China will encourage foreign investment while protecting the rights and interests of Chinese businesses in disputes over foreign mergers and acquisitions, said Ministry of Commerce spokesman Wang Xinpei on Wednesday.

Wang was commenting on the soured relationship between domestic beverage company Wahaha and its business partner, French food giant Danone.

On Tuesday officials claiming to represent 20,000 Wahaha employees sent a statement supporting the Hongzhou-based beverage group in its fight against a possible four billion yuan takeover of Wahaha's businesses that it set up outside the existing joint ventures.

In response, Emmanuel Faber, president of Danone for Asia-Pacific, said Wednesday in Shanghai that the company would take legal action.

He gave Zong Qinghou, founder of the Wahaha Group, a deadline of 30 days to end the dispute; otherwise, Wahaha's businesses that were established outside the joint ventures would be sued.

Citing terms of the companies' joint venture contract inked 10 years ago, Faber stressed that the Wahaha brand name belonged to the joint venture only. Zong, however, insists that the terms were unfair to the Wahaha Group.

"Danone has pumped over US$170 million into the joint ventures over the past decade, and has been able to take out US$380 million in profit sharing," said Zong. "The value of the joint ventures has risen by 51 percent in that time."

Wahaha, which began as a factory in a small school, has grown into a conglomerate that produces more than a dozen products including bottled mineral water, dairy products, and juice packs.

Wang Xinpei said that the Ministry would handle foreign acquisition disputes "strictly by rules."

(Xinhua News Agency April 12, 2007)