With 50 businessmen looking to sign deals, this week’s UK trade mission to China was the largest for over 200 years.
So far, there’s been precious little return, apart from a $1.2 billion engine supply contract for Rolls-Royce.
Indeed, there’s still silence on the most significant deal that was on the negotiating table – Diageo’s bid to take control of Shui Jing Fang, one of China’s most famous bai jiu brands.
Six months ago, Diageo, which is listed in the UK and owns the Smirnoff, Guinness and Johnnie Walker brands, said it wanted to buy Sichuan Swellfun, a holding company that owns the bai jiu brand, valuing it at around $1 billion.
Almost unbelievably, this would be the first ever foreign takeover of a substantial mainland-listed company, outside of the financial services sector, illustrating how closed China is to foreign ownership.
In order to pull of the deal, Diageo has gone about its work carefully, winning over the local government and workforce and then structuring the deal so that as much of the company could be locally-owned as possible, while still giving Diageo control.
But the deal is mired in Chinese protectionism. Shui Jing Fang is a heritage brand (Diageo has had to court the Culture ministry for permission too), which first started distilling its bai jiu some 600 years ago. Allowing it to fall into foreign hands, despite the promise of more investment, has been a difficult idea to swallow.
The UK delegation said it was going to bat for Diageo during this last visit, but so far, there has only been silence on whether it will now go through.