largest outright acquisition by a foreign firm, a $2.4bn offer by Coca-Cola for China Huiyuan, China's largest juice company.
When the deal was announced last September, it was at a price three times Huiyuan's valuation. Since then, as global markets have collapsed, it has only become more appealing. Huiyuan is a private company and juice had previously been free of government control, so theoretically it should have been available for purchase.
The most benign interpretation of the rejection being bandied about by lawyers and bankers is that it reflects a political response to critical comments by America's new administration. The more worrying interpretation is that, even as China publicly urges other countries to commit to opening their markets to Chinese investment and trade, it is imposing yet another barrier to outsiders. Worse still, the barriers are in its domestic consumer sector, one of the few global economic bright spots.
Source: The Economist