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Concerns about China's hold on Hong Kong are heightened by doubts surrounding the CK Hutchison Port deal

Analysts say that the Chinese media's scathing criticism of CK Hutchison for its planned sale of Panama ports to a U.S.-based group highlights Beijing's growing grip on Hong Kong, and its vulnerability to global tensions.

According to the announcement of the sale on March 4, the definitive documentation for port operations near Panama Canal should have been signed by April 2. However, sources claim that the signing will be delayed as it is not a strict deadline. CK Hutchison didn't immediately respond to a comment request.

Wednesday was supposed to be the beginning of a larger deal in which a BlackRock led group would purchase 43 ports in 23 different countries.

This week, pro-Beijing journalists continued to attack the CK Hutchison deal, which would have brought the company more than $19billion. They portrayed it as a possible violation of national safety and a betrayal China. Chinese authorities have also reviewed the deal for fair competition reasons.

Steve Vickers, CEO of Steve Vickers and Associates Limited, a Hong Kong-based political and corporate risks consultancy, wrote: "This issue is a bad sign for Hong Kong no matter what happens next."

If CK Hutchison caves in to Chinese demands, Hong Kong’s reputation as a place where Western investors feel safe to conduct business will be seriously damaged.

Hong Kong's economy has been in turmoil since the COVID outbreak and China's national security law. Many people believe that Hong Kong is now becoming more authoritarian.

In a report released earlier this week, the U.S. State Department stated that there is an "overall tendency... to centralize under Beijing."

The report stated that Beijing allows Hong Kong to maintain some differences with mainland China in terms of commercial and trade policies, but only if these policies are unique to Beijing's interests.

Christopher Beddor is the Deputy China Research director at Gavekal. He highlighted the wider implications of the Panama port deal.

Beddor stated that it is difficult to avoid the conclusion Beijing views CK Hutchison now as a Chinese company with obligations towards the Chinese national interests, and will retaliate if the company does not meet these obligations.

Markets will most likely do some reading-through to other Hong Kong conglomerates.

Donald Trump, the U.S. president, had hailed BlackRock's transaction as an important step in "reclaiming" Panama Canal. Washington's reaction is still unclear if the deal falls through. However, sources have confirmed that the negotiations will continue with BlackRock.

Telling a good HK story

The controversy could cast a shadow on Hong Kong's massive events campaign, which is meant to put the city on a global map while telling "good Hong Kong Stories", as officials describe them.

The Hong Kong Rugby Sevens was held last week in a 50,000-seat stadium on the harbour, as part of a "mega event" which also included Art Basel, Coldplay performances, and a soccer tournament that featured Liverpool, Arsenal Tottenham Hotspur, and AC Milan.

Alicia Garcia Herrero is the chief Asia-Pacific Economist at Natixis. She said that there are two aspects to Hong Kong - social and business.

She said that "Hong Kong (socially) is still safe, and is gaining momentum because of the direction in which the world is going." Herrero says that in business people are feeling "that Hong Kong is under a new regime." (Additional reporting from Hong Kong Newsroom, Scott Murdoch in Sydney and Tommasz Janowski; editing by Tommasz Janowski).

(source: Reuters)