Groupe Danone and its Chinese venture partner, Hangzhou Wahaha, have called a truce on their long-running feud,

The two companies announced late last week that they have agreed to "temporarily suspend all lawsuits and arbitration, stop all aggressive and hostile statements and create a friendly environment for peace talks".

Relations between Danone and Hangzhou Wahaha have been poor for most of 2007, with the French company accusing Hangzhou Wahaha of operating competing firms against the companies' joint venture drinks firms in China.

In April, Danone said that it was looking to integrate companies owned by Hangzhou Wahaha's chairman, Zong Qinghou, into their joint venture. The move was resisted by Zong, leading to Danone starting legal proceedings in May, accusing Hangzhou Wahaha of illegally selling its products, "which are the same as the joint venture's products under Wahaha trademark, without proper authorisation".

Hangzhou Wahaha dismissed the allegation, and countersued Danone in June, claiming up to EUR5bn (US$6.73bn) in damages for what it termed "illegal activities". The fight between the two has grown ever more acrimonious throughout 2007, leading even to French President Nicolas Sarkozy raising the matter at a meeting last month with China's president Hu Jintao.

Danone and Hangzhou Wahaha said on Friday (21 December) that they had agreed to "carry out the talks on the basis of adhering to the principles of equality and mutual benefits, to seek common grounds by tolerating minor differences, to reach mutual understandings and to strive for the success of peace talks".

"Both parties will work together to further develop all entities operating under the Wahaha brands and contribute to develop the Sino-French friendship and promote the co operation between the companies of the two countries," the firms concluded.