In this issue of China Briefing, we focus on the recent reevaluation and reconsideration of joint ventures (JVs) and mergers & acquisitions (M&As) in China. The global financial crisis and the shift in China's economy from export-based to domestic consumption has seen a surge in interest for Sino-foreign JVs and M&As among foreign investors.
However, these investments have faced scrutiny from foreign investors due to previous failures of multinational Chinese JVs and M&A deals. For example, in 2007, there was a legal dispute between Wahaha and Danone over alleged illegal business activities outside the JV. This escalated into a long media-covered controversy that led Danone to eventually decide to sell its 51% stake in the JV.
In the M&A sector, a planned deal between Coca-Cola and Huiyuan in 2008 was thwarted by new Chinese anti-monopoly laws. Coca-Cola aimed to acquire the leading juice brand for $2.4 billion, but after thorough consideration and receiving additional information, the Chinese Ministry of Commerce (MOFCOM) decided against the deal due to concerns that it would strengthen Coca-Cola's position in the market and negatively impact competition.
Despite these challenges, foreign and Chinese companies continue to find synergies in JVs and M&As, particularly for small and medium-sized enterprises (SMEs). These collaborations offer access to capital for Chinese SMEs and solutions for succession planning within the company.
Given the evolving business environment, JVs and M&As are increasingly attractive for both Chinese and foreign companies. The current market conditions provide opportunities for these investments, especially in the context of Chinese SMEs facing difficulties in securing capital and managing succession.
With the global trend suggesting an increase in Sino-foreign JVs and M&As, these investments require careful planning, good cooperation between Chinese and foreign partners, and a deep understanding of the market dynamics. This issue explores the framework and motivations behind taking either of these investment structures, highlighting the changing landscape and potential for growth in Sino-foreign partnerships.
