The commerce ministry said it would not allow the 2.4-billion-dollar acquisition of Huiyuan because it would have had "a negative influence on competition."

"Consumers would have been forced to accept higher prices and a smaller choice of products," the ministry said in a statement, just days before a deadline for issuing a verdict on the deal.

It said Coca-Cola had made some adjustments to the planned deal in reaction to the ministry's concerns, but the changes had not been far-reaching enough.

The purchase was seen as a major first test of how China would apply a new anti-monopoly law. Concerns had emerged that the law, in force since August, would be used to bar foreign enterprises from key sectors of the economy.

"The juice industry is not a sensitive industry for the Chinese government, but it still doesn't want a foreign brand to own a major Chinese brand," said Renee Tai, a Hong Kong-based analyst with CIMB-GK Securities.

Coca-Cola's plan to acquire Huiyuan attracted huge attention when it was announced last year.

The juice-maker controls one of China's most recognisable brands and boasts about 40 percent of the domestic market in pure fruit juices.

The Financial Times, when reporting earlier Wednesday that the deal might not materialise, said its collapse would be a "blow to multinational companies seeking to make acquisitions in China."

Coca-Cola expressed disappointment over the decision.

"We are disappointed, but we also respect the MOC's (commerce ministry) decision," Muhtar Kent, president and chief executive of Coca-Cola, said in a statement, according to Dow Jones Newswires.

After the FT's report, Hong Kong-listed shares in China Huiyuan Juice plunged 19 percent before being suspended, the newswire reported.

"Huiyuan's shares are likely to drop sharply (after trading resumes)," said Hong Kong analyst Tai.

The commerce ministry had until Monday to pass a verdict on the deal, after which Coca-Cola would have been entitled to renegotiate the conditions.

When Coca-Cola's plans were first announced, they were met with a storm of criticism from sections of the Chinese public who were concerned about losing a valuable local brand to foreign buyers.

Initial online reactions to the ministry's decision were overwhelmingly in favour of blocking the deal.

"Great! We can go on drinking Huiyuan juice and supporting Chinese products while doing it! Good luck, Chinese enterprises! Long live China!" said one of the comments on the popular portal Sina.com.

Huiyuan's rivals had also opposed the deal, arguing it threatened to force them out of business because Coca-Cola would take control of a large share of the product distribution network, state media said.

Coca-Cola has big ambitions for China, announcing this month it would invest two billion dollars in the Asian country over the next three years, separate from the Huiyuan deal, and compared with just 1.6 billion spent since 1979.

Chinese regulators have been reluctant to approve some recent foreign acquisitions. Officials in the past have used delaying tactics to stop deals without formally rejecting them.

In July, US private equity firm Carlyle Group abandoned an attempt to buy a stake in Chinese construction machinery maker Xugong Group after waiting three years for regulatory approval.

However, the European Chamber of Commerce issued a statement calling for the government to allow more international investors into the Chinese market by easing restrictions, lowering barriers and allowing greater transparency.

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