Overview

The Anti-monopoly Bureau of China's Ministry of Commerce (MOFCOM) approved Diageo's acquisition of an additional 4% stake in Sichuan Chengdu Quanxing Group, giving Diageo indirect control of Shuijingfang, one of China's best known liquor producers and the owner of a renowned brand of "baijiu", which is a popular Chinese spirit that accounts for more than 30% of China's total alcoholic drinks market.

China's spirits market is one of the world's largest and fastest growing; this transaction will also help the Chinese spirits industry to develop internationally.

This decision contrasts with Coca-Cola's proposed acquisition of Huiyuan, a Chinese juice producer, in 2009, which failed after MOFCOM blocked the deal on competition grounds. The 2009 decision gave rise to concerns that the Chinese authorities would use the Anti-Monopoly Law in order to restrict foreign takeovers of Chinese businesses.

The Diageo / Shuijingfang transaction has therefore been regarded as another test case of China's openness towards foreign investment. It is the first time that a foreign company has acquired the control of a famous Chinese brand under the current Anti-Monopoly Law.