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Loyal Li

30 September 2015 By Peter Thal Larsen

China’s economic slowdown has put even Li Ka-shing on the defensive. The Hong Kong tycoon has rejected accusations that he is turning his back on the mainland. Yet the fact that he felt the need to go public and explain his position highlights the increasingly uncertain terrain facing businesses operating in the People’s Republic.

The 87 year-old has invested in mainland China for decades through companies he controls. Yet in the past few years Li has been placing increasingly large bets on infrastructure and telecom assets in developed markets, particularly in Europe. A corporate reshuffle which shifted his flagship Cheung Kong Holdings’ domicile from Hong Kong to the Cayman Islands added to the sense he is gradually distancing himself from China. More recently, the sale of property in Shanghai and other Chinese cities prompted a flurry of criticism. A think tank associated with state media outlet Xinhua accused Li of selling just as China’s growth was slowing.

In the past, the tycoon might have shrugged off such disapproval. But now he has felt the need to respond. In a three-page statement, Cheung Kong affirmed Li’s support for Chinese President Xi Jinping’s economic reforms and pointed to the company’s growing retail operations on the mainland. Li also cautioned against reviving what he called the “Cultural Revolution-style way of thinking” – a reference to the most chaotic period of China’s modern history.

Li’s decision to go public shows that even the best-connected Hong Kong tycoon can no longer take the support of China’s top leadership for granted. Xi’s anti-corruption drive and push to overhaul state-owned enterprises has met resistance within the ruling Communist party. Private companies and institutional investors risk being caught up in a broader struggle.

There’s no suggestion that Li and his son Victor will abandon their investments in Chinese property, ports, retail and energy anytime soon. Cheung Kong earned 11 percent of its revenue from the mainland in the first half of the year, and a further 16 percent from Hong Kong.

The opportunist Li has always had an eye for a bargain. Yet if commercial decisions continue to prompt shrill accusations of treachery, he is bound to think twice about committing more capital to China. Other companies will draw the same conclusion.


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