A deal for the U.S. to “reclaim” the Panama Canal is increasingly under fire from authorities in China and Hong Kong.
Earlier this month, BlackRock announced a $23 billion deal with CK Hutchinson to take ownership of the Panamanian ports of Cristobal and Balboa, which are located at the Atlantic and Pacific ends of the canal, respectively. It would also take over Hutchinson’s controlling interest in 43 ports in 23 other countries. However, Hong Kong and Chinese leaders could seek to stand in the way.
John Lee, the leader of Hong Kong, stated his concerns about the deal on Tuesday, saying it deserved “serious attention.”
The agreement between the two conglomerates was seen as a solution to President Donald Trump’s threats to take back the canal after he argued that China was using it to “rip off” U.S. ships through entry fees.
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Trump touted the BlackRock deal as the U.S. “reclaiming” the port when it was first announced.
Now, Beijing has opened up investigations into potential antitrust and national security concerns about the deal through various agencies, including its State Administration of Market Regulation, Bloomberg reported.
“If Beijing stops this deal, that’s a direct challenge to the president of the United States on an issue which he really cares about,” said U.S.-China relations expert Gordon Chang. “That is not going to go down very well.”
The lucrative waterway sees 5% of global maritime trade pass through.
CK Hutchison’s stock price fell 3% on Tuesday after Lee’s comments, and the company canceled press and investor briefings that were scheduled for this week when it releases its financial report.
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“We oppose the abusive use of coercion or bullying tactics in international economic and trade relations,” Lee had said in an apparent jab at Trump.
Commentaries published in Ta Kung Pao, a Hong Kong newspaper owned by the Chinese government, claimed the Hutchison-BlackRock agreement would allow the U.S. to “use [the canal] for political purposes and promote its own political agenda” and would make Chinese trade and shipping “subject to the United States.”
CK Hutchison is owned by Hong Kong billionaire Li Ka-Shing. Lee has said any business transaction must comply with Hong Kong law, and the city will handle the deal according to law.
“I suspect that the Hong Kong government is not going to take on Li Ka Shing and Hutchison, but you never know because the environment in Hong Kong is changing. It’s not getting better,” said Chang.
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China’s presence in the canal zone allows it to block U.S. access at will. That could mean in the outbreak of war in the Indo-Pacific, it could prevent the U.S. Navy from surging ships from the Atlantic to the Pacific through the canal.
However, the canal could also be used as leverage for China in its push for Trump to alleviate tariffs. Trump said Monday that Chinese President Xi Jinping would be visiting the U.S. in the “not too distant future.”
Trump at first put a blanket 10% tariff on all Chinese goods. In March, he upped it to 20%, arguing China was still not doing enough to address fentanyl flowing from its country through U.S. borders.
CK Hutchison’s ownership of the canal also faces a constitutional challenge in Panama, which could be a factor in its intent to sell.
Panamanian Attorney General Kenia Isolda Porcell Díaz has filed a submission in support of two lawsuits against renewal of a 25-year contract for Hutchison to own the ports, arguing the contract is “unconstitutional” because it “improperly agree[s] to transfer exclusive rights of the Panamanian State.”
When asked about the reports that China was investigating the sale, foreign ministry spokesperson Mao Ning said the questions should be directed at other agencies.
“I would like to stress that in principle, China has been firmly opposing infringing on or undermining other countries’ legitimate rights and interests with economic coercion and bullying,” she said.
Last month, Panamanian President José Raúl Mulino said his nation would not renew its participation in China’s Belt and Road Initiative, which funds infrastructure projects in nations across the globe in efforts to increase its influence.
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