Beijing Huizhong Tianheng Investment Co, the largest shareholder of Jianlibao Group, urged the minor shareholder, Sanshui district government of Foshan in south China's Guangdong Province, to provide the latest capital flow details before the firm takes over the operation of Jianlibao.

Qu Bing, spokeswoman of Huizhong Tianheng yesterday blamed the Sanshui government for not having "sincerity" over the negotiation.

Qu said: "We sent out a negotiation team to Sanshui on January 24 after receiving a notice from Foshan municipal government requiring the two sides of the controversy to tackle the matter.

"The Foshan government wished us to take over Jianlibao before the Lunar New Year (February 9).

"However, representatives from Sanshui kept us waiting for two days before showing up for the negotiation. They refused to offer the capital flow details to us, which is a basic requirement for further talks."

Last August, former president of Jianlibao, China's leading beverage producer, Zhang Hai was alleged to owe millions to the local government.

On November 16, Huizhong Tianheng bought a 68 percent stake in Jianlibao. Beifang Hengtai purchased 23.1 percent of the company.

The Sanshui government, through its investment arm retains an 8.9 percent stake.

Surprisingly, the Sanshui government took over the running of Jianlibao on December 6 and has sacked 29 of its senior managers.

So far, Sanshui is keeping quiet about the reasons behind the takeover, and is not making any predictions about the future of the dispute.

Late last month Song Deping, director of Sanshui district, was quoted by Private Enterprise News as saying all was well at Jianlibao.

He said Jianlibao has received total orders of 2.6 billion yuan (US$314.01 million) this year.

Qu doubts the accuracy of the figures.

"The statistics we have got from insiders indicate Jianlibao has achieved about 250 million yuan (US$30.19 million) from December to February 19," Qu said. She urged Sanshui to "be honest".

Experts suggest there is no legal basis for the Sanshui government to interfere with civil business undertakings.

"Local governments are not allowed to use administrative power to protect their own property rights," said Zuo Dapei, a researcher with the Chinese Academy of Social Sciences.

"There is no doubt that the local government wishes to see prosperity in Jianlibao, which is a pillar of local business. There is a possibility that the existing or former government have made mistakes over the supervision of Jianlibao."

Zuo suggest Huizhong Tianheng should take legal action.

But Qu said: "It will take a great amount of paperwork for a company to sue the government. It is still too early to talk about a lawsuit."

Qu said the firm hopes negotiations will solve the dispute, but that it reserves the right to sue the government.

(China Daily February 22, 2005)