Was Li Ka-shing pushed to sell Panama ports, or did he jump?

When CK Hutchison and a consortium led by BlackRock announced a $US22.8 billion ($36.5 billion) deal involving most of Hutchison’s sprawling ports business last month, they highlighted the group’s acquisition of two Panamanian ports. That may have been a mistake.

The prominence given to the two ports – one at either end of the Panama Canal – was presumably done to placate Donald Trump.

Trump had been railing relentlessly at what he regards as China’s control of the canal, even though it is Panama that actually owns and regulates the usage of the strategic canal, and Hutchison is a Cayman Islands-registered, Hong Kong-listed, private business.

Hutchison’s 96-year-old multi-billionaire founder Li Ka-shing.Credit: Visual China Group via Getty Images

It overshadowed the fact that what’s being sold isn’t just two ports in Panama but 43 of the 53 ports in 23 countries within the Hutchison portfolio, including those in Sydney and Brisbane.

While it has retained, again for obvious political considerations, its 10 ports in mainland China and Hong Kong, Hutchison is effectively getting out of the ports business.

Highlighting the Panamanian ports inevitably provoked China, where there has been a storm of criticism of the deal within the state-owned media, much of it reposted by China’s authorities.

Hutchison and its 96-year-old multi-billionaire founder, Li Ka-shing, have been accused of “acting in concert with US hegemony” and succumbing to US economic coercion and bullying, and China has announced a review of the deal on national security and antitrust grounds.

Trump sees the sale of the CK Hutchison ports as a victory. China sees it as coercion. For the 96-year-old Hong Kong billionaire, it might just be a good opportunity.

The deal was supposed to be signed this week, but the signing is now reportedly going to be delayed. There are some suggestions that it might be downsized in a concession to China’s concerns.

Trump, of course, has touted the deal as a personal victory, while China’s response characterises it as its loss.

That raises question marks for both countries.

BlackRock and its co-investors, Global Infrastructure Partners (recently acquired by BlackRock) and Terminal Investment, a Swiss-based company owned by the Aponte shipping billionaire family, are Western, privately owned companies.

Hutchison, a conglomerate with interests in ports, infrastructure (including gas pipeline networks in Australia), telecommunications (including a 25 per cent stake in TPG Telecom) and property around the world, is also, ostensibly, a privately owned, commercially driven group. It’s regarded as the most successful company Hong Kong has produced.

If the deal is a win for Trump and the US, is the US president implying – as Beijing might believe –that the consortium will prioritise the management of the ports in the economic and national security interests of the US over those of its investors?

If the deal is contrary to China’s national economic and security interests, as its response implies, does that mean it sees Hutchison’s ownership or control of the ports as supportive of its strategic ambitions?

For the US – and the other 22 countries that will need to consider the implications of the deal from their own perspectives – the BlackRock consortium can be expected to be driven by its own commercial considerations.

Is Donald Trump suggesting that the buyers of the Panama Canal will manage its ports in the economic and national security interests of the US?Credit: AP

Trump might want to attack China’s dominance of global commercial shipping with massive increases in port fees and the rebuilding of a nearly non-existent US shipbuilding industry, but the consortium will be more interested in maximising the returns on a massive investment than in geopolitics. Even in Trump’s America, businesses (other than, perhaps, Elon Musk’s) prioritise profits above all else.

For China, blocking – or trying to block – the deal could suggest that it does see ownership of ports around the world as an important component of its geopolitical strategy and that even its private sector operators (Chinese state-owned companies are also major port operators) have been co-opted, or at least can be coerced to co-operate, with Beijing’s ambitions. It would confirm Western suspicions.

Ownership of ports and infrastructure around the world – particularly within the “Global South” countries, with which China has been steadily building relations and dependence via its “Belt and Road” initiative – is clearly an important part of China’s strategy of gaining influence or control over critical points within global supply chains and its longer-term ambition of undermining America’s global dominance.

Opposing the Hutchison sale does, moreover, present some domestic risks for Beijing and China’s economy.

As China’s economic growth has slowed and deflationary threats have emerged, Xi Jinping has shifted its stance on the private sector, which had previously been subjected to waves of crackdowns, regulation and intimidation. In February, Xi met China’s leading entrepreneurs as a sign that they were back in favour and that he needed them to help re-energise China’s faltering economic growth rate.

Frustrating the Hutchison sale would signal to those entrepreneurs that the state support and the freedoms he was dangling before them to be entrepreneurial and profit-driven come with a caveat. They, and their fortunes, would still be subject to the whims of the state.

More particularly, even after the handover of Hong Kong by the UK to China in 1997, China has tried to maintain a level of commercial independence for Hong Kong and its status as one of the world’s key centres for finance and trade – although its response to the 2019 pro-democracy demonstrations, the controversial national security laws, placed a question mark over the extent of its tolerance.

Ordering or coercing Li and his family into abandoning the sale would send a chilling message to other Hong Kong entrepreneurs, privately held companies, and prospective investors in Hong Kong – and that at a time when foreign investors have, despite a concerted effort by the authorities, been fleeing mainland China.

If Hong Kong is to remain a key global finance and trade hub, it can’t send a signal that it will intervene in the affairs of multinationals, even those built by Hong Kong entrepreneurs.

There is some doubt whether China has much ability to intervene, other than through coercion.

Hutchison has diplomatically retained ownership of its ports on the mainland and in Hong Kong, and while its property arm does have investments on the mainland, it has steadily reduced its exposure to Greater China over the decades. Only about 12 per cent of its revenue is generated within China and Hong Kong, with most of the rest flowing from Europe, North America and Australia.

The $US19 billion of net cash it would get from the sale would be useful, given that it has announced a £7 billion ($14.5 billion) bid for the UK’s Thames Water and has also indicated it will return significant amounts to shareholders.

It would also be timely.

With Trump about to ramp up his trade war with the rest of the world with a new round of tariffs and having made it clear that China will face punitive port and shipping rates for its exports to America, global growth and global seaborne trade are likely to be adversely impacted.

For Li Ka-shing, who built an empire from his start as a manufacturer of plastic flowers, it’s a good time to sell - if he’s allowed to.

The Market Recap newsletter is a wrap of the day’s trading. Get it each weekday afternoon.