Veto of Coke bid is not protectionism

China's Ministry of Commerce on Wednesday vetoed Coca-Cola's $2.4 billion bid for China 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 China of protectionism.

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

Given Coke's dominance and Huiyuan's 45-plus percent market share in China's juice industry, the possibility of the acquisition being rejected for violating China'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 China has in dealing with foreign investors is not protectionism, but too much preferential treatment. This veto is a big step toward China'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 China. Despite this rejection, Coke still plans to invest $2 billion in China in the next three years. China'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

(China Daily 03/23/2009 page2)