The Journal. - The Billionaire Caught Between Trump and China

Episode Date: April 15, 2025

The Hong Kong-based company CK Hutchinson, led by billionaire Li Ka-shing, recently announced a deal to sell majority stakes in two ports on the Panama Canal. The deal with a consortium of investors led by BlackRock pleased President Donald Trump, after he had expressed interest in regaining control over the canal. But, as WSJ’s Rebecca Feng reports, the $22.8 billion deal also angered Chinese leader Xi Jinping, who saw the ports as a bargaining chip with the United States. Allison Pohle hosts.   Further Listening: - China Unleashes a Trade War Arsenal  - The Trade War With China Is On  Sign up for WSJ’s free What’s News newsletter.  Learn more about your ad choices. Visit megaphone.fm/adchoices

Hey, it's Jess. I'm here to say that my colleague Alison Poley is here again to guest host today's episode. Enjoy. In the glittering financial center of Hong Kong, a land known for its concentration of ultra-rich, one billionaire outshines them all. Billionaire entrepreneur Li Ka-shing. Hong Kong tycoon Li Ka-shing. Billionaire Li Ka- Shing. Hong Kong tycoon Li Ka Shing. Billionaire Li Ka Shing.

Li Ka Shing. Li Ka Shing. Multi-billionaire Li Ka Shing. Li Ka Shing is an investing icon. The 96-year-old tycoon is worth $36 billion and is the richest man in Hong Kong. A businessman so revered in Asia, he's earned an epic nickname.

Actually, in Hong Kong, people kind of gave him the nickname of Superman, just because he's so good at doing deals over the years and always at perfect timing. So he's Superman. That's our colleague, Rebecca Feng. He's kind of like the Warren Buffett of Asia. Buffett is 94, he's 96. When Li Ka-shing does anything, everyone stops to try to figure out what's happening

and what's the meaning behind it. — Frequently, reporters would quiz Li Ka-shing about his economic forecasts. — All sorts of questions about Hong Kong economy, global economy, and he's just giving his take? How does he feel about mainland Chinese investors investing in Hong Kong? Is the U.S. Federal Reserve going to cut interest rate? The analysts and journalists were just asking

his take on anything. For a long time, Lee was prominent in both Hong Kong and mainland China. He was an early investor in China's economy and Beijing courted him for his money and fame. And for decades, he's rubbed shoulders with Chinese leaders. Which is why in recent weeks, attacks from Chinese media on Li Ka-shing have been so jarring.

Yeah, it's surprising. It's kind of, it's very harsh, actually. Pro-Beijing newspapers have aggressively criticized Li. Betraying and selling off all Chinese people. Yikes. So yeah, like these editorials were a quest gazing. Yeah, it really sounds like it. Why are they suddenly attacking someone

who's been the Superman of investing? So it all goes back to this one deal that kind of angered this one person in China who is more powerful and sort of has more sway than Li Ka-shing. And that person is the president, Xi Jinping. Welcome to The Journal, our show about money, business, and power. I'm Alison Poley. It's Tuesday, April 15th. Alison Poley. It's Tuesday, April 15th.

Coming up on the show, how Hong Kong's richest man-shing has become so famous there's a meme about him. That his deal-making prowess is so powerful, it can stop typhoons. So how did Lee Ka-shing end up as the richest man in Hong Kong? So he started with a kind of a very humble beginning. Lee began his career in the 1950s by manufacturing decorative plastic flowers. He eventually turned into a savvy real estate investor and bought low-priced land in 1960s Hong Kong. And then his kind of rise to fame was in 1979 when he took over this massive trading group called Hutchinson Wan Poa. It was considered a very like a landmark deal because you know 1979, when you took it over, Hong Kong was still under British control.

So that deal was the first that put a local Hong Kong person in charge of the kind of business that had always been run by British nationals. Lee and his family were part of a new rising class of wealthy locals in Hong Kong. For decades, Hong Kong's free market economy allowed tycoons like Lee to prosper while the island was still under British rule, turning Hong Kong into an economic powerhouse. When the British transferred control of Hong Kong back to China in 1997, China pledged to keep Hong Kong's capitalist system for at least 50 years. In the years that followed, Li's empire only grew. His flagship company, CK Hutchison, became a global conglomerate with interests in real estate, drugstores, and telecoms.

His assets were in Hong Kong, mainland China, and around the world, including dozens of trading ports. So Li Ka-shing's CK Hutchinson has a bunch of different ports around the world. And among those ports, there were two ports at either end of the Panama Canal. It is those two ports on the Panama Canal that have become the center of Lee's current headache. Because lately, US President Donald Trump has become very interested in the Panama Canal. ...security, the Panama Canal. Has anyone ever heard of the Panama Canal? Because we're being ripped off at the Panama Canal like we're being ripped off everywhere else. To Trump, Lee Ka-shing's Hong Kong company

controlling key ports in the canal was a problem, just as if Beijing was controlling those ports. Trump saw that as an unacceptable economic and geopolitical risk. And above all, China is operating the Panama Canal, and we didn't give it to China, we gave it to Panama. It seems clear that he was referring, when he said China, he was referring to CK Hutchison. So Li Ka-shing is firm.

So Trump says that China is operating the Panama Canal, but this is not technically true. To clarify, CK Hutchison owns two of the five ports on the canal, but doesn't control it. The government of Panama owns ports on the canal but doesn't control it. The government of Panama owns and operates the canal. All of which brings us to Li Ka-shing's latest and possibly most controversial deal. In early March, the group CK Hyatt just announced that it signed an agreement with the consortium of investors led by BlackRock,

the world's largest asset manager, which is an American company. And in this case, the BlackRock consortium agreed to buy majority stakes in the ports on either end of the Panama Canal and a bunch of other ports around the world. It would be the biggest deal of Li Ka-shing's career, worth nearly $23 billion. And as Trump continued to threaten tariffs, it looked like a savvy business move. It meant Li would be dumping a bunch of his shipping ports ahead of a possible global trade war. So, yeah, for a business person, it makes sense to de-risk, as they would say. At first, China's reaction to the agreement was muted.

But within weeks, things got a lot more complicated. Because President Trump loved the prospect of this deal, since the company leading the purchase of those ports was BlackRock, an American company. Trump saw that as a win against the Chinese. After the deal was signed, President Trump made this speech. My administration will be reclaiming the Panama Canal, and we've already started doing it. President Trump kind of bragged about it as a victory. He said that we're taking it back.

Just today, a large American company announced they are buying both ports around the Panama Canal and lots of other things. What looked like a win for Trump looked like a loss for China. After Trump's statements, how did Xi Jinping's reaction change? It changed pretty dramatically. You know, Xi was infuriated by it. And that's according to people familiar with the matter, because they were caught off guard that they suddenly lost this very important bargaining chip.

U.S.-China relations are at their lowest point in decades, and Chinese officials saw Trump's desire for the two ports as a crucial piece of leverage. Our reporting basically showed that before CK and BlackRock signed the deal, Chinese officials were trying to include the ports in the massive negotiation deal with the US and suddenly the deal itself became geopolitically sensitive. Yeah. In public remarks, BlackRock CEO Larry Fink

said that the growing tariff rift between the US and China could complicate the deal. Lee and his son Victor, who now chairs Hutchison, pressed on with the deal anyway. But China would amp up the pressure to block the deal from being finalized. And its tactics are starting to present a real challenge. And so now what's the big question looming over this deal?

Basically the biggest question is like is the deal gonna get done or not? That's after the break. Li Ka-shing was in a bind. His deal to sell two Panama Canal ports had landed him in the middle of a global dispute between two of the world's most powerful men, Donald Trump and Xi Jinping. Xi Jinping didn't like the deal, but he had to proceed with caution. Why can't China's leader simply say, nope, this isn't happening? Why can't he's leader simply say, nope, this isn't happening, why can't he just kill this deal?

It'll be a really, really risky move if he does that, because China right now is in the middle of courting foreign investors and hoping for foreign direct investment into China. The international economy is changing. Xi Jinping is walking a fine line. He's been aggressive in the trade war with the U.S., Xi Jinping is walking a fine line. He's been aggressive in the trade war with the US, but he's also trying to put on a charm

offensive to bring foreign investment into China. Xi's message? China is a safe, fertile ground for business. And if he actually forcefully pulled the deal, it sends quite a bad signal, I think, to global investors, especially because the ports are not actually in mainland China or Hong Kong. So we know that Xi Jinping is not happy with this deal. What options does Beijing have to actually put a stop to it?

So there's like a three-part response to this, basically. OK. So there's like a three-part response to this basically. Okay. First that there's, you know, that series of attacks on newspapers. And then, secondly, officials were telling some of the Chinese state-owned businesses to not do new business with Li Ka Shing. And the state-owned firms, you know, were told to hold off on any new collaboration with businesses linked to Li Kaexing and his family. That's already sort of an escalation.

And then there's like a third tool that Beijing can do, and it has done basically, that they can throw in an antitrust review. The Chinese government likely can't fully block the deal through this antitrust review. The Chinese government likely can't fully block the deal through this antitrust review, but they can significantly tie it up with red tape. We had reporting that basically shows that the officials in Beijing are hoping that by sending signals about potential regulatory challenges, the two sides, Hutchinson and BlackRock, would just pull back by themselves voluntarily. The delay tactics appear to be working.

The BlackRock-led consortium had planned to have the deal finalized by April 2nd. That didn't happen. Now members of the consortium are exploring breaking off the Panama ports into a separate deal. In recent weeks, Beijing has also been working to line up alternative buyers should the deal fall through, according to people familiar with the matter. China's pressure tactics continue, but the biggest challenge so far has come from Panama. Last week, in the latest twist, Panama's top auditor accused CK Hutchison of misconduct.

Panama's top auditor is accusing the company of owing $300 million in dues. This is the most serious hurdle yet that this deal is facing. China and Panama are close, and the Chinese corporations invested a lot in Panama. This audit began after the deal was announced, and now that the auditor is looking into it, it could potentially drag on for months, and that could definitely scuttle the deal. In a statement, Panama Ports Company, the unit of C.K. Hutchison that operates the two ports, denied wrongdoing. A senior Panama official said that the legal process could take between six months and a year.

So given all those challenges, what's going to happen to this deal? We really don't know. It kind of depends on what else at the moment that Beijing can do to make Li Ka-shing and his son care. People kept saying and investors kept saying that Li Ka-shing only has 12% of revenue from Hong Kong and mainland China. So it's not that much in the grander scheme of things. Maybe he just doesn't care. However, 12% is still 12%.

Right. It's not nothing. It's not nothing. Yeah. So I think right now the decision kind of rests within Li Ka Shing and his son and his close advisors to basically weigh going through with the deal, how much would that anger Beijing and what's sort of the trade-off here? What does this say about Li Ka-shing's legacy?

I mean, he's 96. It does seem to be a bit of an unfortunate final act of his decades of business career, but I think what it says more is just that the company that Li Ka-shin built many decades ago is now in a different environment. So if other tycoons are watching the so-called Superman get punished this way, what message does that send to them? It sends a very chilling signal to other Hong Kong tycoons and their kids, second generation basically. And these tycoons will be watching very closely

because many of these tycoons are the people and the families who made Hong Kong, Hong Kong over the years. And it basically says that, you know, doing business is no longer just business. There's political risk involved in that. I think they're gonna ask themselves which side they want to be on,

whether it's US or China. And I'm not sure which side they will end up choosing, but that's a question that they would definitely ask themselves because it seems now that you can't just do like a commercial deal, you do need to choose a side. That's all for today, Tuesday, April 15th. The Journal is a co-production of Spotify and The Wall Street Journal. Additional reporting in this episode by Costas Paris. Thanks for listening.

See you tomorrow.