Beijing Puts Its Thumb on Panama Canal Deal

News Analysis

Beijing is meddling in a pending sale of port rights from a Hongkonger-owned company to a U.S. business consortium led by BlackRock, according to a China expert.

The deal announced on March 4 involves 43 ports in 23 countries. However, two ports—Balboa and Cristobal—in the bundle receive disproportionate attention because they are at the Panama Canal.

The seller, CK Hutchinson, is owned by Li Ka-shing, an iconic billionaire in Hong Kong. For decades, Hongkongers admired his success and nicknamed him “Superman.” As an immigrant from mainland China, Li built his empire by selling plastic flowers and then transitioned to real estate, telecommunications, and shipping.

Now, because of the deal, the 96-year-old tycoon is labeled as a traitor for “selling out the country and the entire Chinese population” and “spinelessly kneeling” before the United States.

Between March 13 and March 19, the pro-Beijing Hong Kong newspaper Ta Kung Pao published more than 10 editorials and commentaries, handing him the above reprimand. The articles further advised all businessmen to stand with the Chinese Communist Party (CCP) on critical issues. An article on March 13 said the deal could impact China’s foreign trade and the Belt and Road Initiative, China’s $1 trillion geopolitical infrastructure investment worldwide.

The Hong Kong and Macao Work Office, the CCP’s representative in Hong Kong, reprinted three of Ta Kung Pao’s articles on its official website.

When asked about the criticism at a press briefing on March 18, Hong Kong Chief Executive John Lee repeated the Chinese foreign ministry’s lines that his government wanted foreign governments to “provide a fair and just environment” for Hong Kong enterprises and that he was “against any use of coercion or pressure in international trade.” He added that any transactions must follow Chinese laws and regulations.

Alexander Liao, a China expert and contributor to The Epoch Times, said his CCP insider sources in Beijing told him that Chinese leader Xi Jinping is angry at the deal that President Donald Trump touted in his State of the Union address on March 3. As a result, Liao said, Ding Xuexiang, a CCP Politburo Standing Committee member and vice premier of China, dispatched a special working team to Hong Kong on March 15 to scrutinize the Panama Canal deal.

Liao grew up in China’s military system and was previously stationed in Hong Kong as a seasoned journalist for more than a decade. He has learned that officials in the Hong Kong government aren’t very comfortable with exerting pressure on a business deal, which Hong Kong didn’t used to do. Therefore, the Beijing team has been leading the charge, he said.

He told The Epoch Times that Ta Kung Pao’s smear campaign on Li and the actions of the CCP’s Hong Kong Office were under the directions of the Beijing delegation.

However, the CCP has limited leverage on Li, he said.

Although CK Hutchinson, Li’s flagship enterprise, is listed on the Hong Kong Stock Exchange, it is incorporated in the Cayman Islands. Over the past decade, the share of its business in the mainland and Hong Kong has shrunk to slightly more than 10 percent. Li will pocket about $19 billion from the deal, which prices the transaction at about 14 times the 2024 earnings, higher than the industrial average range of 8 or 11 times.

Liao said that one tool the local government could use is the Hong Kong national security law. Due to its vague definition of national security and the stipulation that the law applies to individuals both inside and outside Hong Kong, thousands of pro-democracy activists protested against it in 2020. Nevertheless, Beijing imposed the law on the former British colony in the same year.

Beijing could use this law to retaliate against Li. However, in Liao’s view, the consequence could take an irreversible hit on the Chinese economy because such a precedence would have a chilling effect on Hong Kong businessmen and foreign investors.

The Ta Kung Pao commentaries have accused Li of “neglecting national interest.”

Political commentator Heng He said on his Chinese-language program that Ta Kung Pao spoke for Beijing and viewed the deal politically rather than as a business transaction of a private company. To Heng, if the CCP is worried that Washington could use the Panama Canal against Beijing after a U.S. company buys the rights to operate the ports, then that proves indirectly that the CCP wants to hold the option to turn hostile to the United States at the ports under a Chinese company’s management and control.

Core US Interest

The Panama Canal is a strategic chokepoint that plays a crucial role in U.S. military and economic interests, serving as a vital passage for warships and cargo between the Atlantic and Pacific Oceans.

Each year, the Panama Canal handles $270 billion in cargo, representing 5 percent of global maritime trade, with more than 70 percent of that trade connected to U.S. ports. The canal was under U.S. control until 1999, when its sovereignty was transferred to Panama under a 1977 treaty signed by President Jimmy Carter.

The Carter–Torrijos Treaty of 1977 requires “permanent neutrality” of the canal, ensuring that no countries are discriminated against and that no ships act with hostility. According to the agreement, if the neutrality is at risk, the United States may use military force to defend it.

After taking office in January, Trump questioned the neutrality. He alleged that the canal was being operated by the Chinese regime and vowed to intervene, prompting denials from Beijing and Panama.

“China is operating the Panama Canal,” Trump said during his inaugural speech. “And we didn’t give it to China. We gave it to Panama, and we’re taking it back.”

In 1997, CK Hutchinson obtained the rights to manage the two ports at both ends of the Panama Canal for 25 years. In 2021, the agreement was renewed to 2047.

When announcing the most recent deal, the company said it was a pure business transaction, irrelevant to the recent political news surrounding the waterway.

The Panama Canal is a peripheral strategic interest for the CCP, yet it is a “core U.S. interest,” Liao said.

Days before visiting Panama as his first trip outside the United States, Secretary of State Marco Rubio said in an interview on Jan. 31: “Hong Kong-based companies having control over the entry and exit points of the canal is completely unacceptable. That cannot continue.”

“If there’s a conflict and China tells them, do everything you can to obstruct the canal so that the U.S. can’t engage in trade and commerce, so that the U.S. military and naval fleet cannot get to the Indo–Pacific fast enough, they would have to do it … and they would do it. And now we’d have a major problem on our hands,” he said.

After Rubio’s visit, Panama said on Feb. 2 that it would not renew its agreement with Beijing’s Belt and Road Initiative when the current one expires next year.

A Prelude to US–China Confrontation Worldwide

Chinese companies have also contacted Li’s CK Hutchinson to buy the rights to operate the two ports in Panama, according to Chinese media reports, which said that the partners and scale of the deal might change.

April 2 is an important milestone when CK Hutchinson and the U.S. consortium led by BlackRock will sign a definitive agreement.

Liao said the chance that a Chinese company can become a buyer is slim and that Trump could press Panama to make the port rights no longer available to private businesses. If that’s the case, Li would no longer be able to sell the rights. If the rights were revoked after the deal, the Chinese buyer would end up with nothing.

In Liao’s view, the United States couldn’t afford for the CCP to win the power wrestle over the Panama Canal because if that were to happen, Washington would lose its command in the world—that’s against Trump’s “Make America Great Again” agenda.

Therefore, the most the CCP could achieve might be to deter other Chinese businessmen from following Li’s suit, according to Liao.

“The Panama Canal deal is just a prelude in the confrontation between the United States and the Chinese Communist Party,” he added. “In the future, many important strategic assets worldwide will be subject to similar tussles. Then an era of clashes will officially begin.”

Darlene McCormick Sanchez contributed to this report.