Hong Kong-based conglomerate CK Hutchison is under significant scrutiny from Beijing over its ports deal with a consortium led by BlackRock, raising concerns about potential actions from China to disrupt the transaction.
The Hong Kong and Macau Affairs Office has circulated state media reports in the past week characterizing the deal, which includes the sale of assets near the Panama Canal, as a betrayal of China and detrimental to national interests.
This deal could enable control over 10.4% of global container throughput, positioning the company as the world's third-largest port operator. Chinese state media has indicated this could lead to increased port and logistics costs for domestic entities and threaten Chinese supply chains.
There are potential legal and policy avenues that Beijing and Hong Kong could explore against the company. While some analysts argue that China's regulatory reach is limited, as none of the ports involved are within China or Hong Kong, legal experts suggest Beijing may still review the transaction.
The State Administration for Market Regulation might assert extra-territorial jurisdiction under the anti-monopoly law if an overseas deal affects competition in China's domestic market. Authorities could also use the Measures for Security Review of Foreign Investments, implemented in 2021, to scrutinize foreign direct investments in critical national security sectors, including infrastructure.
Felix Ng, a partner at law firm Haldanes, indicated that these measures removed the exemption for acquisitions by foreign companies, implying that PRC authorities might have the authority to review foreign-to-foreign transactions involving Chinese entities.
Although CK Hutchison is registered offshore, it maintains operations in China, which could provide Beijing a rationale for intervention.
The company has not commented on the potential for scrutiny.
Legal experts noted that Hong Kong lacks regulations mandating government screening of strategic asset sales, reflecting its traditional status as a free-market hub. This limitation leaves the government with few options, aside from the broad provisions of the National Security Law enacted in 2020, which addresses severe offenses like terrorism and foreign collusion with potential life sentences.
Simon Young, a professor at the University of Hong Kong law school, remarked that given the sensitivities involved, further investigation under the National Security Law could be warranted, especially concerning collusion or espionage.
For a collusion charge to be valid, it would need to show intent to disrupt the policies of the Chinese or Hong Kong governments with serious consequences. Espionage would require evidence of intent to jeopardize national security by sharing information with external forces.
Young expressed uncertainty about whether there is evidence of intent to compromise national security through the ports agreement.
The Hong Kong government has not responded to requests for comment.
While some politicians and analysts argue the deal may not violate security laws, the Secretary for Security can issue notices preventing relevant individuals or organizations from engaging with properties suspected of being linked to national security offenses.
The Secretary for Justice, the Secretary for Security, or police officers have the authority to freeze, restrict, confiscate, and forfeit property connected to such offenses.
Article 29 of the law states that actions that "seriously disrupt the formulation and implementation of laws or policies" by the Chinese and Hong Kong governments could constitute collusion with foreign forces, with both residents and non-residents subject to its jurisdiction.
Hong Kong authorities have previously invoked security legislation to enforce the liquidation of entities linked to pro-democracy figures, illustrating the law's extrajudicial nature.