Claire Jim, James Pomfrett and Anne Marie Ronterry
Executives and analysts say Hong Kong’s advantage as a financial hub will further erode as Hong Kong has highlighted geopolitical fluctuations in the world’s port business, executives and analysts say.
The former British colony was attracted by the storm between Beijing and Washington, emphasized by the decision of the association group CK and Hutchison, which was controlled by Hong Kong billionaire Li Ka-shing to sell its port network, including assets along the Panama Canal to a U.S. consortium led by Blackrock.
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U.S. President Donald Trump praised the deal when he claimed in January that the Panama Canal was run by a Chinese company.
“The Trump administration will see this working… and you have to assume they will follow the same drama book… (They) see it as a victory,” Steven Okun, a senior consultant at the financial and risk consulting consulting firm Kroll, told Reuters.
As the U.S. strives to curb its major global rival China on a front, including trade, transportation, technology and capital raising, more than a dozen businessmen, investors, lawyers, transportation executives and risk analysts talk to Reuters, this has brought greater uncertainty and volatility to Hong Kong.
Traditionally, Hong Kong companies were seen as internationally focused and independent of the Chinese state, reflecting the role of the former British colony as a free-to-financial center.
“We have been constantly reviewing our business plans and discussing our strategy,” said an executive of a listed Hong Kong company.
“For example, do we still want to list our units in Hong Kong and Hong Kong is still attractive as an on-market outlet because investors can build China’s connections.”
Hong Kong has a separate rule of law with China and its own financial policy-making autonomy, but some lawyers, diplomats and business executives say the West essentially regards the city as completely under Beijing’s control after China imposed a national security law in 2020.
They say it hurts it economically and doubts whether it is a jurisdiction for best practice separate from mainland China.
Earlier this year, Hong Kong’s Far East consortium and Chow Tai Fook Enterprise and Brisbane’s “Embraded Casino” group owned the Star Entertainment development project, trying to get Star out.
If successful, bidding would be another test of regulators that view Hong Kong companies as Chinese companies. In 2018, Australia blocked $13 billion ($8.2 billion) to acquire APA Group, the country’s largest natural gas pipeline company, and CK Infrastructure is a unit of CK Hutchison on the grounds that it violates national interests.
“Assembly”
“Hong Kong is increasingly gathering with China … that’s a fact,” said a member of the board of directors of a leading Hong Kong business family.
“To some extent, this increases the complexity and cost of our business deals. We have to endure that.”
According to a person familiar with the matter, CK and Hutchison initially tried to conduct two major port operations in Panama after Trump said the Panama Canal was under control by China.
But later, and the reporter chose to cash out and mitigate long-term reputation risks.
“People in the Hatch Empire are seeking cover,” said the person who knows about the port negotiations. “It’s a nightmare, and we’ve never dealt with something like this before.”
The source added that CK Hutchison executives were in touch with Beijing officials when the situation occurred.
Hutchison did not immediately respond to a request for comment.
Co-management director Frank Sixt said in a statement this week that port transactions “have nothing to do with recent political news coverage.”
The Hong Kong government said it never interfered with the commercial operations of Hong Kong companies and criticized U.S. officials for making unreasonable allegations about the operation of the Panama Canal.
Grab the crosshair
“This has been politicized and weaponized,” a senior Chinese government official said.
“This is unfortunate and regrettable,” the official told Reuters.
Others, including business executives and lawyers, agreed that while officials like Paul Chan, the territory’s finance secretary, said Hong Kong is increasingly seen as a similar one to other Chinese cities, the city remains a hub for the free flow of capital, goods and people around the world.
“The market is based on expectations,” said Vera Yuen, lecturer in economics at the University of Hong Kong Business School. “The valuation in (Hong Kong) is based on their (world) ideas, not what you argue.”
Even before the recent Trump administration’s pressure on Hutchison’s Panama port, some internationally-wide local companies have been developing contingency plans to cope with the growing U.S.-China strategic competition – in a conflict, Hong Kong will be increasingly in the crosshairs.
In 2023, Hong Kong-based conglomerate Swire Pacific sold its Swire Coca-Cola USA division to its controlling shareholder John Swire & Sons Ltd, headquartered in the UK, to protect the business so much that it is no longer considered a “Chinese company” by a “Chinese company”, two sources.
An executive at a Hong Kong transport company described his business as having demonstrated its international posture at a conference with foreign investors.
“The key is our internationalization – our offices, residences and vessels,” the executive said.
“We want to prove that we are not really based on anything.”
($1 = AUD 1.5780)
(Other reports by Greg Torode and Jessie Pang in Hong Kong; Scott Murdoch and Beijing Newsroom in Sydney; Writing by James Pomfret; Editing by Raju Gopalakrishnan)
