Hong Kong's CK Hutchison Holdings could gain Beijing's backing by introducing a mainland Chinese firm as a strategic investor in the...controversial saleregarding its international port investments, but the shift in approach has also raised concerns, according to specialists.
Experts noted that the proposed $23 billion transaction involving CK Hutchison's 43 international ports, including two located at the Panama Canal, might serve as a negotiation tool between the United States and China as they commenced their third round of trade discussions in Sweden.
Experts commented following the announcement by the Hong Kong-based group, owned by billionaire Li Ka-shing, that it intends to bring in a mainland company as a key participant in the consortium for the deal.
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The deadline for exclusive discussions between CK Hutchison and the group, headed by U.S. asset manager BlackRock and the well-known Italian Aponte shipping family's Terminal Investment Limited, passed over the weekend.
The company stated that modifications would have to be implemented to the membership and the framework of the transaction in order for the deal "to be eligible for approval by all pertinent authorities".
Lau Siu-kai, a consultant with the semi-official Chinese Association of Hong Kong and Macau Studies think tank, stated that he thought CK Hutchison's recent action was aimed at securing Beijing's approval, following the government's expression of dissatisfaction with the deal.
He mentioned that the approval was contingent upon whether the central government believed that including a mainland investor would protect national security and ensure the interests of the Chinese shipping sector and global trade.
"Does China believe its strategic interests are protected? On the other hand, the conglomerate must also obtain approval from Panama and the United States. It's about how to manage the interests of all parties involved," Lau stated.
He mentioned that the sale of the two ports near the Panama Canal might be "one of the topics discussed in US-China trade negotiations," since it involves both sides.
Wilson Chan Wai-shun, head of policy research and co-founder at the Pagoda Institute think tank, agreed with Lau's viewpoint, stating that both China and the United States are focusing more on strategic industries.
"Besides the typical tariff matters, US-China trade discussions will also address whether the global and local activities of these companies can safeguard national interests," Chan mentioned.
Whether they achieve an agreement or a silent understanding will influence the strategic enterprises' strategies for selling their assets or choosing their development routes.
He mentioned that the subsequent actions in the agreement and the U.S. reaction were hard to predict since the exclusive discussions with the group had concluded, implying that the specifics would have to be revisited.
"The uncertainties have grown even more than previously. The deal has now been reopened... A new strategic investor could enter the deal. There is also a revised structure for the shareholding and a new valuation," he said.
Chan mentioned that it was crucial to determine if the prospective Chinese investor was solely interested in the two ports at the Panama Canal or in CK Hutchison's full range of assets, as the latter scenario might draw the interest of additional regulatory bodies.
Gary Ng Cheuk-yan, a senior economist with Natixis Corporate and Investment Bank, also pointed out the possible influence of U.S.-China trade negotiations on the transaction, noting that the involvement of a mainland investor could help reduce opposition from Beijing.
"On a net basis, it should enhance the likelihood of the (ports) deal being approved. However, there remains significant uncertainty from both the US and China concerning control, and this is also connected to the ongoing trade negotiations," he said.
In response to CK Hutchison's recent declaration, a spokesperson from China's Ministry of Foreign Affairs, Guo Jiakun, stated that the central government would "regulate" following legal guidelines.
He mentioned that the government would protect national sovereignty, safety, and developmental interests, while ensuring fairness and justice in the market.
CK Hutchison has faced significant backlash from the pro-Beijing faction and media outlets since disclosing the agreement in March, just two months after U.S. President Donald Trump assumed office and pledged to reclaim the Panama Canal, which he believed was under Chinese control.
The agreement also led the China State Administration for Market Regulation to declare that it would initiate a competition law review of the deal.
In April, the market regulator advised all parties concerned against bypassing its assessment following media coverage indicating that the two Panama Canal ports would be excluded from the agreement.
In May, CK Hutchison stated that it was "completely impossible" to continue with the deal under any unlawful or non-adherent conditions.
In June, media coverage indicated that China Cosco Shipping, a state-owned company, along with other Chinese enterprises, had engaged in discussions regarding joining the consortium to address Beijing's worries.
Professor Surinder Brrar, affiliated with the logistics and maritime studies department at Polytechnic University, noted that Cosco was "a highly acceptable and appealing participant regarding China and the potential Chinese approval of the transaction."
He mentioned that bringing in a mainland investor might help obtain approval from Chinese antitrust regulators, but the likelihood of it satisfying the US was "doubtful."
"You can view it as addressing one problem at a time. It seems this approach may not be sufficient for the US unless they alter their stance, and further negotiations are expected before final approval," he stated.
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This piece was first published in the South China Morning Post (www.scmp.com), a top news outlet covering China and Asia.
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