If China’s largest shipping company, China COSCO Shipping Corporation Limited (COSCO), does not hold shares, the Chinese government will block Hong Kong’s CK Hutchison Holdings Limited’s (CK Hutchison) deal to transfer ownership of more than 40 ports around the world—including two ports at the Panama Canal—to Western investors.
The Wall Street Journal, citing people familiar with the deal negotiations, reported that China is pushing for the state-owned COSCO to become an equal partner and shareholder in the relevant ports alongside BlackRock and shipping giant Mediterranean Shipping Company (MSC).
BlackRock and MSC reached a preliminary agreement in March to acquire the ports in a deal valued at nearly $23 billion (about 97.655 billion Malaysian Ringgit).
The report stated that currently BlackRock, MSC, and CK Hutchison are all open to COSCO joining as a shareholder.
Nevertheless, sources noted that it is unlikely an agreement will be reached before the exclusive negotiation period between BlackRock, MSC, and CK Hutchison concludes on July 27. No agreement including COSCO is expected to be finalized before this exclusivity period ends.
The Deal May Anger Trump
However, any transfer of Panama port shares to a Chinese-invested company could anger U.S. President Donald Trump. Trump has threatened to “take back” the Panama Canal and opposed CK Hutchison’s ownership of the canal’s ports.
CK Hutchison’s earlier announcement of a preliminary plan to sell the two ports at the Panama Canal left the Chinese government displeased. It is reported that the Chinese government has already instructed state-owned enterprises to freeze any transactions with CK Hutchison or its controlling shareholder, the Hong Kong billionaire Li Ka-shing family, and related companies.
The proposed port sale plan has also exacerbated the increasingly tense relations between China and the United States.
Sources familiar with the trade talks revealed that during bilateral economic and trade negotiations held in Geneva, Switzerland this May, the Chinese delegation raised the possibility of China’s participation in the deal.
The sources said Chinese officials have informed BlackRock, MSC, and CK Hutchison that if COSCO is excluded from the deal, Chinese authorities will take steps to block CK Hutchison’s sale plan.
At the end of April, China’s State Administration for Market Regulation stated that authorities are very concerned about the transaction and will conduct a review in accordance with the law. All parties involved in the CK Hutchison port deal must not attempt to circumvent antitrust review by any means and, without approval, must not implement the concentration; otherwise, they will bear legal responsibility.