China and CK Hutchison 'Seeking Resolution to $23bn Ports Deal'

Hong Kong ports conglomerate CK Hutchison is involved in talks with city officials to try to find “a reasonable way out” to end Beijing’s opposition to their sale of 43 ports to US investment giant BlackRock, a new report says.

Hutchison, owned by elderly tycoon Li Ka-shing, has faced intense anger from China’s leadership, with state media condemning the $23 billion deal as a “betrayal” of the nation.

Hutchison and the Hong Kong government have a week to reach an agreement till a deadline to seal the controversial deal to sell its two Panama ports and dozens more in Asia, the Middle East, Europe and the Americas to BlackRock, according to the South China Morning Post on Thursday.

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Sources told the Post on Wednesday that the government approached Hutchison straight after they heard the news it was selling most of its overseas port operations to a consortium led by the US firm.

The Hong Kong-based firm said on March 4 it was offloading its interest in 199 berths in 43 ports spread over 23 countries, including port licence agreements at each end of the Panama Canal, in a deal that includes $19 billion in cash.

“Both sides have since been in contact, trying to look for a reasonable way out,” a government source is said to have told the SCMP.

Deal could be cut in half

Meanwhile, the company appears to have signalled that the deal could be cut in half, if the BlackRock consortium, plus Presidents Xi Jinping and Donald Trump are prepared to accept such a split.

Victor Li, the son of Li Ka-shing, reportedly suggested the size of the deal could be slashed when he announced the company’s 2024 results, according to a report by Asia Sentinel.

It noted that Victor Li said they expect moderate growth next year from their nine ports mainly in greater Asia (excluding China) and the 12 they have in the Middle East, plus others in Hong Kong and mainland China.

No mention was made of the company’s ports in Panama “and other parts of the Americas, Europe and Australia,” it said, adding that it has two ports in Australia and 13 in Europe. So, BlackRock may end up with less than half of the original ports agreement, if Trump and Xi agree to that.

“CK Hutchison’s Middle East ports, including the Suez Canal, are highly strategic to China,” it said. “It is inconceivable that Beijing would allow the US to control this strategic waterway which enables convenient shipping from Europe to Asia. Moreover, Beijing is unlikely to cede control of more ports in Asia to the US, since Asia is China’s backyard.”

Limited options

Options are reportedly limited because scrapping the deal would be expensive, while Hutchison and Li Ka-shing’s family could also suffer serious political repercussions if they proceed with the takeover in its current form.

State media outlets have repeatedly said the deal would harm China’s interests.

It comes at a time when the Chinese economy has been weakened by a long-running real estate slump and geopolitical tensions, which restricted foreign investment and undermined public confidence and spending.

And now Beijing faces a wave of tariffs from the Trump administration for industrial and trade policies bitterly opposed by the US, Europe and other Western nations.

Analysts say Beijing wants the ports deal slashed, but may not push for it to be scrapped, because it also badly needs a trade deal with the US to limit or prevent tariffs on exports from multiple industrial sectors.

Meanwhile, Washington wants a sincere crackdown on fentanyl being sent from China to Mexico and other US neighbours, according to a report on Republican Senator Steve Daines’ visit to Beijing this week.

Daines reportedly told Chinese PM Li Qiang he did not want a trade war, but warned that is what Beijing could face if they can’t end what the US believes is a “drug war” killing tens of thousands of Americans every year.