Chinese leader Xi Jinping is angry about a Hong Kong company’s plan to sell Panama Canal ports to a U.S.-led group, in part because the company didn’t seek Beijing’s approval in advance, people familiar with the matter said.
The Xi leadership had originally planned to use the Panama port issue as a bargaining chip in negotiations with the Trump administration, according to people close to Beijing’s decision-making, only to see the rug pulled out from under it.
President Trump, who in the first minutes of his administration called for the U.S. to reassert control over the canal, celebrated the deal as a victory over Chinese interests in America’s backyard, turning Panama into a symbol of the U.S.-China battle for global influence.
Xi’s unhappiness suggests he, too, sees the canal that way and doesn’t like to be painted as the loser. His government republished a commentary last week describing the deal as a betrayal of the Chinese people.
Under the deal, announced March 4, CK Hutchison, a conglomerate controlled by the family of 96-year-old Hong Kong billionaire Li Ka-shing, would sell global port assets to investors led by U.S. asset manager BlackRock for $22.8 billion. Among those assets are majority ownership and operational control of two ports in Panama, one at each end of the Panama Canal.
In Beijing, several Chinese authorities including the State Administration for Market Regulation and the Ministry of Commerce have been told to study the deal with the aim of reviewing what Beijing can do to hinder it, according to a person familiar with the matter. Bloomberg earlier reported the Beijing authorities’ review.
Despite Beijing’s unhappiness, it doesn’t have a simple way to halt the deal. The assets to be sold are all outside mainland China and Hong Kong, and the parties to the transaction have expressed confidence that it can be completed.
The deal puts Xi in a tricky position. On one hand, Beijing has had to make clear its anger over the Hong Kong company’s move, which came without advance notice, to protect Xi’s strongman image, the people close to decision-making said. On the other, they said, Beijing is aware that any significant effort to torpedo the deal risks escalating tensions with the Trump administration. So far, China has been relatively restrained in its retaliation against Trump’s new tariffs on China, suggesting its desire to keep tensions under control.
Last week, a vice minister of a Communist Party agency traditionally charged with building ties with other Communist states led a delegation to Panama aimed at deepening relations, according to the official Xinhua News Agency. “Beijing knows it isn’t in a strong position right now, so it sent a low-level delegation to Panama,” one of the people said.
Trump touted the deal in an address to Congress hours after it was announced. “My administration will be reclaiming the Panama Canal, and we’ve already started doing it,” he said.
The president said in his inaugural address Jan. 20 that “China is operating the Panama Canal,” an apparent reference to the Hong Kong company’s role there.
The $22.8 billion deal isn’t yet final. The companies have said they hope to sign definitive documents by April 2, after which various regulators would need to give consent.
Xi was steaming over the deal because he believed Hutchison’s Li was acting against Beijing’s interests, the people close to decision-making said. Beijing hasn’t been happy with Li for years, they said, as the Hong Kong tycoon has reduced his reliance on mainland China and Hong Kong.
An article Tuesday in Hong Kong’s pro-Beijing newspaper Ta Kung Pao said Chinese ships might face restrictions, surcharges and sanctions if the sale goes through and the operation of the Panama Canal becomes politicized. “If Hong Kong companies turn a blind eye to this, it is tantamount to passing the knife to rivals at this strategic juncture,” the article said.
An earlier commentary in the same paper said the transaction and those pursuing it were “betraying and selling off” all Chinese people. The commentary was republished on the joint website of the Chinese Communist Party’s Hong Kong and Macao Work Office and a government website, indicating it reflected Beijing’s official position.
Since the first commentary was republished last Thursday, CK Hutchison’s share price in Hong Kong has fallen 8.5% after rising sharply on the announcement of the deal.
The Chinese commentary’s contention that American control of the Panama ports could threaten Chinese interests is the mirror image of Trump’s argument that under the current arrangement, China could force the two terminals to restrict American-bound ships. The terminals handled 40% of the containers that crossed the waterway last year.
Panamanian officials manage transits through the waterway and have said that the Chinese facilities don’t represent a military threat or breach the canal’s neutrality.
As of June 2024, CK Hutchison brought in 12% of its revenue from mainland China and Hong Kong, down from more than 26% in 2015, according to its financial statements. Around half of its revenue came from Europe and the U.K.
On Tuesday, Hong Kong’s chief executive, John Lee, said the Hong Kong government opposed “the abusive use of coercion or bullying tactics in international, economic and trade relations.” He said Hong Kong would handle the deal in accordance with the laws and regulations.