Trump wants the Panama Canal. Just empty talk, or a real threat for Hong Kong?

President-elect Donald Trump’s threat to retake the Panama Canal to safeguard US national security has raised questions about the possible impact on Hong Kong and mainland Chinese companies operating there. CK Hutchison Holdings, founded by Hong Kong tycoon Li Ka-shing, is a major player as its subsidiary, Hutchison Ports PPC, has operated two ports at either end of the canal since 1997. Like other Chinese firms with projects there, it would be severely affected if Trump went ahead with his threat to take control of the canal, analysts said. He has repeatedly mentioned his desire for the US to take control of the canal and Greenland, an autonomous Danish territory. On Wednesday, he did not rule out using military force or economic pressure to claim both. Trump has complained that Panama charges US vessels “exorbitant prices”, and alleged Chinese influence over the strategic waterway. International relations expert Wilson Chan Wai-shun said American politicians had complained about Hutchison Ports’ presence in Panama from as long ago as the early 1990s, accusing it of enabling Chinese control of the canal. If the incoming Trump administration managed to pressure Panama to scrap the 25-year concession with Hutchison Ports, the impact on Hong Kong businesses globally would be “substantial”, he warned. “The termination will send a message to the world that the US views strategic locations operated by Hong Kong as effectively under the control of Beijing,” said Chan, co-founder of the Pagoda Institute, a non-profit dedicated to fostering ties between the city and Europe. If other countries took their lead from the US, he added, Hong Kong businesses would find it hard to make infrastructure investments in other Western countries, crippling the city’s ability to expand international ties. Noting how tycoon Li had invested in the European telecommunications industry in the past, he said: “This will become impossible if they equate Hong Kong companies with those of mainland China.” The 82km (51 miles) Panama Canal was built by the US at the beginning of the 20th century, saving ships from having to travel 13,000km around the tip of South America to go between the Atlantic and Pacific oceans. It was controlled by the US first, before being run jointly with Panama until 1999, when it was handed over to Panamanian authorities under the terms of an agreement struck by President Jimmy Carter during his tenure from 1977 to 1981. The US is the canal’s biggest customer, followed by China, and more than two-fifths of consumer goods traded last year between northeast Asia and the US east coast went through the waterway. Trump, who will be sworn in for a second term on January 20, has not let up on repeating that the US should reclaim control of the canal, although the Panamanian government has dismissed his threat. Last week, canal administrator Ricaurte Vasquez rejected Trump’s claims, denying that China controlled the waterway’s operations. He said it would remain in Panamanian control and stay open to all countries, adding that making exceptions for the US would lead to “chaos”. Think tank consultant Lau Siu-kai was not convinced Trump would carry out his threat, as it would look bad and upset US relations with Latin American countries if he disregarded the authority of Panama so blatantly. “It will also further aggravate US-China relations as all Chinese and Hong Kong firms there will be forced to move out,” he said. “At most, the US may succeed in getting Panama to make some concessions. If this affects the interests of Chinese and Hong Kong firms, who will be willing to invest in the canal?” Given the worsening US-Sino relations, Lau added, Trump was probably worried that American vessels using the canal might be blocked by China with its heavy influence there. Among the Chinese firms with a heavy presence is the Landbridge Group. Through a US$900 million deal in 2016, it acquired control of Margarita Island, Panama’s largest port on the Atlantic side and in the Colon Free Trade Zone, the largest free-trade zone in the Western Hemisphere. The deal established the Panama-Colon Container Port as a deep water port for megaships. In 2018, a Chinese consortium led by the China Harbor Engineering Company and the China Communications Construction Company was awarded a US$1.4 billion contract to build the canal’s fourth bridge. Chinese firms have also invested heavily in energy-related facilities along the canal. On Thursday, Hutchison Ports said it would not comment on matters related to the canal. But in 1999, amid swirling talk in the US about Chinese influence, tycoon Li dismissed suggestions that his Hutchison Whampoa would control the canal. “We cannot possibly control the canal,” he said. “We are only an operator of container ports there.” He made clear that the container ports were for loading, unloading and storing cargo and had no role in operating the canal. Then president Bill Clinton said at the time that he did not expect any adverse consequences from “the Chinese running the canal”. Veteran China watcher Johnny Lau Yui-siu was not convinced that the current Panama Canal saga would have an impact on mainland or Hong Kong businesses. “The canal claim is a reflection of Trump’s so-called America First doctrine, as he makes some empty talk to fulfil his campaign promises and secure the support of the American people,” he said. Sceptical that Hutchison Ports might lose its concession, he said most of CK Hutchison’s investments were overseas and “perhaps Hutchison’s relationships with the US are not that bad”. Lau said the biggest threat to Hong Kong was the inevitable trade war between Beijing and Washington, and the city’s three trade offices in the US were at high risk as the US Congress was keen to strip them of their partial diplomatic privileges. He felt the heat generated by Trump’s remarks about the Panama Canal and Greenland, alongside repercussions from clashes between his administration and other traditional US allies, might in fact give Beijing some breathing room. “Precisely because he is hurting the interests of his own allies during this time, China can take advantage of this moment to speed up efforts in repairing relationships with US allies that were damaged in the past,” he said.

Trump wants the Panama Canal. Just empty talk, or a real threat for Hong Kong?

Panama has rejected president-elect’s threats, but Hong Kong and mainland Chinese companies have much at stake