[HONG KONG] Billionaire Hong Kong tycoon Li Ka-shing has found himself in the middle of the China-US geopolitical tussle after announcing a deal to sell his Panama Canal port assets.
The sale, part of a deal with a consortium led by BlackRock that will see Li’s conglomerate pocket US$19 billion, was initially seen as an audacious win that gives the billionaire a premium for the business at a time when the trade war is hurting shipping. It simultaneously hands a victory to US President Donald Trump, who has repeatedly threatened to take over the Panama Canal and falsely claimed that China ultimately operates the waterway.
But the sale has reportedly drawn the ire of Chinese President Xi Jinping and authorities have begun examining the deal. While it’s unclear what measures officials can take given the ports being sold are all outside of China and Hong Kong, it signals immense displeasure that CK Hutchison Holdings – Li’s flagship firm – has bowed to US pressure.
Here’s what you need to know about Li Ka-shing and the Panama ports deal.
What ports did Li own and why did he sell them?
A unit of CK Hutchison controls two out of five ports adjacent to the Panama Canal – an important waterway that handles roughly 3 per cent of global seaborne trade. Panama initially granted the concession to the company in 1998 and renewed it for 25 years in 2021.
There had not been a problem until Trump’s focus on the waterway in recent months. While the president has appeared to be airing his own grievance about the US losing control of the canal, as well as high shipping costs, it’s also fed into the ongoing rivalry between the US and China given the latter’s growing influence in Latin America.
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With pressure from the Trump administration growing, CK Hutchison announced an expansive deal that would sell 43 ports in 23 countries and keep facilities in mainland China and Hong Kong. At US$19 billion, the proceeds are worth almost as much as CK Hutchison’s market valuation before the deal was announced.
Who is set to benefit from the deal?
The biggest beneficiary, should the deal get the green light from relevant authorities, is 96-year-old Li and his family.
Already Hong Kong’s second-richest man, Li’s fortune rose US$1.3 billion shortly after the announcement in early March, according to the Bloomberg Billionaires Index. It now stands at US$30.5 billion, with his stakes in CK Hutchison and property arm CK Asset Holdings representing 40 per cent of his wealth.
Millions of US dollars in fees are likely to flow to the likes of Goldman Sachs, the only investment bank that worked with CK Hutchison, and the plethora of firms that provided legal advice to the BlackRock consortium.
Trump, who declared his intention to take back the Panama Canal in his inaugural address, also notches a political win as he flexes over international trade, the wars in Ukraine and Gaza, Nato and more.
How is China involved and what has been its reaction?
CK Hutchison’s decision to pursue the deal without seeking Beijing’s approval in advance has angered President Xi, who believes Li was acting against Chinese interests, The Wall Street Journal reported, citing sources it did not identify. Officials had planned to use the Panama port issue as a bargaining chip in negotiations with the Trump administration, according to the report.
China’s top office in Hong Kong has also signalled its displeasure with the deal, sharing commentaries from pro-Beijing media outlet Ta Kung Pao that warned companies to be careful about which “side they should stand on” and urged great entrepreneurs to be “passionate and proud patriots”.
Several Chinese agencies, including the State Administration of Market Regulation, are now examining the deal for any potential security breaches or antitrust violations, Bloomberg News reported.
Meanwhile, Hong Kong leader John Lee said that extensive discussions in society about the deal reflect concerns that deserve “serious attention”. He vowed to handle the deal “in accordance with the law and regulations”.
What’s next? Can the decision be reversed?
The next big step for the deal will be CK Hutchison signing a definitive agreement with the BlackRock-led consortium, which is expected by Apr 2.
There’s likely little Chinese authorities can do to scupper the deal, and Beijing has few options to strike back at other parts of Li’s sprawling business empire which also includes retail, telecommunications and infrastructure.
The billionaire has been reducing his group’s exposure to Greater China for decades now and only 12 per cent of CK Hutchison’s revenue comes from operations in the mainland and Hong Kong.
Still, the regulatory scrutiny has already sent CK Hutchison shares tumbling as investors grow wary about how far Beijing’s reach extends and US-China relations become increasingly fraught.
Who is Li Ka-shing and how did he make his fortune?
Born in mainland China in 1928, Li and his family fled to Hong Kong during World War II. Following the death of his father, a teenaged Li left school early, later establishing himself as a plastic flower manufacturer and then a real estate investor. At one point, about one out of every seven private residences in the city were developed by Li’s Cheung Kong.
His rise from poverty to billionaire mirrored the rapid economic growth of the financial hub and his business acumen earned him the affectionate nickname ‘Superman’. His ability to straddle the divide between China and the West also became symbolic of Hong Kong’s role as the world’s gateway to the mainland.
But after enjoying cordial relations with previous Chinese leaders, Li’s ties to the mainland appear to have weakened since Xi took the top job in 2013. He’s earned a new moniker too: dubbed ‘Cockroach King’ for what critics called his closet support of Hong Kong’s pro-democracy movement.
The Panama deal is not the first time Li’s business dealings have drawn Beijing’s ire. He faced criticism in Chinese state media in 2015 when he registered CK Hutchison and CK Asset in the Cayman Islands following a group-wide restructuring that coincided with the sale of some properties in the mainland.
The majority of Li’s wealth consists of stakes in publicly traded companies, including CK Asset, CK Hutchison, Canadian oil and gas producer Cenovus Energy and Zoom Video Communications. BLOOMBERG
