Hong Kong conglomerate CK Hutchison Holdings has made headlines in recent weeks since it announced in early March that it would sell over 40 of its ports to an American-led consortium.
Two of the ports are located at the Panama Canal, a strategic waterway key to international trade that US President Donald Trump claims is controlled by China and which America should “take back.”
Beijing then criticised CK Hutchison, claiming it had “betrayed” China. As the firm’s shares plummeted, the Chinese market regulator said that it would review the deal. Media reports then said that the conglomerate would not be going ahead with the transaction.
The deal was expected to be signed on Wednesday, but the date came and went without any updates.
Here’s what to know about the controversial ports deal, how China has reacted, and the geopolitical implications amid a deepening US-China trade war.
What is CK Hutchison’s ports deal?
CK Hutchison, partly owned by Hong Kong billionaire Li Ka-shing, said on March 4 that it had entered into a US$22.8 billion deal to sell 43 ports to a consortium comprising US-based asset management firm BlackRock and global port operator Terminal Investment Limited, headquartered in Geneva.
According to the latest company brochure, Hutchison Ports – a division of CK Hutchison – operates 53 ports across Europe, the Middle East, Africa, Asia, Australia, and the Americas.
In the announcement, CK Hutchison said the deal did not include the sale of its operations in mainland China and Hong Kong, where it has a total of 10 ports.
The company said that the transaction was “purely commercial in nature and wholly unrelated to recent political news reports concerning the Panama Ports.”
What is the significance of the Panama ports?
Media reports have highlighted the sale of CK Hutchison’s two ports at the Panama Canal – the Balboa and Cristobal ports, on either side of the Central American country’s waterway.
The Panama Canal ports are not among the world’s 15 busiest ports. Ports in mainland China dominate the top spots, while Hong Kong is ranked 11th.
However, the 82-kilometre Panama Canal is a primary route for trade as it is the main connection between the Pacific and Atlantic Oceans. Over 40 per cent of US container traffic is said to travel through the canal every year.
The Panama Canal was constructed and operated in the early 1900s by the United States, which had – and still has – considerable influence in Panama. It was given to Panama in 1999 and has been under the control of the Panama government since.
What are the deal’s geopolitical implications?
CK Hutchison’s deal announcement comes amid a deepening trade war between the US and China.
The Panama Canal has been a major talking point in US President Donald Trump’s foreign policy rhetoric, mentioned in his inauguration speech in January.
At the time, he said: “China is operating the Panama Canal. And we didn’t give it to China. We gave it to Panama, and we’re taking it back.”
Trump also refused to rule out a military invasion of Panama to regain control, prompting the Central American nation to lodge a complaint with the United Nations.
The Panama government has denied Trump’s accusation that China exercises control of the waterway. But Chinese companies do have a presence there, and Beijing has also made investments in the canal and the country’s infrastructure.
Panama was also the first Latin American country to join China’s Belt and Road Initiative, although it withdrew in February amid Trump’s assertions of China’s control of the nation.
How have Beijing and Hong Kong reacted?
Beijing has criticised CK Hutchison’s deal, suggesting that the Hong Kong conglomerate was caving in to the US at the expense of China.
China’s State Administration for Market Regulation said on Chinese social media platform Weibo on March 28 that it would review the deal to “protect fair market competition and public interest.”
Days later, on Monday, Chinese foreign ministry spokesperson Guo Jiakun said: “Let me stress again that China firmly opposes using economic coercion and bullying to harm other countries’ legitimate rights and interests.”
It was the Chinese state-backed newspaper Ta Kung Pao that fired the opening salvo of the attacks. Since CK Hutchison’s sale announcement, the Hong Kong-based paper has published at least seven scathing commentaries about the deal.
The Hong Kong and Macao Affairs Office and the Hong Kong Liaison Office, both top Chinese bodies in the city, reposted some of the op-eds – including one on March 13, which called the sale an act of “spineless grovelling” that neglected national interests and “betrayed and sold out all Chinese people.”
One of Ta Kung Pao’s latest opinion pieces, published on Tuesday, said CK Hutchison should have “the most basic sense of morality and righteousness to defend [China’s] interests.”
Hong Kong Chief Executive John Lee also chimed in. He told reporters in mid-March: “We oppose the abusive use of coercion, of bullying tactics in international economic and trade relations.”
He added that “any transaction must comply with legal and regulatory requirements.”
What has the US said about China’s probe?
Last Friday, the same day China announced a probe into the deal, US State Department spokesperson Tammy Bruce told reporters that she was aware of China’s comments.
“It’s also no surprise that the CCP is upset at this acquisition, which will reduce their control over the Panama Canal area,” Bruce said.
“We are also glad to see US investors acquire a controlling stake in the Panama Ports Company, which owns and operates the ports at Balboa and Cristóbal at either end of the Panama Canal.”
