PepsiCo's hopes of resolving its difficulties with a Chinese partner have been dealt a blow when it emerged today that Sichuan Yun Lu Industrial, its joint venture partner, was filing for arbitration with a government trade body.

Talking at a press conference Qu Zhidi, deputy general manager of the Sichuan Yun Lu Industrial Co said: ""We've officially filed an arbitration against Pepsi (China) Investment Co. before the China International Economic and Trade Commission."

He continued that he was fully confident of winning the arbitration.

Pepsi has been at loggerheads with this Chinese partner for a year now. It began when the soft drinks giant attempted to dissolve its joint venture with Sichuan Yun Lu, a government-backed company, when it became suspicious funds were being misused.

On its part, Pepsi took its case to an international arbitration panel Stockholm last August to dissolve the venture, Pepsi Sichuan Beverage Co.

The panel has asked Pepsi to split the case into two parts. "We have made technical adjustments to pursue this dispute as two parallel actions," a statement said. "One case will be handled by PepsiCo Inc, and the other under the name of PepsiCo Investment (China) Ltd.

"We remain confident of our position in both cases and are optimistic about the outcome of arbitration," Pepsi said.