A proposed sale of strategically significant port assets by Hong Kong’s CK Hutchison to a BlackRock-led investment group has ignited a firestorm of controversy, thrusting the transaction into the complex arena of international geopolitics.
Beijing’s mounting unease over the deal raises critical questions about its future: Can China effectively block the sale, and what arsenal of legal and political tools might it deploy?
A chorus of concern: China voices its displeasure
Official channels in Beijing, amplified by state-controlled media outlets, are increasingly critical of the proposed agreement.
The Hong Kong and Macau Affairs Office has prominently featured commentaries that decry the asset sale as a betrayal of China’s national interests, particularly due to the inclusion of facilities near the crucial Panama Canal.
These concerns center on the potential for the deal to grant BlackRock substantial influence over global shipping, creating a situation where, according to state media reports, BlackRock could control 10.4% of global container throughput, possibly leading to increased expenses and supply chain vulnerabilities for Chinese companies.
Legal avenues: exploring China’s options
While the physical location of the ports outside Chinese territory seemingly limits Beijing’s direct regulatory authority, legal experts suggest potential pathways for intervention.
China’s State Administration for Market Regulation (SAMR) possesses the ability to assert what is known as extra-territorial jurisdiction under its anti-monopoly statutes.
This means that SAMR could review the sale if it believes that, even though it happens outside China, it would reduce competition in China’s domestic market.
Furthermore, authorities could invoke the Measures for Security Review of Foreign Investments, implemented in 2021.
Felix Ng, a partner at the Haldanes law firm, explained Reuters that these measures removed exclusions for foreign company acquisitions and “suggest that PRC authorities may have the power to review foreign-to-foreign transactions if the target involves PRC-related entities”.
Despite CK Hutchison being officially registered outside of China, its extensive operations within the country could provide Beijing with justification for intervention, though the company has not commented on the potential scrutiny.
Security law uncertainty: a wild card
The absence of Hong Kong regulations requiring government oversight of strategic asset sales leaves a void, filled partially by the broad reach of the 2020 National Security Law imposed by Beijing.
This law, intended to combat terrorism, subversion, secession, and collusion with foreign powers, carries heavy penalties, including potential life imprisonment.
Simon Young, a law professor at the University of Hong Kong, suggests that the law’s expansive provisions regarding “collusion” and “espionage” could be relevant.
According to Young, scrutiny under the National Security Law is possible, “Given the sensitivities…particularly over collusion or espionage.”
It must involve actions that could disrupt the policies of the Chinese or Hong Kong governments to create serious consequences.
And according to Young, espionage must involve those who are intending to endanger national security to an outside force.
The Hong Kong government has not responded to requests for comments on this matter.
Beyond direct breaches of security laws, Hong Kong officials retain considerable power to freeze assets belonging to individuals or organizations suspected of endangering national security.
Article 29, which forbids actions that disrupt laws, that are likely to cause consequences, also raises concerns.
The law applies to residents and non-residents.
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