CK Hutchison, one of the largest conglomerates in Hong Kong, earlier this month announced plans to sell its stake in two ports on the Panama Canal to a group of US investors led by BlackRock.
The plan, part of a $22.8bn megadeal that would grant the consortium control over more than 40 ports in 23 countries, followed complaints by United States President Donald Trump that the key shipping route was under Chinese control.
CK Hutchison shares soared following news of the deal on March 4, but plunged less than two weeks later when Ta Kung Pao, a Chinese state-run newspaper in Hong Kong, accused the company in two op-eds of “spineless grovelling” and cutting a deal “that betrayed and sold out all Chinese people”.
With an April 2 deadline to sign the deal looming, CK Hutchison is now in the crosshairs of both Washington and Beijing.
Why would China want to stop the deal?
Editorials in Ta Kung Pao, which is controlled by Beijing’s liaison office in Hong Kong through a subsidiary, are often read as signals from the upper ranks of the Chinese Communist Party.
Hong Kong leader John Lee, who was elected as the sole candidate in an election tightly controlled by Beijing, has criticised the CK Hutchison deal, saying it deserves “serious attention”.
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 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.
On Friday, China’s market regulator said on its official WeChat account that it would carry out an antitrust investigation “in accordance with the law to protect fair competition in the market and safeguard the public interest”.
Following the news, local media, including the Sing Tao Daily and the South China Morning Post, reported that CK Hutchison would not go forward with the deal this week.
What is Beijing’s relationship with CK Hutchison?
The proposed sale has also highlighted longstanding tensions between Beijing and CK Hutchison and its 96-year-old billionaire founder, Li Ka-shing.
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 2015, Li raised eyebrows when he restructured his business interests and registered them in the Cayman Islands. Around this time, he also began to divest from China.
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.
While analysts have offered differing opinions on whether the Li family tacitly supported calls for democracy in Hong Kong, there is broad agreement that it is less visibly pro-Beijing than many of the city’s other business dynasties.
“Compared to other family offices of his generation – such as the Fok and Pao family, who invested in the mainland as early as the 1980s, or the Tung family, who are active in Sino-American relations and Hong Kong governance – Li and his sons position themselves as businesspeople who invest globally and distance themselves from politics,” Wilson Chan, co-founder and director of policy research at Hong Kong’s Pagoda Institute, told Al Jazeera.
Can Beijing stop the sale from going ahead?
Chan said Beijing is relatively constrained in terms of formal regulatory authority to stop the deal.
“In strict legal terms, it will be quite difficult for Beijing and Hong Kong to call off the deal, given the companies and the ports involved are not ‘legally’ located within the jurisdiction of China and Hong Kong,” he said.
Ronny Tong, a Hong Kong barrister and member of the city’s Executive Council, said the antitrust investigation could be seen as a “deterrent” against CK Hutchison moving forward with the deal.
Tong said Chinese regulators typically do not step in to block Hong Kong business deals, but are within their rights to investigate.
“If people carry on their business activities contrary to the law, they ought to be investigated to see whether they have fallen afoul of the law,” Tong told Al Jazeera.
Experts quoted in the South China Morning Post said that Chinese regulators could claim legal jurisdiction over the deal by arguing that BlackRock’s acquisition of so many ports would give them a monopoly over regional trade routes.
Proving that the deal would have an adverse impact on competition, however, could be more difficult, while invoking national security concerns could be challenging as BlackRock is a private company, the experts quoted by the Post said.
Martina Fuchs, a business correspondent for the Chinese state-run Xinhua News Agency, said she expects the deal to be delayed or called off as it has become “highly politicised.”
“China’s criticism of CK Hutchison’s move to sell the ports business also reflects its strategic interests in the region on the one hand side, and the growing pressure from US President Donald Trump to curb China’s influence as well as worries about national security on the other,” Fuchs told Al Jazeera.
“CK Hutchison being thrust into the crosshairs in the midst of the once-again escalating China-US trade war reflects how both powers are battling for control of the strategic waterway,” she said.
What other pressure can Beijing apply?
Even without going through formal legal channels, Beijing could apply pressure in other ways.
CK Hutchison’s affiliate companies and business interests in the mainland are a point of vulnerability, according to an analyst who covers China’s economy, who spoke on condition of anonymity due to the political sensitivity of the issue.
While CK Hutchison has wound down its investment in China, it still earns about 12 percent of its revenue from China – representing more than $300m in 2024.
Its sister company, CK Asset Holdings, still owns dozens of properties in mainland China, which means it is also very exposed to Beijing, the analyst said.
Foreign and local companies in Hong Kong will be closely watching to see what happens next, he said.
“The wider Li family group of companies still has a meaningful amount of assets on the mainland, such as CK Asset’s property holdings. They are almost certainly aware that they could be exposed to retaliation from Beijing,” the analyst said.
Kevin Yam, a lawyer who specialised in financial services and commercial litigation until he left Hong Kong in 2022, said Beijing could use the deal to make an example of the Li family, much as it did to Alibaba founder Jack Ma.
After criticising China’s regulators in 2020, Ma was forced to cancel the IPO of Ant Financial, a financial subsidiary of Alibaba.
Since then, he has only rarely been seen in public.
“Hong Kong being Hong Kong, chances are they won’t cut the Li family down to size to the same extent as they did to Jack Ma, but I reckon ultimately whichever way this thing is going to go … it won’t be directly about the deal,” Yam, who is wanted by Hong Kong police over his participation in the 2019 protests, told Al Jazeera.
Beijing has not shied away from using extrajudicial methods against prominent citizens in the past.
In 2017, Chinese-Canadian businessman Xiao Jianhua – then one of China’s wealthiest people – vanished from the luxury hotel where he was living in Hong Kong, with multiple media outlets reporting that he had been abducted by mainland Chinese agents.
Xiao’s exact whereabouts remained unknown for five years until 2022, when a Shanghai court sentenced the tycoon to 13 years imprisonment for allegedly embezzling $8bn.
In 2023, Bao Fan, an influential Chinese tech banker, went incommunicado amid a crackdown on the financial services industry.
Bao, whose firm announced his resignation last year, has not been publicly heard from since.
What’s next for the CK Hutchison deal?
With just a day to go until the April 2 deadline, the fate of the sale is unclear.
While Chinese regulators are looking into the deal, the Hong Kong government has yet to investigate, according to Tong, who sits on the cabinet of Hong Kong’s chief executive.
On the Chinese mainland, the government appears to be making use of both the carrot and the stick.
Last week, Li’s son Richard was invited to the China Development Forum, a high-profile business summit held annually in Beijing.
While Richard is not involved in the management of CK Hutchison, the markets interpreted his invitation as a positive sign for the company’s relations with Beijing, sending its shares 3.4 percent higher last Monday.
On Thursday, however, Bloomberg reported that Beijing had issued a directive to state-owned enterprises to hold off on new business with CK Hutchison and its affiliates, citing people familiar with the matter.
While it is still uncertain whether CK Hutchison and BlackRock will go ahead with the deal, a delay would not necessarily stop it in its tracks.
The deal reportedly includes a 145-day exclusivity clause for negotiations, after which time CK Hutchison would be free to sell its assets to another party, according to the Post.
The Post said neither party had revealed “the start or end” of the exclusivity period.
Tong said it was difficult to say more without official word from CK Hutchison or BlackRock.
“Very few facts are known to the public,” he said. “[CK Hutchison] is keeping mum, saying nothing at all, so people can only venture to guess what is happening.”