16 October 2019
Mainland media have accused Li Ka-shing (seen here with his top aide Canning Fok) of retreating from China. The group has denied the charge, saying that asset sales are part of normal business decisions. Photo: HKEJ
Mainland media have accused Li Ka-shing (seen here with his top aide Canning Fok) of retreating from China. The group has denied the charge, saying that asset sales are part of normal business decisions. Photo: HKEJ

Why Li Ka-shing shouldn’t get distracted by China criticism

Spare a thought for Li Ka-shing, who is on a two-front war.

In China, the Hong Kong billionaire has been facing criticism from Beijing mouthpieces for cashing out of the mainland. Meanwhile in Europe, the tycoon is facing regulatory challenges in completing two big telecom deals.

As for the first problem — accusations that he is being “ungrateful” by selling his mainland Chinese assets — Li has chosen to stay mum over the criticism.

Outlook Institute, a policy research organization backed by Xinhua News Agency, published last week an article titled “Don’t let Li Ka-shing run away”.

In the strongly worded piece, which has since been removed from the think-tank’s website, it was suggested that Li had profited from China in the past but is now abandoning the country at a time when its economy is facing rough weather.

In another attack, People’s Daily yesterday published an article on its WeChat social media account, implicitly questioning the patriotism of Li.

“He shared the prosperity when we had good times but could not beat the odds together now that we have difficulties,” it said.

It, however, downplayed the impact of Li’s disposal of mainland assets, saying that withdrawal of one businessman won’t make any difference to an economy as big as China. 

The wave of criticism in the Chinese media started after reports surfaced last month that Li’s firms were planning to sell Shanghai property assets worth 20 billion yuan (US$3.14 billion).

The move came on top of a series of other asset disposals in China and Hong Kong in recent years, in contrast to initiatives in Europe where the group continued to make new investments.

Earlier this month, Li’s Hutchison group began the formal process to see through the acquisition of Telefonica’s British mobile unit O2, a deal worth more than US$15 billion.

Elsewhere in Europe, Hutchison announced in August that it will combine its Italian mobile unit with that of VimpelCom’s unit Wind in a huge merger.

However, both the deals are now facing stiff regulatory scrutiny as the European Commission has toughened its stance on telecoms mergers, going by the rejection of a merger between two Danish operators.

In the worst case scenario, Li may find it difficult to pull money out from Shanghai while also being thwarted in his deals in Britain and Italy.

Overall, Li needs to focus his energies on seeing the European deals go through, rather than get distracted by the Chinese media criticism of the mainland asset sales.

As juicy as the story about the soured relationship between Li and the current Chinese leadership appears to be, Hong Kong media has been quite sober, pointing out that businesses have the right to buy or sell assets as they please.

Profit – not patriotism or philanthropy – was always the No.1 priority for business at CK Hutchison Holdings (00001.HK), as often testified by co-managing director Canning Fok Kin-ning.

“Our DNA is to be a fighter,” Fok told the Financial Times this week. “Everyone even said that Orange was terrible — that it would be a lemon!”

Orange has turned out be one of the biggest successes of Hutchison Whampoa, now a privatized conglomerate under CK Hutchison.

Hutchison, whose approach is exemplified by chairman Li’s “buy low, sell high” strategy, did not even have to pay tax to Britain for selling Orange, thanks to a share swap arrangement with acquirer Mannesmann.

According to FT, Fok — the right hand man of Li for over 40 years — is a near summation of the Hutchison group.

The executive owns a flat nearby his office overlooking the Thames in southwest London that he bought before the boom in values of riverside apartments in the previously unloved part of town.

In many ways, CK Hutchison is leading the way for the Chinese to snap up overseas assets. One such example was Canada’s Husky Oil, which Li acquired many years ago.

Husky has a China joint venture with CNOOC Ltd. (00883.HK), which bought Nexen Energy — another Canadian firm — in 2012.

CK Hutchison, which took over British conglomerate Hutchison Whampoa in 1979, also owns the largest private port, and also one of the largest European and Asian health and beauty chains.

“Hutchison is Hutchison and we have big ambition,” concluded Fok.

He would no doubt agree that it is not a sin to be six months ahead of the curve as his clever boss always is.

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EJ Insight writer