Cheung Kong Temporarily Delays Signing Panama Port Agreement? US Concerned about Chinese Coercion

Hong Kong media reported that it is rumored that Li Ka-shing’s flagship company, Cheung Kong Hutchison Holdings Limited (referred to as Cheung Kong), will not sign the agreement for the operation rights of two strategic ports in Panama next week. In response to this rumor, the US Congress is reportedly concerned about the coercion and pressure from the Chinese Communist Party.

According to sources cited by the South China Morning Post on Friday (March 28), Cheung Kong will not formally sign the agreement to sell the operation rights of its two ports along the Panama Canal as expected next week on April 2.

April 2 is not the “true final deadline” for Cheung Kong to negotiate with BlackRock, but rather the earliest possible date for both parties to sign the agreement.

A source close to Cheung Kong Hutchison told the South China Morning Post, “The deal for the two ports in Panama will not be formally signed next week.”

The total value of this deal amounts to $23 billion, and Cheung Kong Hutchison is expected to ultimately gain $19 billion in cash proceeds.

Reports suggest that the current situation does not mean the deal has been canceled, but rather due to the complexity of the transaction, there are still important details that need to be finalized.

On the same day, China’s State Administration for Market Regulation announced that it would conduct an “antitrust” investigation into Cheung Kong’s sale of the ports.

Mainland Chinese financial observers have stated that China’s so-called “antitrust” investigation is an attempt to pressure Li Ka-shing and extract concessions from him.

Cheung Kong has recently become a focus of attention for Western and mainland Chinese media because the company announced in early March that it would sell most of its global port operations to a consortium led by the American firm BlackRock. While the ports are only a small part of Cheung Kong’s business, the involvement of the two ports along the Panama Canal has irked the Chinese Communist Party. Beijing has repeatedly used pro-CCP media to publicly criticize and threaten this transaction.

Bloomberg reported that Li Ka-shing’s business conglomerate focuses on retail, telecommunications, ports, and utilities industries, with only 12% of its revenue coming from mainland China and Hong Kong. Li Ka-shing’s private investment arm, Horizons Ventures, also focuses on overseas business.

The report points out that for the Li Ka-shing group, selling overseas ports for a return of $19 billion in cash is seen as a significant benefit compared to potential loss of business with mainland Chinese enterprises in the future.

Reuters also cited sources within Cheung Kong indicating that the port transaction could divert Cheung Kong’s attention from its ongoing demerger plans, as the company needs to deal with regulatory approval and geopolitical uncertainties. Cheung Kong is currently considering splitting its global telecommunications assets and then listing them in London.

The US House of Representatives’ Special Committee on China posted on social media, “After Li Ka-shing tried to sell Panama assets to US-allied buyers, Xi Jinping blacklisted his empire. This is an obvious coercive governance strategy, economic punishment, and strategic control.”

“The global port strategy of the Chinese Communist Party is not about logistics, but about chips,” the committee wrote.

The sale of port operation rights by Li Ka-shing to BlackRock was initially seen as a bold victory, bringing high premiums to Li Ka-shing, avoiding the impact of the trade war on the shipping industry, and providing a symbolic victory for US President Trump.

However, the Chinese leader was dissatisfied with this deal and ordered a review. Despite Beijing’s displeasure, almost no action can be taken to restrict or prevent this transaction as the ports being sold are located outside of China and Hong Kong.

The Wall Street Journal previously reported, citing sources, that Xi Jinping was displeased that Li Ka-shing had not sought Beijing’s approval before advancing the deal. Additionally, Xi recognized the strategic significance of the canal and had planned to use the Panamanian ports as bargaining chips in negotiations with Trump, only to be caught off guard.

The report states that Xi does not like to be portrayed as a loser. However, he also understands that any major move to disrupt this deal could worsen tensions with the Trump administration.

Zeng Ruisheng of the School of Oriental and African Studies at the University of London, in an interview with the Financial Times, stated that other Hong Kong tycoons are also watching closely to see if Beijing will intervene in the Panama port deal. If Li Ka-shing faces too much punishment, these tycoons may consider relocating more business out of Hong Kong.

He believes that Beijing’s crackdown on Li Ka-shing could “have a counterproductive effect.”