Can Hong Kong’s Hutchison Ride Out Storm Over Panama Ports Deal After Beijing Attack?

Beijing’s veiled attack on Hong Kong’s CK Hutchison for selling its Panama Canal ports by posting a blistering newspaper commentary against it is an attempt to pile pressure on the conglomerate to either axe the deal or negotiate better terms that protect the national interest, observers have said.

But the experts warned on Friday that Hutchison, part of Hong Kong tycoon Li Ka-shing’s empire, was now caught in a dilemma and might end up being punished by both the United States and China no matter how it acted now.

If it backed out of the deal, it could be seen as caving in to Beijing’s pressure and prompt punitive actions from the US. But if it went ahead, Li’s business empire might face political repercussions and be labelled unpatriotic even if it sought to show its loyalty by investing in mainland Chinese ports. As things stood, Li, said the analysts, was not always in the good books of the central government.

“It’s obvious that Beijing is using an indirect way to express its discontent about the planned deal and hopes Li can mend things by turning the deal in Beijing’s favour,” said Lau Siu-kai, a consultant with the semi-official Chinese Association of Hong Kong and Macau Studies think tank.

“The planned deal is set to undermine the development of the nation’s Belt and Road Initiative and hit China’s maritime and shipping building industries as the US will wrest control of many overseas ports which may drastically raise tax on Chinese vessels.”

The belt and road plan is part of China’s vision to grow global trade among friendly nations.

Lau said he believed Beijing would like to see Li drop the deal and negotiate a new one more in its favour.

“But it is not easy as he is caught between a rock and a hard place, where he’ll be damned if he does and damned if he doesn’t. He will face a reprimand from either side whether he proceeds or changes decision,” he said.

“In the end, this might end up escalating into a big diplomatic storm between the US and China.”

Li Ka-shing has been seen as becoming more distant from Beijing over the past decade. Photo: Sam Tsang

The Panama Canal deal was thrust back into the spotlight after Beijing’s Hong Kong and Macau Affairs Office (HKMAO) shared on its official website on Thursday night a scathing commentary by pro-Beijing and government-linked newspaper, Ta Kung Pao. Beijing’s liaison office in Hong Kong also posted the article on its website on Friday morning.

Calling the deal a “betrayal of all Chinese people”, the commentary said the firm should think twice about which side it wanted to stand with, especially in the context of the increasingly tense relations between China and the US.

The firm had come under pressure for months after Donald Trump won his re-election to the White House and demanded that the Panama Canal be freed from what he saw as Chinese control. The firm made a surprise announcement earlier this month that it was selling all its port stakes, except for those in China, to a group led by US investment firm BlackRock in a US$19 billion deal.

This amounted to 80 per cent of the Hutchison Port Group, a subsidiary that owns 43 container ports in 23 countries, including a 90 per cent stake in the Balboa and Cristobal docks at either end of the Panama Canal.

After the deal was announced, Hong Kong’s pro-establishment camp was advised to stay silent on the subject, the Post learned. Last week, Hong Kong delegates attending the “two sessions” gatherings in Beijing – the national legislature’s annual meetings – were urged to refrain from weighing in until the commentary had been posted, sources said.

CK Hutchison did not reply to requests for comment.

International relations expert Wilson Chan Wai-shun, who is the co-founder and director of Policy Research at the Pagoda Institute, said that while it was unclear if the message in the article came directly from Beijing, it would inevitably create the impression that Beijing wanted a say in the major decisions of a Hong Kong business.

“Perceptions matter in politics and external relations,” he said. “Even if in the end Beijing did not have any message that it wanted to send to CK Hutchison Holdings … in the eyes of the rest of the world, they would think there is some pressure to affect this commercial decision.”

The reality was “ports are a very important strategic sector, no matter if it is China, Panama or the United States”, he said, begging the question the kinds of calculations and consultations CK Hutchison had or did not have in arriving at the decision to exit the ports.

Almost to a man, analysts said they were surprised if Hutchison did not bother to send “feelers” to the central government to seek its views, as ports may have commercial considerations but had geostrategic ramifications impacting countries.

Lau Siu-kai added that Li probably had not consulted Beijing about the deal beforehand but it might be due to the mounting pressure from the US that he chose to stay mum about it.

“We don’t know under what circumstances Li came to strike a deal with the group. Maybe he was approached by the American firm,” he said.

“If Li had consulted Beijing beforehand, he knew that Beijing must not allow the deal which may upset the US. He then may face serious consequences about his investments in the country. That’s why he chose to stay silent.”

Wilson Chan noted the deal was still in progress and there could still be changes as it progressed and on how it could be carried out.

Observers said the strongly worded commentary reminded businesses of the importance of considering the national interests in their decisions.

Political commentator Johnny Lau Yui-siu said Beijing had opted to use an indirect approach to express its views towards the deal as it wanted to save some room to maintain good relations with large businesses.

Lau noted that Beijing also wanted local businesses to be aware of the country’s interests when making deals and transactions. But he said the move could make other countries take a more defensive attitude towards Hong Kong.

He added that whether the deal could go ahead would depend on how much CK Hutchison Holdings was willing to sacrifice and how adamant Beijing was on maintaining its stance on the issue.

Li has been seen as becoming more distant from Beijing over the past decade as he was no longer deemed as its favourite businessman in Hong Kong following an overhaul of his empire, including his move to re-register his two new flagship groups abroad in 2015 and before that, the gradual selling of property assets in major cities like Beijing and Shanghai.

During the protests of 2019, Li also issued a subtly worded appeal for leniency for the protesters, urging those in power to provide a way out for young people caught in the crisis.

Official Chinese media outlets swiftly responded with a firm message that the rule of law had to prevail.