Don't Panic

It’s official: Coca-Cola will not, in fact, be allowed to acquire Huiyuan Juice. The Ministry of Commerce (Mofcom) said that allowing Coke to acquire Huiyuan would cramp domestic competition in the corn-syrup-sodden “healthy drinks sector.” The combined firms would control nearly 20% of the Chinese market, but is this ratio inherently monopolistic? The law is vague on that point, but safe to say that this will significantly blunt foreign appetites for Chinese brand acquisitions, even in non-strategic industries like healthy juice. Some, naturally, accuse China of protectionism, and they may be right, but let’s keep in mind that Coke benefits from US agricultural subsidies for sugar that allow it to compete with bottled water’s price point. Regardless, Beijing hasn’t resisted crying protectionism itself. For example, US Energy Secretary Steven Chu said Tuesday that should the US adopt a carbon emission cap-and-trade scheme, it should levy a tariff on imports from countries that don’t regulate emissions, namely China, which has been enjoying a quite inexpensive, even profitable, ride on the Kyoto Protocol. Says China, “Protectionism!” China has gone so far as to call for importing countries to pay for the costs of the carbon emissions produced by the exporter, which would pass the cost on to the consumer in theory, but in reality be quite difficult to track. Such rhetoric may be transparently self-interested, but is it enlightened self-interest or short-sighted panic? The World Bank keeps on rattling Chinese leadership, cutting its forecast for Chinese GDP growth for the second time in four months down to 6.5%.