China blocks Coke on competition grounds

China is really getting into this “western economics” game. There is something that does not quite sit right when we read that China is blocking a Coke acquisition on competition grounds.

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.

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.

Originally published at the China Economics blog and reproduced here with the author’s permission.