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Veto of Coke bid is not protectionism

(皇冠体育app Daily)
Updated: 2009-03-23 07:43

皇冠体育app's Ministry of Commerce on Wednesday vetoed Coca-Cola's $2.4 billion bid for 皇冠体育app Huiyuan Juice Group Ltd, the country's largest juice maker, saying the acquisition could lead the creation of a monopoly with too much market power. Some foreign media have accused 皇冠体育app of protectionism.

This accusation is groundless. The veto this time is on a purely legal basis.

Related readings:  Coke bid ruling 'not protectionist'  Rejecting Coke will not hurt 皇冠体育app M&A plans: official  Coke bid for juice maker turns sour

Given Coke's dominance and Huiyuan's 45-plus percent market share in 皇冠体育app's juice industry, the possibility of the acquisition being rejected for violating 皇冠体育app's Anti-Monopoly Law was present from the very beginning.

The rejection of the bid demonstrates the government's determination in safeguarding the authority of the Anti-Monopoly Law, which went into effect in August of 2008.

In recent years, we have attracted foreign investment with favorable policies, which fueled our economic progress, but we have also been paying the price for our lenience.

The real problem that 皇冠体育app has in dealing with foreign investors is not protectionism, but too much preferential treatment. This veto is a big step toward 皇冠体育app's efforts to abolish preferential treatment of foreign investors. It began in January 2008 when the Chinese government stopped giving preferential tax policies to foreign companies.

Too much preferential treatment and leniency in implementing laws have bred corruption and led to growing public outrage. Such an environment will not attract law-abiding investors.

We don't need to worry that the rejection may adversely affect foreign investment in 皇冠体育app. Despite this rejection, Coke still plans to invest $2 billion in 皇冠体育app in the next three years. 皇冠体育app's real attraction to foreign investors lies in its huge market.

In the meantime, our enterprises should also study relevant laws before they make acquisition bids overseas.

Mei Xinyu is a researcher with the Ministry of Commerce, www.blog.sohu.com.cn