China Blocks Coke

Economic calamities sometimes have a way of bringing out the worst in governments. China was already looking askance at Coca-Cola's $2.3 billion bid to buy China Huiyuan, the country's largest juice maker. Now it has formally rejected the bid. According to the Financial Times, which first reported the action, China said the combination "could have pushed up juice market prices and limited consumers' choices."

Bull. China nixed the deal out of pure nationalism—a misplaced notion of national pride.

"People familiar with the matter said the ministry's thinking reflected wider worries in Beijing about the loss of a leading brand to a foreign company," according to the Financial Times.

So China, which, like everybody, is struggling with the effects of a worldwide slowdown, has decided that national pride should be the priority. Both companies, as well as Chinese consumers and Chinese workers, will be hurt as a result.

But the damage doesn't stop there. Look for other foreign companies, with their jobs and their efficiencies and their investments, to pull back on their plans, or pull out of deals in China. And look for Chinese companies looking to make foreign acquisitions, to run into trouble of their own. There were already deep worries that the slowdown in China could make the global recession a lot worse. This won't help.

Whatever noises it made about "competition" upon rejecting the deal, the government showed its hand earlier when it tried to force Coke to give up the Huiyuan Juice brand in return for China's blessing. Coke refused, because the brand is the whole thing.

"Drinks are not politically sensitive products," an analyst told Bloomberg News. But this move is "purely political."