BEIJING (AP) -- China rejected Coca-Cola Co.'s $2.5 billion bid to buy a major Chinese fruit juice maker Wednesday in a closely watched case that stirred nationalist opposition to the sale of a successful homegrown brand to foreigners.
Coca-Cola's purchase of Huiyuan Juice Group Ltd. was rejected on anti-monopoly grounds, the Commerce Ministry said. It would have been the biggest foreign acquisition of a Chinese company to date.
Beijing's rejection of a foreign acquisition in a non-strategic business such as fruit juice could backfire abroad at a time when Chinese government companies want to invest in more sensitive industries such as mining.
Coca-Cola Chief Executive Muhtar Kent said Coke would now focus on existing brands and innovation of new brands, including juices.
"We are disappointed, but we also respect the decision," Kent said in a statement.
Kent reiterated the company's plan to invest $2 billion in China over the next three years to open new plants and distribution channels.
A woman who answered the phone at Huiyuan said no one was available to comment.
Huiyuan's founders and major shareholders had endorsed the sale as a way for the company to improve product development and marketing.
Coca-Cola's offer for Huiyuan, announced Sept. 3, ignited an outcry by nationalists who objected to the foreign takeover of a major Chinese brand. Rival juice producers complained it would give Coca-Cola too much dominance in China's beverage market.
Huiyuan has 42 percent of China's pure juice market and its green cartons of orange, apple, pear and grape juice are in supermarkets throughout the country.
Communist leaders routinely defy public opinion in their decisions but they might have shared public distaste for the sale because it collided with their goal of building major Chinese companies to dominate domestic industries.
The global economic crisis might have hardened government opposition. Beijing's strategy for coping with the slump includes trying to create strong Chinese brands that can compete more effectively after global demand recovers.
The rejection might also be a response to U.S. criticism of Chinese investments, said Joseph Cheng, director of the Contemporary China Research Center at the City University of Hong Kong.
He noted the 2005 bid by CNOOC Ltd. for American oil company Unocal Corp., which was withdrawn after critics said it might endanger American energy security.
"China is saying, 'Look, if you reject CNOOC's acquisition of Unocal, I can do the same, so why don't we respect each other?'" he said.
China's own companies are stepping up acquisitions abroad. Its biggest aluminum producer, Aluminum Corp. of China, or Chinalco, struck a deal last month to invest $19.5 billion in Rio Tinto Group, an Anglo-Australian mining company. That deal has stirred opposition from some Australian lawmakers who complain it would send the country's resource wealth abroad and are trying to block it.
Unlike major Chinese banks, oil producers and phone companies, which were created by government decree, Huiyuan is part of a pioneering group that has succeeded by supplying products customers want to buy.
China is a top destination for foreign investment but the purchase of existing companies is still unusual and politically sensitive. After Atlanta-based Coca-Cola announced its bid, comments posted on Chinese Web sites called its founder, Zhu Xinli, a traitor. Huiyuan defended the deal as being in the best interests of the Chinese economy.
The Huiyuan bid was the first proposed corporate acquisition rejected on anti-monopoly grounds since a new Chinese law on the issue took effect last August, the government's China News Service reported.
There is no way for Coca-Cola to appeal the decision, according to a Commerce Ministry official, Chen Rongkai.
The ministry said it has investigated 29 proposed acquisitions under the anti-monopoly law since August and has approved 24. It did not give the status of the others.
The law forbids mergers that hurt competition but leaves regulators wide discretion in deciding how to determine that.
The European Chamber of Commerce in China said Friday it was closely watching the case and hoped the government would give a detailed explanation of reasons for the rejection.
A competitive market "can best be achieved by welcoming more international investors into the Chinese market," the chamber said in a statement.
Beijing issued rules in 2006 that bar foreign ownership of companies in power generation, weapons and other industries, but fruit juice makers are not mentioned.
Last year, U.S. investment firm Carlyle Group dropped an effort to buy control of Xugong Group, a maker of construction equipment. Regulators and Xugong's domestic rivals opposed the deal even though the Chinese company sought Carlyle's backing to expand.
Associated Press researcher Bonnie Cao in Beijing and AP Business Writer Jeremiah Marquez in Hong Kong contributed to this report.