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(Bloomberg) — Hong Kong billionaire Li Ka-shing has raised Beijing’s ire by agreeing to sell its control over ports in Panama to appease President Donald Trump. But there may be little the Chinese authorities can do to punish him for it. 

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Li’s CK Hutchison Holdings Ltd. is in line to make $19 billion for the sale of 43 ports but as the assets involved are all overseas, China may not have the regulatory power to stop it. The conglomerate plans to keep its Chinese and Hong Kong ports. 

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While Beijing could strike back at other parts of his empire, the billionaire has been lowering his group’s exposure to Greater China for decades now, a strategy that will help limit the impact of any political fallout arising from the Trump-endorsed deal. Only 12% of CK Hutchison’s revenue comes from operations in the mainland and Hong Kong, with Europe, North America and Australia making up the bulk of the rest. 

Li’s real estate arm, CK Asset Holdings Ltd., is more heavily invested in China, but to a lesser extent than other Hong Kong property giants — and Beijing may think twice about taking any coercive action that could further destabilize a sector in the midst of a painful correction.  

“I see no direct evidence that China can legally block the sale of ports by CK Hutchison to BlackRock,” said David Blennerhassett, an analyst at Quiddity Advisors. “Both parties would have expected this nationalistic backlash.”

The insulated position likely buttressed CK Hutchison’s surprise move to sell off the bulk of its global ports business to the consortium led by BlackRock Inc. Announced last week, the agreement appeared to benefit both Li and US interests, with CK Hutchison offloading the assets at the higher end of their valuation and Trump ending what he called “Chinese control” of the Panama Canal. 

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Within hours of the announcement of the deal, the US president hailed his administration’s “reclaiming” of the trade route. 

‘Pick a Side’

China indicated its displeasure over the transaction via its Hong Kong and Macao Affairs Office, which reposted a critical commentary article warning companies to be very careful about which “side they should stand on”. 

Whether China takes any further action against CK Hutchison will be a test case for how far Beijing is willing to go to rebuke companies caught in the middle of increasingly fraught US-China relations. 

China’s Ministry of Commerce summoned Walmart Inc. executives earlier this week over reports the retailer was asking Chinese suppliers to bear the costs of increased US tariffs. US biotechnology company Illumina Inc. has also been hit with an import ban, barring it from selling its genetic sequencing machines in China.

While those companies have substantial businesses in China, CK Hutchison has little to lose. Li began diversifying outside of China in the late 1980s amid the country’s political uncertainty, investing into ports, telecommunications, utilities and energy in major developed countries including the UK, Canada and Australia. His keen sense for deals and early bets on what would become some of the world’s highest-growth industries over the subsequent decades also won him the nickname “Superman.”

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CK Hutchison’s current operations in Hong Kong and mainland China mainly involve retail, ports, telecoms and infrastructure. 

Still, investors have been spooked by Beijing’s displeasure and now worry that the deal may fall apart or come together on less favorable terms for CK Hutchison. Shares in the company fell 6.4% on Friday, their biggest decline since 2020.

“Either CK Hutchison will completely give up on the deal, or they will push for it to be completed faster to avoid political uncertainties, but that may affect the transaction price,” said Andy Wong, investment and ESG director at Solomons Group.

Strong-Arm Tactics

Multinational companies have bent to China’s will before. Cathay Pacific Airways Ltd., Hong Kong’s flagship airline owned by conglomerate Swire Pacific Ltd., enraged Beijing after some of its staff came out in support of pro-democratic protests in the city in 2019. State-backed firms imposed boycotts on the airline and mainland regulators threatened to block its access to Chinese airspace. Within days, Cathay’s chief executive officer resigned and the company acceded to a list of Beijing’s demands. 

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While concerns linger, China’s stern reaction to CK Hutchison’s port sale may be as far as it goes, because the company has kept facilities in Hong Kong and mainland China, thus safeguarding national security, said Richard Harris, founder and CEO of Port Shelter Investment Management.

“I see it being more political rhetoric rather than an instruction or a demand,” said Harris. 

Whatever happens, Li is unlikely to be the last billionaire caught between the world’s two biggest economies. 

“It’s not an isolated case as more assets are considered as strategic by different governments,” said Gary Ng, senior economist at Natixis SA. “We are now living in a world in which a business decision can often be escalated to a political level.”

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