Criticism from the Chinese community is mounting of Hong Kong tycoon Li Ka-shing’s CK Hutchison Holdings over a recently announced sale of 80 percent of the Hutchison Port Group for $23 billion to a consortium led by US investment firm BlackRock.
As reported by Reuters on March 5, Ryan Berg, director of the Americas Program at Washington’s Center for Strategic and International Studies, hails the sale as a US win, putting the debate over the Panama Canal’s “security” to rest.
With the upended world order following Donald Trump’s return to the White House, it is understandable that businesses with huge exposure to seismic geopolitical risks are tempted to cash in their stakes before it’s too late.
However, Hutchison Port Group is no ordinary business group. It owns 43 container ports with 199 berths in 23 countries, including a 90 percent stake in the Balboa and Cristobal docks at either end of the Panama Canal.
To understand why the planned sale has momentous implications not only for China, but for the United States and the rest of the world, it is instructive to scratch far deeper beneath the surface.
First, with strong bipartisan consensus on China as America’s primary rival, the US has been doubling down on thwarting and containing China’s rise in multiple key domains such as high-end semiconductor chips, trade, and “small-yard-with-high-fence” decoupling in the name of “de-risking”. All are intended to throttle China’s preeminent position in the global supply and value chain.
China remains the largest trading partner for over 120 nations worldwide, compared with over 50 for the US. Even if not “Made in China”, a vast array of the world’s products has China embedded in terms of rare earths and other materials, finished parts and components, and global logistics. Seven of the world’s top 11 container ports are located in China, including Hong Kong. However, apart from air cargo and rail freight, most Chinese goods are transported by ship around the globe. Thus, control of Hutchison’s global port portfolio would make critical sense to an “America First” strategy.
Second, among global ports, the ports at either end of the Panama Canal are of such vital importance to President Trump’s ambitions that he announced his intention to take back control of the canal in his inauguration speech in January. He recently called on the Pentagon to prepare military options for the canal if push came to shove.
To appreciate the full purport of the Panama Canal, it would be instructive to view it as part of a grander geostrategic jigsaw puzzle. Throwing the sanctity of other countries’ territorial integrity to the wind, Trump has repeatedly made known his desire for Greenland and Canada (including their massive rare-earth and other mineral deposits), as well as dominance over Mexico. The Panama Canal would enable America to control the key shipping channel connecting the two oceans on both sides of the American continent. All told, these territorial ambitions would augment the US’ undisputed supremacy over the entire Western Hemisphere, a massive, impregnable base for making America “great again”, exerting its influence in the Asia-Pacific and other domains through “offshore balancing” and long-armed coercion.
Third, the US Trade Representative (USTR) is currently seeking public comments until March 24 on imposing proposed gargantuan fees and restrictions to curb China’s dominance in the maritime, logistics, and shipbuilding sectors, according to an ING Bank report dated Feb 24.
China’s global shipbuilding market share has grown from less than 5 percent in 1999 to more than 50 percent in 2023. China controls 95 percent of shipping container production and 86 percent of the world’s supply of intermodal chassis. This dominance by China’s shipping is seen by the US as part of its “existential threat”.
America’s shipbuilding industries have been uncompetitive for a very long time. Not only are US vessels much more expensive to make, but operating a US vessel costs around twice as much as South Korean or Chinese vessels.
According to the ING report, just over 4 percent of the total global merchant fleet is originally built in the US, predominantly consisting of smaller and older vessels. The US shipbuilding industry lacks the capacity to construct the new generation of large container ships, tankers, or bulk carriers. Only a handful of the global order book of 5,600 vessels is placed with US shipyards. However, draconian fees, levies and other measures proposed by the USTR include up to $1 million per vessel for Chinese maritime transport operators’ entrance to a US port, or up to $1,000 per net ton of the vessel’s capacity, ranging from $500,000 to $1.5 million per vessel entrance. Additional fees are proposed for vessels ordered from Chinese shipyards, ranging from $500,000 to $1 million per vessel entrance. Refunds are proposed of up to $1 million per entry for operators using US-built vessels instead.
According to USTR expectations, the percentage of US goods required to be transported on US-flagged vessels would increase gradually, starting at 1 percent and reaching 15 percent over seven years. US goods are to be exported on US-flagged, US-built vessels, with exceptions if the maritime transport services demonstrate that at least 20 percent of US products per calendar year will be transported on US-flagged, US-built ships.
To be included in a report due on April 1, the USTR’s findings and recommendations will be submitted to Trump, who will decide whether to take action.
According to a New York Post report of March 5, the Trump administration is also preparing an executive order designed to reinvigorate US shipbuilding and reduce China’s stronghold over the global maritime industry.
Meanwhile, Senator Mark Kelly, Senator Todd Young, Representative John Garamendi, and Representative Trent Kelly have introduced a Shipbuilding and Harbor Infrastructure for Prosperity and Security for America Act, to close the gap with international shipbuilders through a series of programs.
According to a CNBC report of March 12, Kelly flags up the reality that loss of US shipbuilding and shipping has resulted in the reduction in the number of shipyards not just for commercial ships but also warships and military sealift ships for the US Navy. The US military aircraft carrier capacity lacks 90-100 oceangoing tankers to fuel warships in a wartime emergency. Kelly suggests that this is a matter of national security.
Hence, game-changing measures are now being designed by the Trump administration to bring shipbuilding back to the US.
According to the ING report, while China’s shipbuilding sector is growing, it is not a particularly significant contributor to economic growth. In 2024, ship exports accounted for around 1.2 percent of total exports and approximately 0.2 percent of GDP. However, the draconian “America First” measures to remake the world’s shipping architecture are bound to throw a huge spanner in the works of a slowing global economy, including China’s. They would further distort global supply chains, investor confidence, and international relations, creating even more uncertainty in the world order already traumatized by Trump’s iconoclasm during his first 50 days after returning to the White House.
Regardless of the whys and wherefores of Hutchison’s decision to sell its port portfolio, there is little doubt about its impact on China’s national economic and geopolitical interests.
A Ta Kung Pao article pointed out that Hutchison’s asset disposal would enable the US to weaken China’s competitiveness in global trade by raising logistics costs and disrupting supply chains. It asked Li’s company to think about which side to choose on an issue of such critical national importance.
According to a South China Morning Post report of March 14, at this stage, Hutchinson’s sale to the BlackRock-led consortium is an “in-principle” agreement giving the two sides 145 days to hammer out specific terms and details before finalizing the transaction. The deal will need to be approved by CK Hutchison’s shareholders, obtain approval from the Panamanian government where necessary, and meet unspecified customary terms agreed by the two sides. As all disposal targets involved are located outside China including Hong Kong, the deal is not subject to the approval of Chinese regulators or authorities in Hong Kong, other than compliance with the Hong Kong Exchanges and Clearing Ltd’s listing rules. Should the company scrap the deal, the pain would be limited, at least financially, according to the report.
Cognizant of such matters of grave importance outside the field of commercial transactions, perhaps it is still not too late for Hutchison to contemplate a rethink. Would sale of its global shipping portfolio to one of China’s global shipping giants instead be a wiser business decision?
The author is an international independent China strategist, and was previously the director-general of social welfare and Hong Kong’s official chief representative for the United Kingdom, Eastern Europe, Russia, Norway, and Switzerland.
The views do not necessarily reflect those of China Daily.
