China’s anger over the sale of Panama Canal ports to a U.S.-led group highlights how container terminals have turned into valuable assets as both Beijing and Washington compete for worldwide dominance, according to experts.
This month, CK Hutchison, a Hong Kong-based holding company, completed the sale of 43 ports across 23 nations – which includes facilities along the crucial Central American canal – to a consortium headed by leading investment firm BlackRock for a total of $19 billion in cash.
Following two weeks of discussion, Beijing toughened its stance on Friday and announced that antitrust authorities will examine the transaction. This development is expected to halt the companies’ plans to finalize their agreement by April 2 as initially intended.
Prior to the announcement of the review, experts informed AFP that the agreement enabled U.S. President Donald Trump to assert credit for “reclaiming” the canal as part of his “America First” policy.
Kurt Tong, managing partner at The Asia Group and a previous senior US diplomat to Hong Kong, stated, “The US created a political issue at the cost of China and subsequently managed to claim success.”
That isn’t pleasant in Beijing.
Several of the ports up for sale are located in countries that are part of China’s Belt and Road Initiative (BRI), a worldwide development strategy proposed by Chinese President Xi Jinping.
Ports play a vital role in that network, and China has shown remarkable success in this domain, according to Henry Gao, a trade law specialist from the Singapore Management University.
Last month, Panama officially withdrew from the BRI after a visit from US Secretary of State Marco Rubio.
Gao pointed out that there is an increasing tendency to use ports and trade infrastructure as instruments for exerting geopolitical influence.
‘Nightmare’ scenario?
On March 4, CK Hutchison caused a stir within China’s shipping sector when they announced a deal described as being “of unprecedented scale” by Xie Wenqing, a port development specialist from the Shanghai International Shipping Institute.
He informed AFP that Chinese shipping companies were uncertain about maintaining neutral passage after the control of the ports changed.
“He also expressed worries regarding extra expenses for Chinese vessels or potential bias in the order queueing process,” underscoring the extensive reach of U.S. authority.
The agreement, combined with the recent increase in US tariffs, might weaken China’s position as a leading manufacturer, according to Wang Yiwei, who directs the Institute of International Affairs at Renmin University of China.
He pointed out that more frequent inspections and higher docking fees could undermine China’s competitive advantage and disturb international supply networks.
The U.S. has employed multiple rationales to focus on significant infrastructure initiatives within the Belt and Road Initiative with the aim of seizing these assets and diminishing China’s role as the global manufacturing hub, Wang further explained.
John Bradford, who serves as the executive director of the Yokosuka Council on Asia-Pacific Studies, stated that the agreement wouldn’t be beneficial for China. However, he also mentioned that certain worries surrounding it have been exaggerated.
Ports operators like CK Hutchison are business organizations governed by legal frameworks and do not have the authority to determine issues related to national sovereignty, such as whether a vessel can enter a specific port.
“Should operators openly show preference for one company over another, that would typically be considered unlawful,” Bradford stated.
Laws in most nations require treating various clients equally, making apocalyptic situations less likely to occur.
Hong Kong’s role
Analysts suggest that Beijing’s subsequent actions in examining CK Hutchison could significantly impact Hong Kong and its position as China’s key link for global business ventures.
“The entire Panama port situation has redirected focus towards questioning whether Hong Kong remains an appropriate location for asset storage or commercial activities,” stated Tong, who previously held a diplomatic role.
Sure enough, the international business community active in Hong Kong is monitoring this matter with great attention.
CK Hutchison is incorporated in the Cayman Islands, and the assets up for sale are located entirely outside of China.
This did not prevent the State Administration for Market Regulation from declaring the antitrust review on Friday.
Jet Deng, a senior partner at the Beijing office of law firm Dentons, said China’s antitrust laws can be applicable outside its borders, similar to those of the United States and the European Union.
If a deal reaches China’s reporting threshold, a declaration must be made regardless of where the transaction occurs, provided that the entities involved have significant operations within Mainland China, he explained.
Companies that do not report this information could face fines amounting to as much as 10 percent of their previous year’s operating revenue, Deng further explained.
Hung Ho-fung, a political scientist from Johns Hopkins University, stated that Beijing might alarm “cautious” international companies which have already reduced their commercial presence in Hong Kong.
If the agreement falls apart due to Chinese influence, individuals might think that Hong Kong is aligning more closely with mainland China, where “considerations of national security dominate all business transactions,” according to Hung.
