Understanding the Causes and Consequences of Li Ka-shing’s Sale of Ports in Panama

Hong Kong billionaire Li Ka-shing, upon announcing the sale of his assets at the Panama Canal ports, unexpectedly found himself targeted by the Chinese Communist Party.

His company Cheung Kong Hutchison Holdings Limited reached an agreement with a consortium led by BlackRock Inc., to sell multiple ports under its control for $22.8 billion. Initially seen as a bold victory, the deal not only brought Li Ka-shing a hefty premium, shielding the shipping industry from the impact of the trade war, but also delivered a symbolic victory for U.S. President Trump.

Chinese President Xi Jinping was displeased with the deal and ordered a review. Despite Beijing’s dissatisfaction, as the ports being sold are located outside of China and Hong Kong, the Chinese government had almost no means to restrict or block the transaction.

One of the subsidiaries under Cheung Kong Hutchison Holdings Limited controls two Panama Canal ports. The canal boasts a total of five ports, facilitating around 6% of global maritime trade flows. Panama initially granted the concession to Li Ka-shing’s company in 1998, extending the agreement for another 25 years in 2021.

In his inauguration speech on January 20, Trump openly expressed concerns about Beijing’s operation of the Panama Canal, citing discontent over the loss of U.S. control of the canal and the high shipping costs.

According to NBC News, Trump vowed to reclaim control of the canal, a concession granted during the Carter administration to Panama, emphasizing the strategic importance of U.S. military dominance in Panama and over the canal, and the need to weaken Beijing’s influence, particularly in ensuring unimpeded access for U.S. military vessels.

Under continued pressure from the Trump administration, Cheung Kong Hutchison announced on March 4 that it would sell 43 ports in 23 countries to the consortium led by BlackRock, while retaining port rights in mainland China and Hong Kong. The transaction, valued at $22.8 billion, even exceeded Cheung Kong Hutchison’s total market capitalization before the announcement.

Should the deal receive regulatory approval, the biggest beneficiary would be the 96-year-old Li Ka-shing and his family enterprise.

According to the Bloomberg Billionaires Index, after announcing the deal in early March, Li Ka-shing’s wealth surged by $1.3 billion, reaching $30.5 billion. His holdings in Cheung Kong Hutchison and the real estate branch, Cheung Kong Property Holdings Limited, make up 40% of his fortune.

Most of Li Ka-shing’s wealth comes from stakes in public companies, including Cheung Kong Property, Cheung Kong Hutchison, Canadian oil and gas producer Cenovus Energy, and Zoom Video Communications.

Wall Street institutions like Goldman Sachs, responsible for brokering the deal, and legal advisors for the BlackRock consortium, are set to rake in service fees ranging in the millions of dollars.

The Trump administration hailed the deal as a victory in countering Beijing’s influence in America’s backyard, with the Panama Canal seen as a symbol of global influence competition between the U.S. and China.

The Wall Street Journal reported, citing sources, that Xi Jinping was displeased with Li Ka-shing for advancing the deal without prior approval from Beijing. Additionally, Xi recognized the strategic significance of the canal and had planned to use the Panama ports as leverage in negotiations with Trump, only to be caught off guard.

Reports indicated that Xi dislikes being portrayed as a loser but is also aware that any significant move to disrupt the deal could escalate tensions with the Trump administration.

Up to now, Beijing has shown relative restraint in retaliating against Trump’s imposition of new tariffs on China, indicating Xi’s desire to manage the tense situation.

Pro-Beijing media in Hong Kong openly criticized Li Ka-shing, labeling it as “a betrayal of the Chinese people”. These articles were then reprinted by the Liaison Office of the Central People’s Government in the Hong Kong Special Administrative Region, which wields the highest authority in Hong Kong.

Bloomberg and Huari Insights quoted sources saying that several Chinese entities, including the State Administration for Market Regulation and the Ministry of Commerce, were instructed to review the deal in order to assess measures to impede it.

Hong Kong Chief Executive Carrie Lam publicly stated that the deal would be handled in accordance with laws and regulations.

The next significant development in the transaction will involve Cheung Kong Hutchison and the BlackRock-led consortium finalizing the agreement, expected to be completed before April 2. Regulatory approval from the relevant authorities will also be required.

Bloomberg reported that the Chinese authorities are almost powerless to block the deal. Moreover, Beijing has limited options to retaliate against Li Ka-shing’s vast business empire.

For decades, the billionaire has been reducing his business exposure in Greater China. Currently, only 12% of Cheung Kong Hutchison’s revenue comes from mainland China and Hong Kong, which is one of the reasons behind Beijing’s discontent with Li Ka-shing.

In 2015, following a group reorganization and partial sale of mainland properties, Li Ka-shing registered Cheung Kong Hutchison and Cheung Kong Property Holdings in the Cayman Islands, facing criticism from official Chinese media.

Despite Beijing’s dissatisfaction, preventing the transaction is no easy task as the assets being sold are all located overseas outside of mainland China and Hong Kong. The parties involved in the deal also expressed confidence in its completion.

Since the Chinese media criticized the deal, Cheung Kong Hutchison’s stock price plummeted, with investors growing increasingly concerned about Beijing’s expanding sphere of influence and escalating tensions between China and the U.S.

On March 18, Cheung Kong Hutchison announced that they would not hold any earnings-related press conferences or analyst meetings this year. Additionally, another company under Li Ka-shing, Cheung Kong Property Holdings, also canceled these events.

Analysts noted that blue-chip companies in the Hong Kong stock market rarely cancel all communications related to earnings, suggesting a link to the controversy sparked by the sale of port assets.