Chinese authorities have begun investigating the sale by C. K. Hutchison of his port activities of Panama to foreign investors. The company, owned by the billionaire Li Ka-shing, had announced at the beginning of the month the asset sale, including those near the Panama Canal, of strategic importance, to a group led by BlackRock and MSC of the Italian shipowner Gianluigi Aponte.
The deal, under which CK Hutchison is expected to receive $19 billion for the sale of 43 ports, was immediately publicized by President Donald Trump such as United States claim to the Panama Canal.
Le CK Hutchison shares, which had already suffered a sharp decline in the stock market last week after the media release, losing more than 5%, yesterday extended their losses after the news of the review was published, falling by 2,8%. CK Hutchison shares, on the other hand, had risen after the deal became public, as its value was roughly equal to the entire market capitalization of the company before the announcement.
The veil is lifted by some Chinese media
But soon after the operation it was attacked by the Chinese state media: from Hong Kong daily newspaper Ta Kungpao, considered pro-government, and relaunched on the official website of the Hong Kong and Macao Affairs Office of the State Council of China. The newspaper stressed that the sale of port assets it is not a “normal commercial transaction” but rather an action with profound geopolitical implications which could damage the Chinese national interests. The text harshly criticizes CK Hutchison, accusing the company of “having no backbone”, to “kneel” before American interests, of "looking only at profit" and of "ignoring national interests and the sense of nation", going as far as to define the operation as a “betrayal and sale of all Chinese”
The text goes on to say that BlackRock is in line “with the US anti-China crackdown policy” and that the US could use this transaction as a “model” to acquire more key ports around the world through political pressure, implementing their “long-range jurisdiction” to implement repressive measures that could leave Chinese ships “without a port to dock in.”
Chinese authorities fear traffic restrictions and surcharges from the US
Chinese authorities fear that the United States may implement measures such as selective limitations on ship flow or the imposition of “political surcharges”, significantly increasing i Logistics costs for Chinese companies and compromising the stability of their supply chain. Some analysts quoted by Chinese sources point out that BlackRock, becoming one of the three largest port operators in the world with the control of approximately 10,4% of the global container terminal handling volume, could easily increase the docking costs for Chinese cargo and reduce the market share of Chinese shipping companies.
Chinese government officials looking for security or antitrust violations
Now also several Chinese agencies, including the State Administration of Market Regulation (SAMR), have received instructions from senior government officials di analyze the agreement to identify potential security or antitrust violations, sources said. BloombergIt is also unclear what levers China might use to block the deal, given that the ports Li Ka-shing's company is selling are all outside China and Hong Kong.
Beijing’s review of the deal does not necessarily mean that follow-up action will be taken, the sources said, but deals of this size attract the attention of regulators both in China and elsewhere.
Fears for the continuation of the transaction
But the China's discontent now threatens to interrupt the expected transaction for a final signature by April 2ndRegulatory scrutiny could heighten concerns about the company's ability to maximize the value of its global asset portfolio, said Denise Wong, an infrastructure analyst at Bloomberg Iintelligence. It could also hinder the company's overseas merger and acquisition efforts, deterring potential partners who certainly don't want to to get stuck in tensions between the United States and China.
The attack by Chinese politicians
Li's port deal has also drawn veiled criticism from some of the most important politicians of Hong Kong. Leung Chun-ying , who served as the city’s chief executive from 2012 to 2017, said in a Facebook post Monday that business leaders who lack the support of their home countries will end up as orphans, bullied by others. Leung is currently vice-chairman of China’s top political advisory body, placing him among the country’s national leaders. Without naming Li or CK Hutchison, Leung criticized “some Hong Kong business leaders” for putting business interests ahead of their country’s. Hong Kong’s current leader also weighed in, saying the “widespread discussions” on the issue reflected society’s concern about the issue. “These concerns deserve serious attention,” he said. John Lee in his weekly press conference in response to questions about the sale.
Despite Beijing's heat, Li's conglomerate is relatively insulated from Chinese pressure, with only 12% of CK Hutchison's revenue coming from operations in mainland China and Hong Kong. Europe, North America and Australia make up most of the rest.
China's Counterattacks in Trump's Trade War
Meanwhile, China is in full counterattack in the tariff war started by Trump: it has imposed reciprocal duties on some US goods, while it has banned the American producer of genetic technologies Illumina Inc. to import more machines into China, effectively hindering the company's growth in mainland China. PVH Corp., the parent company of Calvin Klein , has been added to a blacklist. More recently, Chinese authorities have summoned executives of Walmart Inc. following reports that the retailer pressured Chinese exporters to accept the costs of increased tariffs, warning them not to intimidate local suppliers.
