Cloud Over Panama Ports Deal: China Slams HK Owner's Sellout

A cloud of doubt has risen over CK Hutchison’s deal to sell its ports – including two adjacent to the Panama Canal – to US company BlackRock after Beijing condemned the sale as a betrayal of China.

Shares of CK Hutchison dropped by 6.4% on the Hong Kong Exchange on Friday after China’s Hong Kong and Macau Affairs Office (HKMAO) reposted a commentary criticizing the deal.

The repost of the critical state media commentary by China’s governing body overseeing the territory highlights the complex geopolitical pressures the firm faces, as investors worry the deal could be derailed without Beijing’s backing.

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CK Hutchison said last week it agreed to sell most of the global $22.8 billion ports business, including assets it holds along the strategically important Panama Canal, to a group led by BlackRock.

In total, the consortium will control 43 ports in 23 countries. US President Donald Trump, who has called for the waterway to be removed from what he says is Chinese ownership, hailed the deal.

‘Power politics packaged as ‘business’

On Thursday, the Ta Kung Pao newspaper based in Hong Kong published a commentary saying the deal “betrays and sells out the whole of Chinese people,” neglects national interests and shows CK Hutchison is profit-seeking.

The commentary, reposted on HKMAO’s website, said the US would constrain China’s maritime trade and Chinese companies would face great risks in logistics and supply chains, impacting China’s Belt and Road initiatives.

“This deal is an act of hegemony by the US, which uses its state power to infringe upon the legitimate rights and interests of other countries through despicable means such as coercion, pressure, and inducement,” the commentary wrote.

“It is power politics packaged as a ‘business behaviour’.”

CK Hutchison and the HKMAO did not immediately respond to requests for comment.

While shares of CK Hutchison fell, the benchmark Heng Sang Index rose by 2.1%.

A Hong Kong-founded and -listed firm owned by billionaire Li Ka-shing, CK Hutchison has said its business operations are independent from China.

But Hong Kong’s edge as an international financial centre is expected to erode further as it gets squeezed by geopolitical tensions, executives and analysts have said.

Shipping companies shifting from Hong Kong

Some shipping companies are moving operations out of Hong Kong and taking vessels off its flag registry, Reuters reported earlier this month.

Trump, meanwhile, is planning an executive order to charge fees for China-linked vessels at US ports, in a bid to resuscitate American shipbuilding and disrupt China’s supply chains.

Vera Yuen, a lecturer at the University of Hong Kong’s business school, said the commentary was a “manifestation of political risks and a cautionary lesson for companies that want to do business with both sides.

“You cannot do both at the same time,” she said.

This is not the first time billionaire Li has been in Beijing’s crosshairs. In 2015, Chinese media commentaries criticized him for abandoning China by extensively selling his assets at a time of economic tension in the country.

While CK Hutchison agreed to negotiations with the BlackRock consortium on an exclusive basis for 145 days according to a statement, the deal has not been finalised yet.

“The risk of the deal has increased,” said Thomas Kwok, head of equity business of Chief Securities. “CKH is now caught in the middle; if it doesn’t sell, it would continue to be bothered by the US; but if it sells it would upset Beijing.

“We need to watch where this will lead CKH to now; if it would go through litigation to keep the Panama port, or they will need to communicate with Beijing.”