President Trump claims that China’s control of the Panama Canal has placed the Hong Kong tycoon and his group at the heart of a showdown between the United States and China.
That sprawling company, CK Hutchison Holdings, is one of the most valuable listed companies in Hong Kong and regards some of the world’s largest investors as shareholders. Hutchison Ports, one of its subsidiary companies, has been involved in the Panama Canal since 1997.
Of the five ports in Panama, Hutchison is the largest – at both ends of the canal. According to the Panama Maritime Authority, last year’s Khu Harbor served containers of cargo that carried 39% of the canals, one of the world’s most important waterways. (Other ports are owned by a Taiwanese company, a Singapore company and an American Memory Joint Venture.)
The company’s role has brought about Washington’s impact on Beijing on Hong Kong, a special administrative region in China, which has become more obvious in recent years. The Trump administration argues that China can use its influence on Hong Kong companies to force Panama to restrict U.S. trade at the ports.
What is Hutchison, and who is this tycoon?
Li Ka-Shing, the billionaire founder of CK and Hutchison, is a Hong Kong legend. A high school dropout from Mr. Lee, 96, turned small businesses selling plastic flowers into an empire that spans infrastructure, finance, retail and telecommunications.
Hutchison Ports is a subsidiary of CK Hutchison, whose shares are listed in Singapore and operate the Balboa and Cristóbal ports on the Pacific and Atlantic lateral sides of the Panama Canal. The company employs 30,000 people and operates 53 ports in twenty countries. Its largest shareholders are Blackrock and Vanguard, the two largest asset managers in the world.
For decades, until his retirement in 2018, Mr. Lee operated his own business in ways that Chinese companies could not achieve, taking advantage of Hong Kong’s free market and different laws. Like other Hong Kong entrepreneurs, Mr. Li has established connections with China’s top leaders in Beijing and invested in China.
But in recent years, Mr. Li has sometimes talked about China’s increasing grasp of Hong Kong. In 2019, when pro-democracy protests took place with police forces, Beijing was trapped in line with the city’s elites, Mr. Li called on the authorities to exercise restraint.
Since then, Mr. Li has sold most of his real estate holdings in China and transferred some of his investments to Europe, a move that has angered Chinese nationalists.
What does Jihe Port do on the Panama Canal?
Since Panama granted a 25-year concession in 1997, the Port of Kristol operates Balboa and the Port of Kristol. It is the only port operator, the Panama government is a shareholder and receives payments for container movement through canals and dividends.
However, Hutchison renewed the port for another 25 years in 2021, and now there are questions.
Panamanian authorities have committed to conducting an audit to verify that the records are “correctly reporting their income, payments and donations to the state.” On January 21, nearly twelve auditors entered the company’s office and began work.
In addition, two Panama lawyers filed a lawsuit this week, challenging the country’s contract with Hutchison, saying it violated Panama’s constitution. The Chinese government said on Wednesday that it “confidence the Panama government will provide a fair environment for businesses including Hong Kong.”
CK Hutchison did not respond to duplicate requests for comment.
If Hutchison is in Hong Kong, why is it called Chinese?
This is related to the abnormal status of Hong Kong and its old-line companies such as CK Hutchison.
Hong Kong was ruled by Britain for a century and a half before returning to China in 1997. Beijing promises to make the city “highly autonomous”. Beijing implemented a national security law against Hong Kong in 2020 after democratic protests broke out in New York City.
Beijing’s strict control over Hong Kong has eliminated political opposition. Most of the reasons that make Hong Kong different from China, such as a vibrant civil society and a company that can operate independently, have been eroded.
During his first term, Mr. Trump signed an executive order revoking a special designation under U.S. law that allows the United States to treat Hong Kong differently in terms of immigration and trade than China. President Joseph R. Biden Jr. expanded executive orders during his term.
Meanwhile, Hong Kong authorities have taken steps to show their loyalty to Beijing.
“Everything has to be ‘Hong Kong, China’,” said David Webb, a long-time Hong Kong investor. “It was not surprising that Hong Kong companies were considered Chinese at the time.”
What is China’s participation in Panama?
The Trump administration’s focus on China’s influence in Panama is part of broader concerns about China’s belt and road initiatives, which has financed and built infrastructure projects around the world. Panama became the first Latin American country to join Belt and Road in 2017.
U.S. Secretary of State Marco Rubio visited Marco Rubio this week, and Panama President José Raúl Mulino said he would not renew his belt and road agreement. But Beijing has already cut back on its loans worldwide.
Panama received $669.7 million in grants and loan commitments from China, about half of its neighboring country Costa Rica, according to a research project by William Mary, Virginia. In 2019, the State-owned China Export International Bank provided loan commitments to the privately owned Panama Bank.
China plans to do more for Panama following the visit of top leader Xi Jinping in 2018. However, the Panamanian president leaned towards Beijing in 2019, Juan Carlos Varela.
Mary Triny Zea Contributed reports from Panama City Anne Correll From Mexico City, and Zixu Wang From Hong Kong.
