As Trump hails taking back of Panama Canal, Hong Kong Inc walks tightrope

Reuters

06-03-2025

HONG KONG, March 6 (Reuters) - Hong Kong's edge as a financial hub will erode further as the city becomes embroiled in China-U.S. tensions, with the flash sale of a Hong Kong-owned global ports business highlighting geopolitical volatility, executives and analysts said.
The former British colony is caught in the eye of a storm between Beijing and Washington, underlined by the decision by conglomerate CK Hutchison (0001.HK), opens new tab, controlled by Hong Kong billionaire Li Ka-shing, to sell its ports network, including assets along the Panama Canal, to a U.S. consortium led by BlackRock.
U.S. President Donald Trump, who claimed in January that the Panama Canal was being operated by a Chinese company, has hailed the deal.
"The Trump administration is going to see that this worked...and you have to assume they're going to follow the same play book...(they) see this as a victory," Steven Okun, a senior adviser to financial and risk advisory Kroll, told Reuters.
As the U.S. strives to contain its main global rival China on fronts including trade, shipping, technology and capital raising, a dozen business people, investors, lawyers, shipping executives and risk analysts who spoke to Reuters say this is bringing greater uncertainty and volatility to Hong Kong.
Hong Kong firms have traditionally been seen as internationally-focused and independent of the Chinese state, reflecting the role of the former British colony as a freewheeling financial hub.
"We have been constantly reviewing our business plan and discussing about our strategy because of the political tension," said an executive of a listed Hong Kong company who declined to be named given the sensitivity of the topic.
"For example, do we still want to list our units in Hong Kong and is Hong Kong still attractive as a listing venue, because investors could draw a China connection," he told Reuters.
Hong Kong has a separate rule of law from China and its own financial policy-making autonomy, but some lawyers, diplomats and business executives say that after China's imposition of a national security law in 2020, the city was essentially being viewed by the West as fully under the control of Beijing.
This has hurt it economically and cast doubt on whether it is a jurisdiction separate from mainland China with global best practices, they said.
Earlier this year, Hong Kong's Far East Consortium and Chow Tai Fook Enterprise, which owns a development with Star Entertainment, the embattled casino group in Brisbane, tried to buy Star out.
If successful, the bid will be another test of regulators who view Hong Kong companies as Chinese. In 2018, Australia blocked a A$13 billion ($8.2 billion) takeover of the country's biggest gas pipeline company, APA Group (APA.AX), opens new tab, by CK Infrastructure, a unit of CK Hutchison, citing it would be against the national interest.
'LUMPED IN'
"Hong Kong is being increasingly lumped in with China ... that's a fact," said a board member of a leading Hong Kong business family with interests locally and overseas, including retail and property.
"To a degree, this has raised the complexity and cost in our business dealings. We have to live with this."
According to a person with knowledge of the matter, CK Hutchison had initially tried to fight to keep its two main port businesses in Panama after Trump alleged the Panama Canal was under Chinese control.
But later, Hutchison opted to cash out and mitigate longer term reputational risks.
"People in the Hutch empire are running for cover," said the person with knowledge of the ports negotiations, who declined to be identified due to the sensitivity of the issue. "This is a nightmare situation and we've never dealt with anything like this before."
This source added that CK Hutchison executives were in touch with officials in Beijing while the situation unfolded.
CK Hutchison did not immediately respond to a request for comment.
Co-managing director Frank Sixt said in a statement this week the ports transaction was "unrelated to recent political news reports."
The Hong Kong government has said it has never interfered with the commercial operations of Hong Kong companies, and criticised U.S. officials for making what it said were unreasonable and distorted accusations regarding the operation of the Panama Canal.
CAUGHT IN CROSSHAIRS
"It's been politicised and weaponised," a senior Chinese government official said of the Trump administration's framing of Hutchison as a Chinese entity - something the firm has denied.
"It's unfortunate and regrettable," the official told Reuters, declining to be identified.
Others, including business executives and lawyers, agreed that Hong Kong is increasingly being viewed as similar to other Chinese cities, even though officials like the territory's financial secretary, Paul Chan, say the city remains a global hub for the free flow of capital, goods and people.
"The market is based on expectations," said Vera Yuen, an economics lecturer with the University of Hong Kong business school. "The valuation (of Hong Kong) is based on what they (the world) think, not what you claim."
Even ahead of the recent Trump administration pressure on Hutchison's Panama ports, some local firms with international reach had been drawing up contingency plans to deal with growing U.S.-China strategic rivalry – and a growing sense Hong Kong would be in the crosshairs in a conflict.
In 2023, Hong Kong-based conglomerate Swire Pacific (0019.HK), opens new tab sold its Swire Coca-Cola USA unit to its controlling shareholder, John Swire & Sons Ltd headquartered in the U.K., to protect the business so that it would no longer be seen as being held by a "Chinese company", two sources with knowledge of the matter said.
A Hong Kong shipping firm executive described how his operation was already presenting its international posture in meetings with foreign investors.
"The key is being as international as we can – our offices, domiciles and ships," the executive said.
"We want to be able to show we are not really based anywhere."
($1 = 1.5780 Australian dollars)