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Broken Coke deal sign of protectionism

Bottles of Coca-Cola sit on the shelves of a store in Beijing, China.

TEXT OF STORY

Kai Ryssdal: A little bit of the fizz went out of Coca-Cola today. The company lost what could have been a big toehold in the Chinese market. Regulators in Beijing put the kibosh on Coke's plans to buy a Chinese juice company for $2.5 billion dollars. Marketplace's Dan Grech reports.


DAN GRECH: In a way, Coke got lucky. Analysts say the multi-billion-dollar price tag on Chinese juice maker Huiyuan was too high. But the broader implications are troubling for Coke and for other multinationals. Kirstie Nicholson is an antitrust lawyer for the British law firm Lovells.

KIRSTIE NICHOLSON: This may be a message to international companies that it's going to be difficult for them to invest in these famous national Chinese companies.

The Chinese government invoked a new anti-monopoly law to reject Coke's bid. But analysts say the real reason was protectionism. Everyday Chinese and the Communist Party elite both disliked the idea of a popular juice brand being owned by Americans. Matthew Slaughter is a professor of international economics at Dartmouth. He says rising protectionism in China and elsewhere, including the U.S., could prolong the credit crunch.

MATTHEW SLAUGHTER: Greater flows of foreign direct investment can be part of the way that the crisis resolves. In part because foreign direct investment tends to be patient, long-term investments across countries.

China rode foreign capital to its current heights, but that door is closing. Outside investment in China was down 21 percent last year, and is falling even faster in 2009.

I'm Dan Grech for Marketplace.

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