The decision of China Mengniu to pull out of a deal to buy Australia's Lion Dairy & Drinks earlier this week underlines the rocky trade relationship between the two countries, GlobalData has said.
Australia argued that Mengniu's move for Lion, which is itself owned by Japan's Kirin Holdings) was "contrary to the national interest", without going into further detail, GlobalData's Dean Best wrote.
"The decision comes against the backdrop of a currently rocky relationship between Canberra and Beijing, the source of which is far removed from milk or yogurt," he said.
"Ties have become strained amid Australia’s refusal to allow Huawei a piece of the country’s 5G network and amid Canberra’s call for an independent inquiry into COVID-19."
As part of a tit-for-tat trade dispute between the two countries, Beijing has announced tariffs on Australia’s barley exports, placed restrictions on beef shipments and launched an anti-dumping probe on the Aussie wine industry.
"Given this context, it is hardly a surprise Australia effectively blocked Mengniu’s move for the Lion assets," Best said.
"But the end of that proposed transaction is another sign of how relations between Australia and China are at a low ebb – and how the agri-food industry is being caught in the crossfire."
The collapse of the deal follows nine months on from Mengniu’s purchase of Australian infant formula business Bellamy's, which was "waved through last autumn by the Australian government, albeit with conditions", said Best.
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