As I travel around Latin America I see the continuing expansion of China's influence. Chinese companies have invested billions of dollars to secure a natural resource supply and appear to be the contractors of choice for many government infrastructure projects.
Yesterday Reuters announced that Coca Cola will acquire Chinese juice producer Huiyan for $2.5 billion. With 2008 sales estimated to be $3.8 billion and revenue growing at about 30 percent per year, Huiyan is an attractive acquisition for Coke. One obstacle to completing the acquisition is China's new anti-monopoly law which was passed August 1, 2008. Would it not be ironic that after pushing China to more fully develop its legal system, the Chinese government then invokes the new law to block the largest acquisition in the history of China by a foreign company.
During the Carter administration President Carter met with the Premier of China. Carter was pushing the theme that civilized countries let their citizens immigrate at will. In response to this point the Premier replied, "how many Chinese would you like me to allow to immigrate to the U.S.--1 million, 10 million, 100 million?" Carter then dropped the point scared at the thought of 100 million Chinese immigrants moving to the U.S.
Another story told to me by a friend who was legal counsel to the securities underwriters (investment bankers) for some of the first securities issuances in overseas markets by Chinese government owned companies. In his preparation of the selling prospectuses much attention was paid to the risk factors related to the securities and frequently shortcomings in the Chinese legal system were cited as significant risks. Whenever the legal risk was specific enough, a governement official would ask my friend to draft a new law to make the risk factor go away. 24 hours after the draft law was prepared, the government official would return with an approved piece of legislation such that the risk factor could be deleted from the prospectus.
The Chinese government clearly understands the workings of foreign legal systems and it will be interesting to watch how the development of their own legal system evolves, is interpreted and implemented.
