When the East Meets the West: A Retrospect on China’s Negotiations with Foreigners

Abstract

In 1996, Hangzhou WAHAHA group, French Danone group and Peregrine Investments Holdings reached an agreement through negotiation to establish a joint venture (later Peregrine transferred its shares to Danone group). Thanks to this transaction, WAHAHA solved a cash flow problem and enjoyed rapid growth; meanwhile, Danone Group enjoyed the benefit of sharing “WAHAHA”, which is an excellent brand. Their partnership should have been a role model of “win-win” cooperation. However, in 2007, a battle broke out between WAHAHA and Danone over corporate control. WAHAHA accused Danone of trying to purchase its non-joint venture companies at unreasonably low prices. Danone claimed WAHAHA founder Zong Qinghou took advantage of his control of WAHAHA group to establish a large number of non-joint venture companies under the WAHAHA trademark, which violated the agreement and undermined the interest of the major joint venture. To resolve the dispute, Danone took WAHAHA to court. WAHAHA launched a two-pronged response: it actively responded to the law suit and launched a media campaign featuring nationalism. During the course of this dispute, there was a lot of action on both sides, such as employee representatives and franchisers of WAHAHA openly supporting Zong Qinghou, Danone group accusing Zong Qinghou of forging shareholders’ signatures, and much more.