The Wall Street Journal: China’s Coke Smackdown: It’s Just Business

America or China, which is the better capitalist?

China has now forbidden a Chinese company–China Huiyuan Juice Group–from selling itself to Coca-Cola:

“In accordance with the relevant provisions of the Antimonopoly Law, the Ministry of Commerce reviewed various aspects of this concentration including: market share and market control, the degree of market concentration, the impact on market access and technological progress, the impact on consumers and other business operators, and the impact of brands on market competition in the juice market. The review was in strict compliance with relevant laws and regulations. The views of parties concerned were fully aired during the review process.”

That is in marked contrast to the way the U.S. has handled certain deals involving Chinese companies seeking to acquire U.S. businesses, raising national security concerns in opposing Cnooc’s $18.5 billion proposed acquisition of oil-and-gas concern Unocal (though 70% of Unocal’s energy reserves were in Asia) and the proposed buyout of networking-equipment maker 3Com by Bain Capital, which included a 16% investment in 3Com by China’s Huawei Technologies.

“The now-withdrawn $18.5 billion acquisition bid for Unocal Corp. (UCL) by CNOOC Ltd. (CEO), China’s third-largest oil company and one that is 70% owned by the Chinese government, encountered a buzz saw of opposition, exposing America’s deep anxiety about China’s rapid emergence as a global economic power,” wrote Laura D’Andrea Tyson at the time.

In the Bain-3Com deal, the U.S. government implied that China may use the deal to spy on the U.S. Then 3Com said its new chief executive, fluent Mandarin speaker Robert Mao, would be based in Beijing, where two-thirds of 3Com’s 6,000 employees already work.

The Huiyuan deal was the first major test of China’s strengthened antimonopoly law, and as the above WSJ article points it, the ruling could have a chilling effect on merger-and-acquisition activity in China, as well as on foreign investment in the country generally. It also could complicate efforts by China’s own companies to make overseas acquisitions, an area where China has big ambitions.

Of course, in each of the instances above, the end game was the same, the prevention of a local company’s acquisition by a foreign buyer. Still, it is interesting that the free-trading U.S. raised the protectionist rationale while the putatively communist country couched its objections in business terms.