CIC takes a sip of Diageo

The Chinese Government’s interest in the company may influence the spread of Diageo’ products throughout the region where Diageo in 2006 partnered with a Chinese company to produce a locally branded white spirit, Swellfun, aka Shui Jing Fang. At least, that’s what outside observers are second-guessing.

Hopefully, Diageo will fare better than The Coca-Cola Company. In March, the Chinese anti-trust authorities dealt a blow to Coca-Cola’s ambitions by blocking its USD 2.5 billion purchase of drinks company China Huiyuan Juice Group on anti-monopoly grounds. Only in September 2007 had Coca-Cola’s then CEO, Neville Isdell predicted that China would eventually become Coke’s largest market.

So much for gazing into a Chinese crystal ball.

CIC’s strategy is far from less clear. It recently invested USD 1.5 billion in Canadian mining company Teck Resources Ltd. and USD 163 million in an Australian property trust, the Goodman Group.

Geopolitical strategists assume that it is China’s economic policy to reduce its dependence on the U.S. dollar exchange rate when purchasing natural resources.

That is why China is already investing a large portion of its surplus dollars into strategic reserves of natural resources, into the development of resource-rich areas in the under-developed world as well as into resource and energy companies, they say.

Precious metals make sense, but drinks?