What Are We Afraid of?

From a legal standpoint, the decision was justifiable. But we should still be willing to scrutinize the decision, which may hurt business more than it helps it.

While technicalities will continue to fuel arguments by those for and against the deal, we prefer to re-examine the case in terms of "national brands" and public interests, which turned what would otherwise be a commonplace acquisition into a public issue.

Upon hearing the news that Coca Cola wanted to buy Huiyuan, proponents labeled it a disaster for a national brand. They draped themselves in aggressive slogans such as, "we would rather go bankrupt or lose our jobs than sell the company to foreigners". One internet survey showed 80% of netizens opposed the deal. So what was it that we feared so much about this purely commercial acquisition?

This touches upon an important matter of judgment. Many mentioned the Coca Cola acquisition and CNOOC's (China National Offshore Oil Company) blocked bid for US firm Unocal--saying China cannot sell the fruit juice giant to CocaCola lest the nation's dignity be harmed. And although the Huiyuan deal did not touch upon any secret technologies, nor threatened China's national security, and despite that it would remain a competitive market with low barriers to entry, the opinions still had an impact on the Ministry. About one month ago, a vice-director in charge of foreign investment at the Ministry told media that intense public attention to the issue has interfered with their work.

At that time, some worldly observers predicted that the deal had a high probablity of being blocked. Certainly, we don't believe that the above arguments were the decisive factors behind the Ministry's verdict, but the reality is that criticism of verdict is being based on it.

And certainly, some feared the verdict would be seen as catering to calls for protectionism. But this ultimately does not benefit Chinese firms pursuing oversea expansion, like Chinalco's deal with Rio Tinto, which was still under review by the Austrian government.

China is growing to be a source for foreign direct investment. If we set up many restrictions on it, how can we ask our trade partners to open their own markets to Chinese firms? To our relief, the Ministry clearly stated that this neither means China would shutter its gates to qualified foreign funds seeking to buy Chinese businesses, nor it said this was a signal that China was pursuing trade protectionism.

But another detail deserving deep thought was that Huiyuan's interests were totally ignored throughout the case. Huiyuan missed its best opportunity to make money by selling itself. In order to protect some vague or phantom public interest, zealous opponents to the deal insisted it was worth sacrificing Huiyuan's interests for the public good. But at it's core, the firms' acquisition was a kind of business deal. If a firm does not have the power to handle its brand or sell itself, it will undoubtedly dampen entrepreneurs' enthusiasm.

And what makes Huiyuan so different than other domestic firms which have been bought? After Lucky, a domestic film manufacturer, and Mininurse, a cosmetic brand, were acquired by foreign firms, did Chinese consumers suffer deep harm at the hands of a "foreign monopoly"? Did we suffer huge losses or lose our dignity in the above two sectors? And if not, why couldn't Huiyuan sell itself?

Well, its all over now. Zhu Xinli, chairman of Huiyuan, couldn't make money from the Americans, and everyone else is content. The only thing that opponents are happy about is that Coca Cola might be grateful of such a deal's blockage, whereas it could spare itself huge expenses amidst the gloomy economic climate.