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Coke takeover of Huiyuan may face double reviews by authorities

By Nie Peng (chinadaily.com.cn)
Updated: 2008-09-05 17:35

Huang Jianchu, an economic law official with the Standing Committee of the National People's Congress, noted when explaining the "national security review" that multinational companies withheld their core technology from Chinese companies they acquired.

Althougth the acquisitions did help Chinese companies go international, multinationals kept most research and development work in their own hands, he said.

A multinational company could even take steps to restrict or exclude competition once it had sealed a dominant place in the Chinese market, he added.

A Xinhua report on Wednesday said the approval of the acquisition faces two difficulties: First, the sizes of the two companies will raise monopoly concerns; second, Huiyuan is a household brand many Chinese think should be protected.

By 10:30 am Friday, an online poll conducted by web portal Sina.com had registered the participation of 13,6947 netizens, with 81.99 percent of them showing opposition to the acquisition. More than 113,000, or 82.85 percent of those polled suspected the move could remove one more of China's main home-grown brands.

Lack of capital has hindered Huiyuan's development, says expert.

Why did Huiyuan go so far as to sell itself to a foreign company? Although Huiyuan founder Zhu Xinli was not available for comment, Liu Yulan, secretary general of Shanghai Beverage Trade Association, said lack of capital was the crux of the dilemma faced by private enterprises such as Huiyuan.

"Although Huiyuan is an influential brand with a very large market share, a healthy circle of capital flows has yet to form," said Liu to the National Business Daily. "Otherwise, it wouldn’t have gone so far as to sell itself."

She said she hopes the government will ignite new hopes for domestic brands like Huiyuan through policy changes.

China's private enterprises have long been suffering from limited financing sources.

Banks usually prefer lending to State-owned enterprises and foreign-funded companies, which are backed by the government, to providing loans to private enterprises due to concerns about their credit standing.

Widespread violations of accounting rules and tax evasion have tainted the reputation of private enterprises.

Under such circumstances, entrepreneurs lack confidence in the growth of their businesses, especially when the costs of raw materials, human resources and logistics are all soaring, and in order to maintain operations they could eventually opt to sell their intangible assets, analysts say.

 

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