US soft drinks giant Coca-Cola is “cooperating fully” with Chinese authorities on allegations that it illegally mapped part of a southwestern province as part of its distribution operations, it said Wednesday.

Coca-Cola was found to have “illegally collected classified information with handheld GPS equipment”, a news portal run by party officials in Yunnan province, said last month, citing a provincial mapping bureau.

The report did not provide further details on the case.

Coca-Cola said that its local bottling plants in China have used electronic mapping and other techniques as part of their logistics activities, but added that all the systems they used were freely available.

The South China Morning Post reports an ongoing “anti-espionage investigation” into Coca-Cola, and notes the involvement of the Ministry of State Security, hinting that Beijing is earnestly approaching what they see as an important case:

The case is being handled jointly by the National Administration of Surveying, Mapping and Geoinformation and the Ministry of State Security. The involvement of the top intelligence authority underscores the seriousness of the case.

“We understand that espionage is a serious charge against a world famous company,” said an official from the administration. “We are still in the process of gathering information.

“What we can say for now is that many subsidiaries of Coca-Cola are involved and this happens in many provinces. Due to the sheer scale of the case, the complexity of the technology involved and the implication to our national security, we are working with the Ministry of State Security on this.”

National security concerns led China to crackdown on companies offering online mapping services back in 2010. As GPS technology has become a ubiquitous fixture in modern-day society, concerns over national security have prompted China to tighten regulations on standard GPS equipment, and to develop the Beidou navigation system - their own alternative to the U.S.-maintained network of GPS satellites – which opened for commercial use late last year. The Wall Street Journal reports on the ambiguities that companies and researchers face while working in the midst of Beijing’s GPS and mapping apprehensions:

Beijing has long been guarded about mapping, for national-security reasons and because of sensitivity over the definition of the country’s borders and the names of disputed territories. It has stepped up regulations as standard international GPS technology has proliferated in mobile phones and other hand-held devices.

Companies providing online map and location services in China are required to apply for government approval, under rules from China’s State Bureau of Surveying and Mapping. Approval typically is reserved for domestic companies.

The rules for conducting research and collecting data for business in China often are unclear and have caused problems for foreign companies. A Chinese court in 2010 sentenced American geologist Xue Feng to eight years in prison for trying to buy data about China’s oil industry, including the coordinates of wells. The data were believed to have been commercially available, Mr. Xue’s defense team said. But the court convicted him on charges of attempting to obtain and traffic in state secrets, raising questions on the definition of secret information.

News of Beijing’s espionage probe into the U.S.-based Coca-Cola Company comes days after the Obama administration called on China to make “serious steps” to prevent cybertheft in the wake of a highly publicized string of hacking campaigns against U.S. news organizations.

© josh rudolph for China Digital Times (CDT), 2013. | Permalink | One comment | Add to del.icio.us
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The food-safety regulator in Shanxi province said Saturday that during an April inspection it found that a batch of drinks produced by Coca-Cola (Shanxi) Beverage Ltd. was made with water containing chlorine. The statement, from the Shanxi Provincial Bureau of Quality and Technical Supervision, refers to the suspension as a penalty for the chlorine levels.

The statement didn’t detail the findings and didn’t say when the plant will resume production.

A Coca-Cola spokeswoman said the Atlanta-based company found only trace levels of chlorine in a batch made between Feb. 4 and Feb. 8. The levels were just below the national standard of purified water in China of 0.005 milligrams per liter, the spokeswoman said, adding that the chlorine level was below World Health Organization limits for drinking water.

Xinhua, on the other hand, reported that the Shanxi subsidiary had admitted to and apologised for the contamination, and that other, unspecified problems had been found on the plant’s production lines. But the agency had previously declared that the official investigation had cleared Coca-Cola:

An investigation and analysis conducted on Tuesday by the Food Quality Safety Supervision Testing Institute of Shanxi Province and the Shanxi Entry-Exit Inspection and Quarantine Technology Center found that the chlorine levels of the nine allegedly contaminated batches were found to be lower than that of purified drinking water, the Shanxi Provincial Bureau of Quality and Technical Supervision said on Wednesday.

The products are therefore safe for consumption, the experts concluded.

See also ‘Truth, Rumour, Weibo & Coca-Cola‘, on how earlier reports of the contamination fit into the government’s ongoing anti-rumour campaign.

© Samuel Wade for China Digital Times (CDT), 2012. | Permalink | One comment | Add to del.icio.us
Post tags: chlorine spills, Coca-Cola, food safety, rumors, Shanxi, Xinhua
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On the morning of April 11, Chinese web users woke up to find that the reports that had previously filled their Weibo pages — in coded words adopted to evade the censors — now featured the front page of every official newspaper. The rumor, repressed by censors and dodged by government spokesmen, had become a state-approved fact overnight.

“What was treated as attacks spread by ‘international reactionary forces’ has now become truth. Then what other ‘truths’ exposed by foreign media should we believe?…God knows!” wrote Weibo user Jieyigongjiang. “How did it all become truth? Was I being fooled?” user Zousifanye asked ….

China’s heavy-handed censorship may now actually accelerate the spread of rumors, which could be seen as more plausible precisely because they are censored. Chinese web users trying to figure out the most likely truth must speculate not only about the rumors themselves, but also about every move the government makes in response. Did the state order censors to crack down on a particular story because they want quell a false and potentially destabilizing rumor or because they want to prevent an uncomfortable truth from spreading? If censors clamp down on a growing rumor later than expected or not at all, is this because they’re simply slow or because government wants to build up public attention for its own purposes …? For Chinese netizens trying to parse out truth from rumors, every story and its government response are a new mystery, and the guessing game never really ends.

While the focus often falls on political gossip, rumours also thrive in other areas of public interest, from natural disasters and industrial accidents to food safety. Danwei translated a varied list of ten harmful rumours from the front page of Monday’s People’s Daily, including the following:

A text message that read: “Family, classmates, friends, don’t eat tangerine oranges! This year the tangerines from Guangyuan (Sichuan Province), have maggots under their peal. Sichuan buried a large batch and sprinkled them with lime.” This SMS was forwarded from phone to phone, and reported by news sources. It led to a massive drop in the price of tangerines across the country, and a loss of RMB 1.5 billion for the agriculture industry.

Rumors about an explosion at a chemical plant in Xiangshui (Jiangsu province). This caused panic and 4 people were killed in a car accident trying to escape.

Students at Chongqing Jiaotong University College of Civil Engineering and Architecture spread a rumor about acupuncture needles being too hot.

The list is part of a blitz of anti-rumour articles in recent weeks amid a crackdown which, in the wake of Bo’s downfall, has even claimed leftist sites such as Utopia. At least one exemption seems to remain, however:

Resolutely refute rumors…unless they target foreign companies like Coca-Cola english.peopledaily.com.cn/90882/7790401.…

— Tom (@seeingredchina) April 18, 2012

An official investigation into a Coca-Cola plant in North China’s Shanxi Province was initiated yesterday after media reports claimed nine batches of disinfectant tainted Coke entered the consumer market ….

An anonymous employee at the Shanxi Coca-Cola plant recently told China National Radio (CNR) that on February 8, large amounts of chlorine were found in the water used to manufacture Coke and the production was halted.

Shanghai Daily reported later that day that the supposedly contaminated drinks had been tested, and found to be safe.

See also Rebecca MacKinnon on ‘The Not-So-Great Firewall of China’ and Tania Branigan on microbloggers’ testing of China’s censors, via CDT.

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Post tags: Bo Xilai, Coca-Cola, danwei, microblogs, rumors, weibo
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As expected, cost pressures dragged fourth-quarter China restaurant margins down to 15.8 percent from 18.2 percent a year earlier.

Yum wants to bring margins up to around 20 percent for all of 2012 and plans to use higher prices to offset inflation in food prices, labor costs and other items.

Yum also plans to bolster growth by adding another 600 restaurants in China, where its brands include KFC, Pizza Hut, East Dawning and Little Sheep. The additions would bring Yum’s restaurant count to about 5,100.

While Yum’s operations in China and other developing countries have made it a top pick for international investors, the company’s U.S. division has underperformed.

Despite the growth of fast food’s popularity and an increase in consumer spending on things like KFC and Coca-Cola, there are also fears about China’s slowing housing market, which may lead to mixed messages on China’s economy. CNN Money reports:

Coca-Cola (KO, Fortune 500) said Tuesday morning that its profits topped estimates, helped by a 10% jump in volume in China. Emerging markets are a key focus for Coke as the beverage market matures in the U.S.

However, even if the emerging middle class in China is acquiring more of a taste for some of the top Uncle Sam brands, that may not mean that the Chinese economy overall is impervious to potential pain.

One of the biggest concerns facing China is whether or not its real estate market is a bubble along the lines of what happened in the United States in those naughty Aughties. And there is some evidence that the Chinese housing market is cooling … perhaps faster than the government there would like.

On the one hand, you might be able to spin the housing weakness in China as a good thing. It may mean that China’s central bank, which was aggressively raising interest rates and reserve requirements for banks over the past few years to fight inflation, succeeded in killing any asset bubbles.

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He recalled that his wife, surnamed Liu, returned to the family home in Changchun, capital of Jilin province, at about 8:35 pm and drank less than half a bottle of the strawberry drink before handing it to their son to finish.

“About five minutes later, my wife was on the floor, twitching and foaming at the mouth,” he said on Thursday. “Her hands were like chicken’s feet.”

It was not until the ambulance arrived that the boy also began crying in pain.

Both victims were rushed to the intensive care unit at the No 1 Hospital Affiliated to Jilin University. However, Chu’s son died five hours later.

“He’s now at the funeral parlor. His body and teeth are black,” said the father.

The drinks have been pulled from sale locally, a move attributed to local authorities by China Daily and to manufacturer Coca-Cola by The Wall Street Journal. Coca-Cola insisted, however, that the product itself was not to blame, while The Wall Street Journal noted a similar case in 2009 in which the company was cleared of responsibility for mercury contamination:

Coca-Cola spokeswoman Joanna Price said Friday that authorities in Changchun, the capital of Jilin, had pinpointed two bottles of the strawberry-flavored variety of the drink as the source of the poisoning. She declined to comment on whether the drinks may have been poisoned after bottling.

Ms. Price said Coca-Cola tested its product line and found no other contaminated bottles. Nevertheless, Coca-Cola has pulled all Minute Maid Pulpy Super Milky drinks from shop shelves in Changchun, and the strawberry-flavored variety from the entire province.

“This case does not involve a product-quality issue, and government authorities are carrying out detailed investigations at this time,” a statement from the Atlanta-based company said ….

A young man who fell ill in 2009 after drinking a can of Sprite, a Coca-Cola brand, said he was poisoned by a chemical substance in the product. Xinhua said Chinese authorities who investigated the case found that mercury was added to the Sprite after its purchase, and they exonerated Coke.

Many in China appear willing to take the company at its word on this occasion, according to The Financial Times. Instead, public anger is once again directed at China’s own food safety authorities. From The Diplomat’s David Cohen:

The Chinese public has instead turned its attention to China’s food safety administration, which issued a set of remarkably weak standards for milk in June – including, remarkably, lowering the minimum protein content of milk sold in China from 2.95 per hundred grams to 2.8 – a significant step away from the developed world standard of 3.0. The poisoning in the Sanlu scandal was caused by melamine, an industrial chemical which manufacturers used to disguise low protein contents. The new standards also allow milk to contain as many as 2 million bacteria per milliliter, some 20 times the allowable amount in the United States and EU.

The sheer audacity of lowering China’s most-watched food safety standard has raised suggestions of powerful special interests – an article in The People’s Daily quoted Zeng Shouying, vice director of the Dairy Industry Committee of China Dairy Association claiming that China’s three major dairy companies exploited their advisory role in the drafting committee to remove tougher standards proposed by experts. The Ministry of Health responded yesterday in the pages of the same paper, telling the journalist that “it was right that dairy producers, crucial to the safety of their produce, should be represented in the drafting committee.”

A recent report by The New Yorker’s Evan Osnos illustrated the long shadow of China’s melamine scandals: trust in domestically-purchased products remains so low that mainland tourists return from Macau laden with cans of baby formula.

Health concerns have also arisen in connection with the early withdrawal of a new Coke can in the West. TIME reports that the new design caused confusion between Diet and regular Coke, bringing unexpected calories to dieters and potentially more serious consequences to diabetics.

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Post tags: Coca-Cola, dairy industry, food safety, jilin, melamine, milk contamination
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Among U.S. holdings, CIC declared a stake of $1.77 billion in Morgan Stanley (MS.N) and a previously unannounced $713.8 million holding in BlackRock Inc (BLK.N), the world’s largest independent money manager.

CIC disclosed stakes, mostly small, in more than 60 companies, including:

– $498 million in the U.S.-traded stock of Brazilian miner Vale SA (VALE5.SA);

– $29.8 million in Citigroup (C.N);

– $19.9 million in Bank of America Corp (BAC.N);

– $14.7 million in American International Group Inc (AIG.N);

– $9 million in Coca Cola Co (KO.N);

– $6.3 million in Apple Inc (AAPL.O);

– $4.1 million in News Corp (NWSA.O).

The complete SEC filing can be read here.

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Post tags: Apple, CIC, Coca-Cola, news corp, overseas investment
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Coca-Cola Inc. said Tuesday that a second manager who worked in the company’s Shanghai bottling plant has been detained by police on suspicion of accepting bribes or kickbacks.

The announcement came just days after Coca-Cola confirmed that a middle manager at the same facility, the Shanghai Shenmei Beverage & Food Co., was detained earlier this year in a bribery investigation.

“We can confirm that two former employees at Shanghai Shenmei Coca-Cola bottling plant have been detained by the police,” Kenth Kaerhoeg, a Coke spokesman said in a statement Tuesday. “This matter does not involve bribery of government officials but instead allegations that the former employees extracted kickbacks from suppliers and embezzled from the bottler.”

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China’s decision not to allow Coca Cola to buy local soft drinks champion Huiyuan Juice, announced on March 18, and the latest World Bank report predicting growth will slow to 6.5% from the previously forecast 7.5%, has caused some commentators to wonder whether China could turn inwards. The fear is that China could turn away from its relatively open economic model and copy Japan’s ‘mercantilist’ model, defined as manipulating the terms of trade in one’s favour through currency depreciation and non-tariff barriers to imports and investments, and thus ‘stealing’ growth from one’s neighbours.

Japan has a total trade-to-GDP ratio of just 18%, and the stock of foreign direct investment represents a truly lamentable 1%. With only 2 million registered foreigners, Japan is the least welcoming country in the Organisation of Economic Cooperation and Development (OECD), with a ratio of 1.5% foreigners to the total population. Compare that to 10% in Spain, or even Germany, which has 16 million foreign residents in a population of 85 million.

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The decision by the Commerce Ministry Wednesday to block what would have been the largest-ever takeover of a Chinese company by a foreign buyer is also a major blow to Coke, which had hoped to parlay its high-profile sponsorship of the Beijing Olympics into greater commercial success in a critical market.

Lawyers and investment bankers said Beijing’s ruling — the first major test of a new antimonopoly law — undermines the government’s public opposition to protectionist barriers, which are getting heightened scrutiny amid the global recession.

The ruling sends “a very negative message,” said Lester Ross, an attorney in U.S. law firm WilmerHale’s Beijing office who wasn’t involved in the deal. “I think it was driven by protectionism, fueled by popular resentment against a foreign company acquiring a popular Chinese brand.”

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Post tags: anti-monopoly law, Coca-Cola, Huiyuan
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For almost half a year, Coca-Cola executives have been waiting for China to give the OK to Coke’s proposed takeover of Huiyuan, the big Chinese juice company. Coke announced the $2.4 billion deal in early September, but it can’t go through without officials in Beijing agreeing that Coke swallowing Huiyuan doesn’t violate China’s antitrust law. Here we are in March, though, and they’re still waiting. One way or the other, the wait is going to end soon: Coke and Huiyuan agreed to a March 23 deadline for the deal.

With that date in mind, consider the news today from Coke that it plans to invest another $2 billion in China over the next three years. Coke’s announcement of its China plans seems like a straightforward message to the folks in Beijing: Pay no attention to critics of the deal in China who are angry at the idea of a big, bad American company taking over one of their favorite brands. Or, as Coke CEO Muhtar Kent said (according to a statement Coke released today), Coca-Cola’s “commitment and confidence in China never wavers.” Take that, opponents of the Huiyuan deal! Given the dicey state of the Chinese economy right now, I suspect that’s a message Beijing officials are eager to hear.

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A group of Chinese drinks makers are to submit plans to the government they hope will block Coca-Cola’s takeover of China Huiyuan Juice Group, state media reported Monday.

A consortium has prepared three plans and handed them to the Ministry of Commerce to keep the Huiyuan brand in Chinese hands, the Beijing Morning Post reported, citing an unidentified official at one of the companies.

The ministry says it will review the proposed 2.4 billion-dollar friendly takeover of the Hong Kong-listed company, according to the principles of a market-oriented economy.

If approved, the takeover would be the largest by a foreign firm of a Chinese company and Coca-Cola’s second largest acquisition ever.

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Coca-Cola Co.’s $2.4 billion deal to acquire China Huiyuan Juice Group Ltd. offers the first major test of China’s new antitrust law — one that comes amid public concern over the loss of national brands.

The new law, which took effect last month, attempts to streamline and standardize the government’s antitrust activities. Previously, no unifying law was on the books, and several agencies had a say in matters of general competition and mergers.

How Beijing’s regulators handle the case could offer a clue as to whether the law will remove a layer of murkiness from China’s deal landscape or add another one. Although Chinese officials have indicated they will lean toward international best practices, implementation rules clarifying the new law have been slow to come out. It isn’t clear whether the government agencies involved would be equipped to handle the case so soon.

Read also Coca-Cola deal major test for China’s new anti-monopoly law by AFP.

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Coca-Cola bought the juice maker for about six times its 2007 earnings, whereas Coca-Cola, arguably one of the world’s premier beverage companies, trades at only four times its 2007 earnings. If Coca-Cola had paid such a high price for a company in the United States — or, frankly, anywhere else in the world — its stock would have been punished far more severely.

But the $2.4 billion price tag gives Coke something extremely unusual: control of a Chinese company.

The Chinese government resists foreigners coming in and gobbling up home-grown companies — even ones like Huiyuan, which wasn’t doing so well. After all, China is a reforming, communist dictatorship where private property rights were introduced just a few years ago.

Read also “Coke’s US$2.4B juice deal signals thirst for China companies” from the Financial Post.

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Coca Cola expects China to be its largest market, said E. Neville Isdell, chairman and chief executive officer of the Coca Cola Company. Although China’s economy has been growing rapidly for more than two decades, Isdell noted that he had confidence in its further growth. “China is currently our fourth largest market, but I hope it could become No.1.”

Coca-Cola built two new bottling factories in east China’s Jiangxi Province last July and in northwest China’s Xinjiang Uygur Autonomous Region in August, bringing the total number of its factories in China to 37….[Full Text]

[Image: A shopper passes a Coca-Cola stand at a Shanghai supermarket, via Xinhua]

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As part of its efforts to boost its sales in China, Coca-Cola Co. (KO) is investing $80 million to build a new China headquarters and research and development center in Shanghai , the company’s new president for China business, Douglas Jackson, said Monday.

The R&D center, which is expected to be finished by the end of 2008, will be one of six Coca-Cola research centers globally, and will develop products for China and other markets, Jackson said. With the completion of the new R&D center, Coca-Cola will increase its R&D staff in China to 200, from 40 now. “Consumers in this part of the world are changing rapidly…I think having that kind of R&D center on our doorstep is going to be great in terms of speed to market,” said Jackson, who has been the head of Coca-Cola in China for three months. [Full Text]

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