The balancing act over the Hutchison shipping ports in Panama

Mark Pinkstone/Former Chief Information Officer of HK government

Is the proposed sale of the Cheung Kong Hutchison (CKH) shipping ports at either end of the Panama Canal an astute business deal or a bold political takeover? It can be argued both ways.

The Chinese side of the pendulum foresees doom as the sale would increase the US hegemony over global shipping because the sale includes not only Hutchison’s two shipping ports, but 80 per cent of all of Hutchison’s 43 ports world-wide. The intended principal buyer is BlackRock Inc., a major US financial and investment conglomerate.

The business side of the pendulum sees it as a major business deal worth US$23 billion.
The proposed sale drew the ire of China's Hong Kong and Macau Affairs Office (HKMAO), which reposted a Ta Kung Pao commentary criticising the CKH port deal with U.S. investment firm BlackRock as a betrayal of China, sending shares of CKH sharply lower on March 14.

The commentary said the U.S. would constrain China's maritime trade, and Chinese companies would face great risks in logistics and supply chains, impacting China's Belt and Road initiatives.
"This deal is an act of hegemony by the US, which uses its state power to infringe upon the legitimate rights and interests of other countries through despicable means such as coercion, pressure, and inducement," the commentary wrote.

"It is power politics packaged as a 'business behaviour'."

The in-principle agreement with the BlackRock-led consortium gave the two sides 145 days to hammer out specific terms and details before finalising the transaction, according to a Hong Kong Stock Exchange statement by CKH. Also, the deal will need to be approved by CK Hutchison’s shareholders, obtain approval from the Panamanian government, and meet unspecified customary terms agreed by the two sides, according to the statement “After the Panama Canal has been ‘Americanised’ and ‘politicised’, the US will definitely use it for political purposes and implement its own political agenda, and China’s shipping and trade here will certainly be subject to the US,” Ta Kung Pao wrote in a series of articles blasting the sale.

US president Trump announced immediately after his inauguration in January that he would “recover” the Panama Canal, which was owned by China. He was totally wrong. The Panama Canal is owned and operated by Panama, and the ports at each end are owned by Panama Ports Company, a subsidiary of Hutchison Port Holdings, a further subsidiary of CKH But it’s obvious that kicking China (via Hutchinson) out of Panama had been planned for some time.

Immediately after his inauguration, Trump sounded out potential buyers for the ports and had a meeting with BlackRock’s CEO Larry Fink in the White House. Fink is an old billionaire buddy of Trump. After that meeting, Trump sent his right-hand man, Secretary of State Marco Rubio, off to Panama to sort things out. And, by sheer coincidence, within a month, a deal was made for the sale of the ports.

Meanwhile, Reuters reported that Trump is planning an executive order to charge fees for China-linked vessels in the US. ports, in a bid to resuscitate American shipbuilding and disrupt China's supply chains.

But Li Ka Shing (96) retired, but still an advisor to the company, and his son Victor (60), now chairman of CKH, are businessmen like Trump. And a deal is a deal.

The disposal was primarily driven by an attractive valuation by wealth management firm Morningstar of the ports’ worth undertaken by CKH. Zerina Zeng and Zoey Zhou from debt research firm CreditSights, with offices in the US, UK, and Singapore, said. “CK Hutchison has a track record of recycling assets, and this is not the first time that Li and the conglomerate have faced criticism in the Chinese media, which we do not view as a major hurdle for deal completion,” they said.

The sale is understandable owing to its small returns compared with its role as a lightning rod of US-China tensions. The ports in Panama accounted for merely 1 per cent of CKH’s earnings before interest, taxes, depreciation, and amortisation, according to JPMorgan.

The sales proceeds will generate US$19 billion in cash for CKH, substantially higher than Morningstar’s US$10.5 billion valuation of its port assets. CKH’s shares surged by almost a quarter in intraday trading before closing 22 per cent higher at an 18-month record of HK$47.10 in Hong Kong. Its shares fell after the Chinese criticism later in the week.

But CKH has not totally abandoned its shipping business. After the proposed sale, CKH would still own stakes in four of the world’s 10 busiest container ports: Hong Kong’s Kwai Tsing port, Shenzhen’s Yantian port,Ningbo’s Beilun terminal, and the Mingdong and Pudong terminals in Shanghai.

However, it must be mindful of the words of China’s Foreign Ministry spokesperson Lin Jian when he said that the ministry supported Hong Kong companies in doing business overseas but “opposed any abuse of coercion and pressuring in international trade and economic relations.”
Hong Kong’s Chief Executive John Lee Ka-chiu concurred, adding: “The Hong Kong SAR government urges foreign governments to provide a fair and just environment for enterprises, including enterprises from Hong Kong.”

Mark Pinkstone

** 博客文章文責自負,不代表本公司立場 **

As towers of glass, steel and concrete start forming the skyline of the Northern Metropolis, a swath of green the length of the development is being maintained to protect the wildlife inhabiting the area for more than a century.

The Northern Metropolis (NM) development is a futuristic university city, occupying one third of Hong Kong’s land mass along Shenzhen River boundary with the mainland. Catering for a new population of 2.5 million and offering 65, 000 jobs with additional transport links, the project is expected to reach it potential in 2036.

In addition to the residential development, the plan includes an extension of the existing logistics hub in the Hung Shui Kiu and Ha Tsuen areas. And two eco-tourism nodes will be established in the coastal areas of Tsim Bei Tsui and Pak Nai, featuring resorts, weekend markets, and camping sites. Authorities have expressed their intention to create a coastal protection park along the 10.7-km coastline.

However, it is being built on what was previously fish farms, agricultural land, marshes and mangroves – wetlands, a natural habitat for wildlife and an important foraging ground and habitat for migratory water birds.

The plan was launched as a proactive conservation policy in the Chief Executive’s annual policy address in 2021 and has gone through various consultation exercises involving surveyors, conservationists, property holders and the public.

The wetland conservation system is estimated to have a total area of about 2 000 hectares (ha). This includes the existing Hong Kong Wetland Park (HKWP) at Tin Shiu Wai (about 62 ha) plus an expansion of about 240 ha, the Mai Po Nature Reserve (about 370 ha), the proposed establishment of three Wetland Conservation Parks (WCPs) at Nam Sang Wai (about 400 ha), Sam Po Shue (about 520 ha) and Hoo Hok Wai (about 300 ha), as well as the establishment of Sha Ling/Nam Hang Nature Park (about 4 ha) and Tsim Bei Tsui/Lau Fau Shan/Pak Nai Coastal Protection Park (about 145 ha).

Indigenous to Hong Kong and southern China is the Eurasian Otter which has been documented in parts of the territory for more than a century with the earliest sighting records dating back to the 1890s. Today, the species is considered locally rare with a restricted distribution, occurring primarily around Mai Po Inner Deep Bay Ramsar Site, with occasional sightings in Lok Ma Chau, Hoo Hok Wai, and Hong Kong Wetland Park. (A Ramsar site is a wetland designated as being of international importance under the Ramsar Convention, a global treaty signed in 1971 in Ramsar, Iran, to protect and sustainably use wetlands).

Otters in Hong Kong. (Source: South China Morning Post)

Access control measures are in place in areas with otter occurrence, such as Mai Po Nature Reserve, the non-visitation area of the Wetland Reserve at HKWP and ecological mitigation wetlands created under development projects, to protect the sensitive habitats and minimize potential disturbance to the wetlands and their associated animals. Separately, under the planned Sam Po Shue Wetland Conservation Park (SPS WCP), enhanced freshwater wetland habitats and ecological passage will be established to allow wildlife, particularly the otters, to travel between the SPS WCP and adjacent wetlands. Additionally, the river channels within the SPS WCP will be enhanced to provide habitats for the otters, with the incorporation of habitat enhancement features such as otter platforms, artificial holts (otter burrows) etc. at appropriate locations in the park.

Reports from the Adelaide Zoo in Australia indicate that otters are not shy (unless threatened) and in fact become more playful in the presence of humans.

Lau Fau Shan oysters were once favored in Hong Kong until the mid-70s when they were subjected to contamination from heavy metals fed into the Shenzhen River further upstream from battery making factories. The loss-making industry is now virtually dead save for about 10 per cent of its former glory being maintained by villagers with purified water systems.

Conservation groups believe the introduction of eco-tourism in the area would help the villagers bring survival back to the industry.

Now, under the NM development plan, a dedicated Coastal Protection Park (CPP) is being established along the Deep Bay coastline, covering Tsim Bei Tsui, Lau Fau Shan, and Pak Nai.
The CPP, spanning about 10 km and covering about 145 ha, aims to protect critical habitats for horseshoe crabs, mangroves, and seagrass beds.

Conservation groups, including The Nature Conservancy, are also actively advocating for Pak Nai, near Lau Fa Shan, to be designated as a formal Marine Protected Area (MPA) to safeguard its status as a biodiversity hotspot.

The government is to be applauded for taking the initiative of blending the eco system in an intense high-rise technical urban sprawl. The government has launched public engagement exercises and invited Expressions of Interest (EOI) for eco-tourism nodes in these areas. The goal is to transform conservation value into economic vitality through guided tours and educational facilities without compromising ecological integrity.