Suspicious

The implementation of China’s newish Anti-monopoly Law looks increasingly ominous. The proposed acquisition of China’s largest juice maker, Huiyuan, by US soft drink conglomerate Coca-Cola looks to have hit a serious snag. Sources allege that Mofcom doesn’t want to grant Coke usage rights to the Huiyuan brand, and has other conditions as well, including extracting promises from Coke to invest more in the future. Since Huiyuan’s brand value makes up a large proportion of the deal value, this may simply be Mofcom’s not-particularly-subtle way of saying “No.” Suspicion of foreign firms’ investment intentions is not limited to this deal; the Ministry of Finance just issued rules preventing state-owned banks from selling stakes to foreigners at a discount from market prices. This may not be unreasonable. Royal Bank of Scotland, for example, bought a 4.3% stake in Bank of China for US$1.6 billion in 2005 and flipped it in January for a sweet US$2.4 billion. However, it’s not just foreigners feeling the regulatory knout. The National Development and Reform Commission (NDRC) has ordered provincial governments to stop subsidizing the power expenditures of local industries, a practice that subverts the NDRC’s plans to force inefficient factories to upgrade or close.