The Chinese partner of the PepsiCo food and drinks group has refuted the suggestion by the US company that it breached contract terms and is even threatening to sue PepsiCo over the allegations.

PepsiCo and Sichuan Radio, Film and Television Industry Development Co. set up Sichuan Pepsi in 1994 with PepsiCo controlling a 27% stake. But PepsiCo has been alleging for some time that its partner has committed a serious of violations of cooperation contracts and agreements and has "ravaged" cooperation with the group. Last week, the US company took its long-running dispute with Sichuan Pepsi to an international arbitration panel in Stockholm with a view to terminating the joint venture. PepsiCo is also seeking damages for breach of contract.

In response to PepsiCo's allegations that company managers rewarded themselves with cheap home loans and Mercedes limousines, Sichuan Pepsi vice president, Qu Zhidi, said he welomed the intervention of the arbitration panel and accused PepsiCo of squeezing the joint venture by increasing the price of the concentrate used to produce Pepsi-Cola. "Sichuan Pepsi welcomes such arbitration and the naked truth will finally come out," Qu said.