Chinese Firm Considered for Panama Canal Port Sale, Raising Concerns Over Provoking Trump

On July 28, Bloomberg and other media outlets reported that a Chinese state-owned shipping company is being considered as a key strategic investor in negotiations for the sale of operational rights to the Panama Canal. However, there are concerns that this move could provoke U.S. President Donald Trump, who has asserted since taking office that he would reclaim control over the Panama Canal, which is operated by China.

CK Hutchison Holdings, which owns the operating rights to the Panama port, stated in a report submitted to the Hong Kong Stock Exchange on the same day that it is in discussions with consortium members to invite a major Chinese strategic investor to join the consortium.

CK Hutchison said, "In order for this transaction to receive all necessary regulatory approvals, changes to the consortium composition and the structure of the sale are required," adding, "We plan to allow sufficient time for these discussions to take place."

This announcement came immediately after the 145-day exclusive negotiation period for the consortium led by U.S. asset management firm BlackRock expired the previous day.

Bloomberg reported on July 22 that China COSCO Shipping Corporation (COSCO), a Chinese state-owned enterprise, is expected to join the consortium and is demanding veto rights or equivalent authority as a condition for its participation. The Wall Street Journal (WSJ) reported that China has pressured for COSCO's inclusion and threatened to block the deal if COSCO's participation falls through.

The Chinese authorities have long regarded the sale of CK Hutchison's 43 ports as a threat to national interests, as two strategically important Panama Canal ports would be transferred to BlackRock. China perceives BlackRock as an agent of the United States.

The Chinese government has warned relevant parties not to bypass antitrust reviews in order to expedite the sale.

CK Hutchison's stock price surged by 37% over several days after the port sale plan was announced in March, as it was seen as a wise move to escape from a business hampered by the U.S.-China trade war. However, the stock later gave up all of its gains after drawing the ire of Chinese authorities. Nevertheless, as expectations for the deal's success grew, the stock price rebounded.

Denise Wong, a Bloomberg Intelligence analyst, said, "Reports that negotiations are ongoing and that COSCO has been included in the consortium have likely eased concerns about Chinese regulatory hurdles and strengthened investor confidence in the feasibility of the deal."

Bloomberg reported that, if the sale is successful, Hong Kong billionaire Li Ka-shing, who owns CK Hutchison, would secure a massive sum of over $19 billion.

However, David Blennerhassett, an analyst at Quiddity Advisors, noted that even if COSCO enters into discussions to participate in the negotiations, significant obstacles remain. He pointed out that this move could overturn the current course of negotiations and provoke President Trump. He also added that if CK Hutchison's sale negotiations are prolonged, this could put pressure on the company's stock price.