The Chinese State Administration for Market Regulation (SAMR) has announced that it will review the sale of two Panama Canal ports, Balboa and Cristobal, by Hong Kong-based CK Hutchison to a US investor consortium led by BlackRock. The regulator’s statement, released on its website, cited the head of the SAMR’s second antitrust division, saying, “We have been closely monitoring this transaction and will scrutinize it in accordance with the law to protect fair competition and the public interest.”
According to a source familiar with the matter, the SAMR is collecting information and preparing to launch an investigation as early as next week. The regulator will examine whether the deal violates the law and restricts competition in China’s domestic shipping market and the global freight market, the source said.
Two sources familiar with the matter told the Financial Times that the regulator has consulted at least one industry expert to work on the case, who suggested attaching conditions to the port purchases to ensure that the deal does not weaken the competitiveness of Chinese shipping companies and freight owners.
The sources also stated that the ports in Panama “only make up a small part” of the deal, which also includes ports in Europe, Southeast Asia and the Middle East. It is unclear whether the Chinese regulator intends to investigate the entire deal or focus only on the Panama Canal ports, the FT reported.
A source of the South China Morning Post expects that authorities in the 23 countries where the ports are operated will conduct their own antitrust investigations if they deem it necessary.
The planned signing of the agreement on April 2 has been postponed and the negotiations are ongoing, with both sides preparing for a possible renegotiation, a source said.
The SAMR’s intentions were questioned by the FT’s sources, with one saying, “Is this a warning shot to others or an attempt to scuttle the deal?” Another emphasized the deal’s impact on Hong Kong as a financial hub.
The FT also reported that CK Hutchison is being scrutinized by Panama’s auditor, Anel Flores, who said his office is working “hard” to complete the review of the two port concessions in Panama.
The review will examine whether the company from Hong Kong meets the conditions of the 25-year port concession, which was signed in 1997 and extended for the same period in 2021. The Panamanian authorities are concerned because the concession brings a “relatively low return” to the state, the FT reported.
US President Donald Trump previously stated that Washington could demand the return of the Panama Canal under its control if the current conditions for its use are not revised, citing high tariffs for US ships. The US was involved in the canal’s construction in the early 20th century and in 1977, the US handed over the canal to Panama, with full control transferred in 1999.
Trump also referred to China’s influence on the canal’s management. After the US chief of staff’s demands, Panama refused to extend the Memorandum of Understanding with China on the “Belt and Road Initiative”.
The US State Department announced that the US has waived the fees for US ships passing through the Panama Canal, following talks between US Secretary of State Marco Rubio and Panamanian President José Raúl Mulino. The Panama Canal Authority, however, denied this.