Chinese antitrust regulators on Friday blocked a deal by the Hong Kong-based CK Hutchison conglomerate to sell two ports along the Panama Canal to a consortium led by investment giant BlackRock.
The $22.8 billion transaction between CK Hutchison, which is controlled by 96-year-old Hong Kong billionaire Li Ka-shing, and BlackRock involved 43 port facilities around the world. It was scheduled to conclude by April 2. The most strategically important, and politically explosive, acquisitions of the sale were ports located at either end of the Panama Canal.
President Donald Trump has portrayed Chinese-owned ports on the Panama Canal as threats to American national security because the Chinese military could potentially use them to shut down the canal. He hailed the BlackRock deal as a major step toward alleviating that threat when it was announced in last month.
“My administration will be reclaiming the Panama Canal, and we’ve already started doing it. Just today, a large American company announced they are buying both ports around the Panama Canal,” Trump said on March 5.
International markets seemed to like the arrangement as well, sending CK Hutchison stocks into the stratosphere. However, the Chinese Communist Party (CCP) has not echoed this enthusiasm, according to new reporting by Al Jazeera and Watcher Guru, a finance and cryptocurrency website. Per the reports, Dictator Xi Jinping has allegedly been displeased that Li did not consult with him about the deal or clear it with Party officials.
According to Al Jazeera:
The Wall Street Journal earlier this month reported that anger over the deal extended all the way to Chinese President Xi Jinping.
Citing unnamed sources familiar with the matter, the newspaper [the Chinese state-run Ta Kung Pao] said Xi was angered that CK Hutchison had not sought his approval for the deal and that he had hoped to use the Panama Canal ports as a bargaining chip with Trump, who has pledged to “take back” the strategically important waterway.
Watcher Guru also cited a recent Ta Kung Pao op-ed as describing the transaction as a “betrayal of all Chinese people.”
Influential Chinese state media blasted CK Hutchison in mid-March for “spineless groveling,” while Beijing’s puppet administrator in Hong Kong, John Lee, ominously muttered that the deal deserved “serious attention” from regulators – even though there was no obvious legal pretext for the Chinese government to get involved. The necessary pretext was evidently discovered at the eleventh hour, as China’s State Administration for Market Regulation suddenly announced it would investigate the deal to “protect fair competition in the market and safeguard the public interest.”
Within hours of that announcement on Friday, CK Hutchison said “there will not be an official signing of the two Panama ports deal next week.” The sale is not technically dead, but there is presently no indication of how long the Chinese government intends to continue its vague antitrust investigation.
“We are confident that Panama will require the sale of these assets within its sovereign territory,” a White House official told the New York Post on Monday.
The Post editorial board said Beijing’s effort to scuttle the BlackRock deal proves Trump was “dead right” about the menace China poses to U.S. interests in the Panama Canal.
“China’s rulers look determined to retain control of the strategically critical maritime conduit – whether to threaten U.S. access to the key shipping lane or to ensure it will remain open to Chinese vessels no matter what,” the editors wrote.
“Beijing might stand down when it realizes its heavy hand in Hong Kong’s commercial market will frighten more firms out of doing business there – yet another step toward killing the golden goose of what had been a global financial center,” they suggested.
Beijing has indeed been fretting about the flight of foreign capital from Chinese markets, in part because the overbearing Communist regime has launched a string of crackdowns against both Chinese and foreign business operations. Also, despite carefully worded promises that Xi’s deranged citywide coronavirus lockdowns will never be repeated, the shadow of the immense damage from the pandemic looms large over foreign business decisions.
BlackRock itself has about $16 billion invested in Chinese stocks, which might give the gigantic investment company enough leverage to get the CK Hutchison deal rolling again after a brief regulatory delay. Or Xi could use those investments as leverage against the company, threatening its portfolio to ensure BlackRock accepts the quiet demise of its Panama Canal ambitions.
Al Jazeera on Tuesday suggested an internal Chinese political and cultural angle that might be almost as significant as the international ramifications of the Panama Canal deal. It suggested that there is bad blood between aging Chinese dictator Xi and the even more aged CK Hutchison tycoon Li Ka-shing.
Li is something of a legend among Hong Kong investors, and Xi is severely allergic to businessmen who have a stronger grip on the public imagination than he does.
Per Al Jazeera:
Li’s rise from a mainland Chinese-born refugee to Hong Kong real estate tycoon holds an almost mythical status in the Chinese territory, a former British colony, where he built his reputation navigating Western business interests and the Communist Party.
Li was known for his close relations with Chinese leaders Deng Xiaoping and Jiang Zemin, who oversaw China’s economic opening between the late 1970s and early 2000s, but his political influence waned following Xi’s rise to the top job in 2012.
… In 2018, Li passed control of his company to his son, Victor, but the tycoon has stayed in the limelight. The following year, Li angered pro-Beijing commentators with his ambivalent comments about Hong Kong’s mass pro-democracy protests at a time when other companies in the city were openly critical of the demonstrations.
Legal and business analysts quoted by Al Jazeera tended to side with the White House official who spoke to the New York Post, predicting that it will be legally difficult for Beijing to kill the deal if Panama exercises its jurisdiction over the canal and gives its blessing. For that matter, the legal authority of Beijing’s top market regulator to quash transactions made by a Hong Kong company is dubious.
The antitrust investigation announced on Friday could be an attempt to intimidate Li, his family, and CK Hutchison executives into backing out of the sale. And it could perhaps send a signal to other Chinese businessmen as the trade war heats up that no matter whose names are printed on their company letterhead, Xi Jinping is the chief executive officer of every business in China.
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