A Scathing Critique over the Proposed Port Sale
China criticizes weak-willed proposal for selling Panama Canal ports to BlackRock
In a jab aimed at the American asset management giant, BlackRock, China has publicly bashed a proposed deal to acquire ports in the Panama Canal, labeling it as "spineless groveling" and a "betrayal" of the Chinese people.
A critical op-ed published by the state-run Ta Kung Pao newspaper, subsequently shared on the website of China's Hong Kong and Macao Affairs Office, sent shares of CK Hutchison (CKH), the Hong Kong-based owner of the ports, plummeting by over 6% on Friday.
Analysts suggest this dip in shares indicates investors are worried the deal may not ultimately materialize if Beijing voices opposition.
Dan Baker, a senior equity analyst for Morningstar, commented to CNN, "I'm not aware that any approval from Chinese regulators is required given CKH is retaining all of its existing Chinese ports. However, there is a chance that other influencing factors may jeopardize the deal." CNN reached out to the conglomerate for an official response.
Last week, a coalition led by BlackRock announced plans to invest $22.8 billion to buy the ports of Balboa and Cristobal, situated at either end of the canal, from CK Hutchison. The consortium also agreed to purchase CK Hutchison's majority stake in 43 additional ports spanning 199 berths across 23 nations. The deal is still labeled as an "agreement in principle."
During his presidential campaign and tenure, Donald Trump voiced intentions to "recapture" the Panama Canal from Panama, which assumed control of the waterway in 1999 under a treaty negotiated two decades prior. He pointed to Chinese ownership of certain port operations as evidence that China controlled the canal.
### A Political Hot Potato
Upon initial announcement, the deal appeared to be a smart move for CK Hutchison - a global conglomerate affiliated with Li Ka-shing, a cunning investor long recognized in Hong Kong. By selling the ports to BlackRock and associates, they expected to receive over $19 billion in cash, a sum notably higher than analysts' estimates for the ports' worth.
However, Thursday's vitriolic op-ed from a newspaper closely affiliated with the ruling Communist Party may throw a wrench in the works. They accused CK Hutchison of "spineless groveling," "profit-seeking," and "disregarding national interests and national justice, and betraying and selling out all Chinese people."
The op-ed concluded, "Faced with such a major event and a matter of great justice, the relevant company should think twice ... and think carefully about what position and side it should stand on."
Constructed by the US in the early 20th century and completed in 1914, the Panama Canal was primarily operated by the US for most of the century. Control was subsequently handed over to Panama under a controversial treaty opposed by many Republicans at the time.
The 51-mile canal is crucial for international trade and US military vessels, with approximately 4% of global maritime trade and over 40% of US container traffic passing through it. Unlike Trump's concerns, the canal itself remains under Panamanian, not Chinese, control.
Hutchison, the Hong Kong-based company, agreed to sell ports at the Panama Canal to a consortium led by BlackRock, but investors may be concerned this deal may not go through due to criticism and opposition from China. The op-ed published by the state-run Ta Kung Pao newspaper accused Hutchison of disregarding national interests and justice, which could potentially jeopardize the deal. The sale of these ports would generate over $19 billion for Hutchison, making it a significant business move for the conglomerate.
