It is really hard to see this argument especially given China's overseas acquisition ambitions. Can the Chinese government not see what a damaging move this is after months of "anti-protectionist" speeches around the world. This is a naive move I am afraid.
China blocks Coca-Cola bid for Huiyuan [FT]
China rejected a $2.4bn Coca-Cola deal that would have been the country’s biggest foreign takeover, stoking fears of protectionism and warnings the decision could scupper Beijing’s push to invest in overseas mining companies.
China’s ministry of commerce ruled against Coke’s proposed acquisition of Huiyuan Juice, the country’s leading juice maker, on competition grounds, saying the move would hurt smaller domestic companies and limit consumer choice.
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Bankers and lawyers denounced the move as a protectionist measure that would also have negative implications for Chinese investment abroad, notably Chinalco’s proposed $19.5bn tie-up with Rio Tinto, the Anglo-Australian miner.
Barnaby Joyce, a maverick Australian politician leading a fight to block the Chinalco investment on nationalist grounds, said China’s “welcome” rejection gave him “ammunition to articulate my beliefs”.
It will be interesting to see how this plays out in the courts and in the newspapers.
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3 comments:
Isn't it unfair to view MOFCOM's decision through the prism of Chinese equity investments overseas? Coca-Cola and Huiyuan are each leading beverage suppliers. While one may not necessarily agree with MOFCOM's decision, it is not implausible that the acquisition does raise legitimate competition concerns. Chinese authorities are likely to be aware that foreign nationalists including in Australia are likely to use this to oppose Chinese investments regardless of whether there are competition concerns. If Chinalco's deal with Rio raises legitimate competition concerns, it would be right and proper for the deal to be blocked on competition grounds. It would be a different thing altogether to block the deal simply because Chinalco is a Chinese government owned company. Again, nothing necessarily wrong with that. But why infer improper motives for MOFCOM's decision to block Coca Cola's bid for Huiyuan when there are reasonable competition grounds for the bid to be blocked?
Thanks for the comment. The point you make is a good one. However, whilst it might not be fair to view this decsion in light of Chinese overseas investments it is rather naive to believe that the press would not do exactly this.
The FT article in full also makes it clear that some believe that this is a purely political move. I am not convinced otherwise.
The Conference Board noted that the post-merger market share would be between 43% and 57% of the juice market. As that level of concentration would be an issue for competition laws in many countries, is it not plausible that the MOFCOM decision was based on valid anti-competitive concerns? Coke already dominates the carbonated drink market and could certainly leverage their distribution and sales networks to increase overall market share. As a minimum it is at least a debatable issue and not simply evidence of protectionism.
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