China better place to do business than US, says Coke chief

Coca-Cola now sees the US as a less friendly business environment than China, its chief executive has revealed, citing political gridlock and an antiquated tax structure as reasons its home market has become less competitive.

?It?s like a well managed company, China,? Muhtar Kent, Coke?s chief executive, told the Financial Times. ?You have a one-stop shop in terms of the Chinese foreign investment agency and local governments are fighting for investment with each other.?

Mr Kent also pointed to Brazil as an example of an emerging economy that is making itself attractive to investment in ways that the US once did. ?They?re learning very fast, these countries,? he said. ?In the west, we?re forgetting what really worked 20 years ago.?

Mr Kent argued that US states did not compete enough with each other to attract businesses while Chinese provinces were clamouring to draw investment from international companies.

Meanwhile, he said, China?s bud-get discipline and rapid economic growth made it an appealing place for businesses.

China now accounts for 7 per cent of Coke?s global sales volume and in the first half of this year Coke sold more than 1bn cases of its products in China, twice the rate of five years ago.

China represents about 6 per cent of Coke?s annual operating profits, according to analysts at Bernstein Research.

The US, meanwhile, accounts for 41 per cent of annual revenue and 19 per cent of its operating income.

Mr Kent?s remarks came a month after Coke announced a $4bn investment in China over the next three years, while on Monday it said it would invest $3bn in Russia in the next five years. Coke continues to spend at home, however, with a $1.3bn investment in capital assets in North America this year.

China has not always been friendly to Coke. Two years ago China?s ministry of commerce rejected the company?s proposed $2.4bn acquisition of Huiyuan, the country?s leading juice maker, on grounds that the deal would hurt small domestic companies.

Mr Kent hit out specifically at US provisions that tax companies for repatriating cash earned overseas. Coke does not disclose how much cash it holds overseas. ?A Chinese or Swiss company can do whatever its wants with those funds [earned overseas]. When we want to bring them back, we are faced with a very large tax burden,? he said.

? The Financial Times Limited 2011