Beijing is set on pushing China COSCO Shipping to become involved in Li Ka-shing’s Panama port deal. Reports suggest that the Chinese Communist Party has threatened to block a deal that would transfer dozens of port assets to Western investors if COSCO Shipping does not secure a stake.
China COSCO Shipping, also known as China Ocean Shipping (Group) Company, is China’s largest shipping company and a state-owned enterprise. Li Ka-shing’s conglomerate, CK Hutchison Holdings Limited, is in talks to sell two ports in the Panama Canal and over 40 other ports globally to a consortium led by American finance giant BlackRock.
The Wall Street Journal cited sources on Thursday, July 17, stating that Beijing is spearheading COSCO Shipping’s involvement in the deal, requiring the Beijing-controlled company to become a partner and shareholder alongside BlackRock and container shipping operator Mediterranean Shipping Co.
BlackRock and Mediterranean Shipping Co reached a preliminary agreement in March this year to acquire the port assets from CK Hutchison for nearly $23 billion.
This move has greatly displeased Beijing. Sources indicate that the Chinese authorities have instructed state-owned enterprises to halt any transactions with CK Hutchison or its controlling shareholder – the Li Ka-shing family.
Sources reveal that Beijing has warned BlackRock, Mediterranean Shipping Co, and CK Hutchison that if COSCO Shipping is excluded from the deal, China will take measures to impede CK Hutchison’s proposed sale.
Sources say that BlackRock, Mediterranean Shipping Co, and CK Hutchison have all expressed willingness to accept COSCO Shipping’s entry as a shareholder.
However, sources suggest that it is unlikely for an agreement to be reached between BlackRock, Mediterranean Shipping Co, and CK Hutchison before the July 27 deadline of the exclusivity negotiation period set earlier. Until the end of this period, an agreement including COSCO Shipping in the deal cannot be reached.
On the other hand, any transfer of Panama port shares to Chinese companies may anger President Trump. Trump believes that Chinese companies controlling the Panama Canal pose a military security threat to the United States and sees regaining control of the canal as a major political achievement.
The proposed port deal has become a point of discussion in US-China negotiations. Sources reveal that during trade talks held in Switzerland in May this year, Chinese representatives raised the possibility of Beijing’s involvement in the deal.
BlackRock, CK Hutchison, and Mediterranean Shipping Co all have business interests in China, with the latter being one of the key drivers of China’s global exports.