Li Ka-shing’s port sale sparks heated debate

Earlier this month, Cheung Kong Hutchison, controlled by the Li Ka-shing family, announced that it had reached an in-principle agreement with a consortium led by U.S.-based Blackrock to sell 80 percent of the assets of its CK Hutchison Port Group. The deal involves 43 ports and supporting logistics networks in 23 countries around the world, and is one of the largest port sales in the world in recent years. It is expected that the final agreement for the sale of Panama Ports will be signed by April 2nd. However, Beijing’s dissatisfaction may cast a shadow over the deal. With all the parties speaking out, the issue continues to attract strong attention and has become a new battleground in the U.S.-China wargame.

The uncertainty of the sale agreement

After US President Donald Trump threatened to repeal the Panama Canal transfer agreement due to Chinese manipulation, the issue of the right to operate this key international waterway has become a hotspot in US-China relations. A few days ago, Hong Kong’s richest man Li Ka-shing’s Cheung Kong Hutchison Holdings Ltd. has planned to sell its 43 overseas ports to a consortium led by BlackRock for US$19 billion, including the Panama Canal-related business, which Trump claimed “poses a national security problem for the U.S.”. Trump praised BlackRock after the deal was announced. Cheung Kong’s sale does not include its HPH Trust, which manages port facilities in Hong Kong, Shenzhen and other Chinese ports, including Yantian International and Hong Kong International Terminals.

The deal bears the mark of Li Ka-shing, the Hong Kong billionaire who has been dubbed “Superman” for building his vast business empire. Now, to avoid being drawn into a wider showdown between the U.S. and China, Li is looking to stay out of the line of fire by selling his business to a group of well-heeled U.S. investors for US$19 billion. However, a number of Chinese media outlets have recently published articles questioning Cheung Kong’s port deal, saying, “Don’t be naive, don’t be foolish,” and that “great entrepreneurs are all geniune patriots”, and questioning why CK Hutchison has so easily transferred so many of its important ports to “unsuspecting U.S. forces”. CK Hutchison responded to the skepticism by saying that the transaction was purely commercial in nature. It must be said that Li Ka-shing’s sale of global port assets other than China, especially the Panama port, once again demonstrates his precise grasp of capital market trends in the global geopolitical landscape.

It remains to be seen whether there will be any complications in the countdown to the signing of the agreement. The Hong Kong and Macao Affairs Office of the State Council of China has recently forwarded a number of commentaries to Ta Kung Pao, criticizing Li Ka-shing for “succumbing to U.S. pressure” and “betraying the interests of the country”. “The article “All Great Entrepreneurs are Geniune Patriots” begins with a series of five questions to CK Hutchison, including “In the face of right and wrong, how should an entrepreneur make choices and where should he lead his enterprise? The article said, “Great entrepreneurs are never cold-blooded speculators seeking profits, but passionate and proud patriots. Although the article did not name Li Ka-shing, it cited Henry Fok, Pao Yuk-kang, Tso Kwong-piu, Ko Lin, Ko Ching-ping and other deceased Hong Kong and Macau people who contributed to the country during the early period of the founding of the Communist Party of China (CPC) and after the reform and opening up of the country as a comparison group of Li Ka-shing, and emphasized that entrepreneurs have to have a spirit of “the greatness of the businessman is to serve the country for the sake of the people”. At a time when Beijing’s political pressure is escalating, CK Hutchison’s share price has fallen, underscoring the investment market’s heightened concern about Beijing’s involvement in geopolitical risks.

Who dares to invest?

Hong Kong’s richest man, Li Ka-shing, has built a multinational port business empire that has been able to expand, not only because it has gained trust from China, helping to promote important national strategic interests such as “One Belt, One Road”, but also because it has gained trust from the international community, proving that the group is not a spokesperson for China under Hong Kong’s unique position of “one country, two systems”. However, in recent years, with the entry into force of the Hong Kong National Security Law, the west sees Hong Kong as losing its autonomy, and it is difficult for Li Ka-shing’s multinational port business kingdom not to be viewed by the international community as a “Chinese enterprise” and become a target of attack by various countries.

According to a report by the Mercator Institute for China Studies in Germany, China has placed considerable emphasis on its global port presence, with 110 ports in 67 countries, and the roles of Chinese companies in these ports can be categorized into three types: operator/owner, developer, and funder. Among these ports, CKH owns or operates 78 ports in 37 countries, of which 33 are owned or operated by Chinese companies. The two ports that CKH intends to sell served 39% of the container ships in the Panama Canal last year, with the US being the largest user of the canal, accounting for 73% of the traffic. China was second with 21.4%. If CKH were to sell all of its overseas ports, it would mean an instant loss of 40 percent of this strategic node for China. The Chief Executive of the Hong Kong Special Administrative Region (HKSAR), Mr. Lee Ka-chiu, has already said that the concerns raised by Li Ka-shing’s deal “deserve to be taken seriously”.

Subtly, in the case of CK Hutchison’s port sale, it is different from the Chinese government’s direct statement and even intervention in the TikTok and Huawei’s Meng Wanzhou cases. This time, the Chinese government did not make a direct statement, but expressed its attitude through the official media department’s newspapers in Hong Kong, in order to incite nationalistic sentiments to flog a private enterprise. The fact that Li Ka-shing has not violated any laws or regulations, but has been subjected to a lot of pressure from public opinion, is questionable. At the same time, the fact that the government has not yet intervened directly shows that the Chinese top management may still be exploring and evaluating the situation. On the one hand, the matter is so big that it has to be taken care of, but on the other hand, since it is an offshore transaction of a foreign enterprise, it is not good to intervene. According to sources familiar with the matter, the Chinese authorities have begun to investigate the sale of Li Ka-shing’s overseas port business, and a number of departments, including the State Administration for Market Supervision, have been instructed by senior state leaders to examine whether there are any potential security loopholes or antitrust violations in this transaction.

In recent years, Hong Kong’s status as an international trading port has been facing serious challenges. Over the years, Hong Kong has become the world’s seventh-largest re-export port for goods by virtue of its independent tariff zone, with re-export trade supporting a quarter of Hong Kong’s economy. However, the Trump administration’s imposition of tariffs on Chinese goods and the inclusion of Hong Kong for the first time in the scope of the same tariffs have directly impacted this position. A few days ago, China’s official newspaper Ta Kung Pao commented that the agreement between CK Hutchison and BlackRock was “profit-oriented, forgetting righteousness in the face of profit,” and that it was related to “national interests and national justice. This kind of open contempt and warning to a private company in the media is reminiscent of “Cultural Revolution-style criticism” and will scare away many potential foreign investors. Beijing’s increasing interference in Hong Kong’s business community – pressuring business leaders to be patriotic through statements and visits by Chinese officials – suggests that it is becoming increasingly difficult for Hong Kong companies to dissociate themselves from Chinese politics.

Geopolitical Risks Create Increasing Uncertainty

In the face of the intensifying US-China game, companies are naturally more concerned about whether they will be more easily victimized by the geopolitical rivalry between the big powers. If companies want to operate or expand their business in the international market, they have to strengthen their ability to anticipate geopolitical risks. Li Tzar Kuoi, the son of Li Ka-shing and chairman of Cheung Kong Hutchison, said in a statement accompanying last week’s financial results that the business environment for Cheung Kong Hutchison this year could be “volatile and unpredictable”. With just a week to go before the scheduled date for signing the agreement, any attempt by Hong Kong or Beijing to block the deal would be extraordinary. Chinese companies often have to get permission from regulators to move money out of mainland China. CK Hutchison operates ports around the world, including in China, but none of the 43 ports involved in the BlackRock deal are in China. None of the 43 ports involved in the BlackRock deal are in China, and CKH’s shares are not listed on the mainland.

Since 2012, shortly after Xi Jinping took power, Li has sold many of his real estate investments in mainland China and reinvested most of his money in Europe. His actions have been widely criticized by Chinese nationalists, but from a financial perspective, it was smart. He managed to divest himself of these investments before the start of the Chinese real estate market crash in 2021, which has continued to deteriorate ever since. It has since been argued that this sale of overseas ports, like the one that foresaw the dramatic changes in China’s real estate market, was strategically far-sighted if analyzed purely from a business perspective, avoiding possible political risks while realizing an asset at a very attractive price and leaving the group with plenty of room for its future strategic deployment. However, all these are based on the foundation that the agreement can be signed smoothly.

As geopolitical tensions between the US and China intensify, access to information on the flow of goods through key waterways will be crucial in the event of a “supply chain war”. Trump has repeatedly advocated regaining control of the Panama Canal and surrounding areas for reasons including the threat posed by Chinese influence. U.S. media revealed that the White House has asked the Pentagon to provide military options to ensure U.S. “free access” to the canal. In addition, the Office of the U.S. Trade Representative’s proposal to levy high fees on Chinese-made ships has triggered tremors in the international shipping industry. China’s influence in the global port network has also seen more setbacks than advances over the years, with a net overall decline in the number of ports owned directly by China or operated by third parties. As a result, Beijing is bound to take action against Li Ka-shing’s agreement to sell these two important ports. This standoff is a test of how far China’s top leader, Xi Jinping, is willing to go in exercising control over Hong Kong’s commercial sector, and the U.S. will certainly not stand by and watch. The global supply chain and control of ports are developing into a major battleground for great powers, and the future is sure to be a smoldering one.

Years ago, when globalization was in full swing, not many people questioned which country a company belonged to, but now, with the dramatic changes in geopolitics and the global economic crisis, ideology has once again taken over the high ground of public opinion. For example

TikTok is incorporated in the U.S., with corporate headquarters in Los Angeles and Singapore, but is controlled by the board of directors of the Chinese company, TikTok. Even if public opinion glosses over it, TikTok is a global private company: 60% of its investors are global institutions, 20% of its shares are held by its founder, Yiming Zhang, and the other 20% are shared by all its employees; and three of its five board members are Americans. But it’s hard to explain in a few words the real money at stake behind the scenes. And like most major Chinese companies, the Communist Party of China (CPC) set up a party branch at Beatnik in 2014, which probably says a lot. As for Li Ka-shing’s Cheung Kong Hutchison, there is breathing room in today’s searing situation only because of its reliance on Hong Kong, the former Pearl of the Orient, which has evolved into a multinational enterprise through decades of Chinese investment. The deal puts Beijing on the horns of a dilemma, as any major move to jeopardize it could aggravate tensions between the Chinese government and the Trump administration. As you can imagine, there will be consequences to this port sale, and even if the deal is signed, Beijing will be ready to “settle scores in the fall,” and there will be more to come.

Article/Editorial Department Sameway Magazine

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