Hong Kong-based port operator CK Hutchison Holdings is reportedly delaying its sale of two ports on opposite sides of the Panama Canal to a U.S.-led consortium.
The deal has not been called off, according to a report from the South China Morning Post.
The transaction was initially expected to be signed on April 2, according to the sale announcement made on March 4. But Hutchison has postponed the signing period. The deal also still would need approval from the Panamanian government.
China’s antitrust regulator, the State Administration for Market Regulation (SAMR), said Friday it would vet the deal in a probe.
SAMR is “aware of this transaction and will conduct a review in accordance with the law, to protect fair market competition and public interest,” the watchdog said in a statement. The regulator did not reveal when an investigation would be launched.
Jet Deng, a senior partner at the Beijing office of law firm Dentons, told France-based global news agency AFP that China’s antitrust laws can be applicable outside its borders, similar to those of the U.S. and E.U.
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The sale of both ports was part of a wider $23 billion deal to sell 45 ports in 23 countries to a consortium led by asset management giant BlackRock, that also included the terminal operator wing of Mediterranean Shipping Company (MSC). This would give MSC, already the world’s largest container shipping firm, the largest footprint of terminals worldwide with more than 100 across 54 countries.
That part of the deal is expected to proceed “on an expedited basis,” and is expected to go through even if the Panama piece does not.
The parties involved have 145 days to exclusively negotiate the final terms, although they have not explicitly stated when that period startup. After that time runs out, Hutchison can sell the assets to other parties.
Panama’s Balboa and Cristóbal ports are now the epicenter of a broader geopolitical tug-of-war between the U.S. and China that has escalated after the election of President Donald Trump.
President Trump’s desire to “take back” the Panama Canal has been the chief driver of this geopolitical shift, and is part of a platform that has sought to advance American interests in the Western Hemisphere, all while combatting Chinese influence.
In total, 74.7 percent of the cargo that goes through the canal originates or is destined for the U.S., according to data from the Panama Canal Authority. Additionally, 46 percent of the total containers moving from northeast Asia to the U.S. East Coast traverse through the canal, the Commerce Department says.
While Trump’s rhetoric has been filled with baseless allegations that China is operating the canal and has some level of control of the waterway, the president’s allies in Washington have shared more tapered concerns over the level of influence China may have over the Panama Canal.
Those worries were tied directly to CK Hutchison’s ownership of Balboa and Cristóbal, with Secretary of State Marco Rubio citing it as a U.S. national security concern. Hong Kong-based companies like CK Hutchison are subject to broadly defined national security laws under the Chinese Communist Party, in which Beijing could surveil businesses without warrants, or compel them to surrender corporate and customer data.
The pressure from Washington likely spurred BlackRock CEO Larry Fink to pitch Trump on acquiring the ports, and has set off bells and whistles both in China and Hong Kong.
Chinese state media posted scathing commentaries on the acquisition, calling Hutchison’s move “spineless kneeling, profit-seeking and unrighteous act” that betrays and sells out the Chinese people. State offices in Hong Kong and Macau reposted both articles, representing
Shortly after, public officials from China and Hong Kong both voiced their displeasure with the deal, calling it “bullying.” Adding to the matter, Chinese President Xi Jinping was reportedly furious that the transaction took place.
On Thursday, reports surfaced that Beijing instructed state-owned companies to pause new deals with Hutchison chairman and billionaire business tycoon Li Ka-Shing. While another report from the South China Morning Post disputed this directive, Hutchison’s stalling suggests a possible about-face due to government pressure.
Kurt Tong, a former State Department official who served as the American consul in Hong Kong, told the Wall Street Journal that the deal “is not crossing a red line for China.”
“The benefit of holding on to the two ports was a matter of perception for the U.S., not a matter of reality,” Tong said. “Port operations are run according to Panamanian law, not by Hutchison.”
While Tong indicated it would be a loss of face for Beijing if a U.S. investor took control of the ports, he ultimately believed it wouldn’t risk Hong Kong’s status as a global financial hub by quashing the deal.