The curious ventures of Superman Li: Is Hong Kong tycoon’s empire switch political or just good business?
As tycoon Li Ka-shing faces criticism for pulling out of mainland and Hong Kong markets, many ponder his connections to Chinese politics
Often referred to as “Superman” in Hong Kong because of his business prowess, Li Ka-shing is the richest businessman in Asia, and chairs conglomerate Hutchison Whampoa and Cheung Kong Holdings, a property group. Li turned Cheung Kong Industries into a top property group, and Cheung Kong expanded to acquire Hutchison Whampoa in 1979 and Hongkong Electric in 1985. Li is a noted philanthropist and heads a charitable foundation that is a shareholder in Facebook.
When President Xi Jinping rolled out the red carpet at the military parade in Beijing to mark the 70th anniversary of Japan’s surrender in the Second World War on September 3, Hong Kong’s richest man was conspicuously absent.
Li Ka-shing was nowhere to be seen among guests who included China’s allies, Russian President Vladimir Putin and South Korea’s Park Geun-hye. But among the 300 delegates from Hong Kong’s political and business elite were his two sons – Victor Li Tzar-kuoi and Richard Li Tzar-kai.
The next day, a Friday, Victor Li returned to Hong Kong and made a decision to merge two key units of the CK Hutchison business empire, Cheung Kong Infrastructure Holdings (CKI) and Power Assets Holdings. The move was the latest step in a sweeping reorganisation of Li Ka-shing’s businesses.
The deal, made public the following Tuesday, became a lightning rod for mainland media to come down hard on Li, taking the realignment, along with a property deal last month, to mean that the magnate was turning his back on mainland and Hong Kong markets.
The prominence of the Li family and the attention they attract stems from the ubiquitous nature of their business presence. The Li Empire spans the gamut, from the ParknShop supermarkets to the Watsons drugstores to container ports and even to the electricity supply and telecom services.
Aside from the general public reaction, any indications that the Li family is sloughing off both its Hong Kong home turf and the mainland also carry political and economic ramifications.
Last month, Li Ka-shing’s Cheung Kong Property Holdings reportedly put on sale a commercial complex in Shanghai’s Pudong area, due to open next year, for 20 billion Yuan (HK$25 billion).
Some mainland media have said Li was free to park or pull his capital in any market as part of a free market economy, but others have criticised him for receiving preferential treatment from his connections with government officials and not repaying the favour by pulling out of China.
“It means the market is concerned about the effect of Li’s business behaviour on investment confidence and the environment on the mainland,” said Peng Peng, a senior research fellow at the Guangzhou Academy of Social Sciences. “But the concern does not mean there are any drastic changes in the nation’s economic policy.”
Matter of divided opinion
The viral debate over Li’s intentions erupted about 10 days ago when the Outlook Institution think tank, set up under the auspices of Xinhua, ran a strongly-worded commentary.
It said Li should not drift away from the mainland where he had enjoyed a great run in the past decades largely because Beijing favoured him. It argued that Li had “missions” to finish in China.
Jumping into the debate, state newspaper The Beijing News, said Li was an investor who was free to make his own choices. Therefore, no one should place any expectations on him.
Amid the debate, came news last month that no doubt made the Li bashers smile. Li lost his position as the richest Chinese man in the world, according to the widely followed Hurun report. He was unseated by Wang Jianlin, chairman of mainland property and entertainment group Dalian Wanda.
Wang is worth 260 billion Yuan, pipping Superman Li – a fond nickname given to him all these years – whose net worth is 200 billion Yuan, reported Hurun.
Responding to the media maelstrom over Li’s manoeuvres, a CK Hutchison spokesperson denied the group was abandoning the Hong Kong and mainland markets, and explained that the planned CKI-Power Assets merger was a commercial decision.
“No political angle,” was the short answer Victor Li gave to the media on the merger.
Peng and others at the think tank, who are studying the rags-to-riches stories of businessmen on the mainland, offered a political reason.
“Li appears to be closer to previous leaders such as Hu [Jintao] and Jiang [Zemin],” said Peng. “He isn’t particularly close to the existing state leaders.”
Li’s connections with the central government could be traced back to the Deng Xiaopeng era in the 1980s, when the leader encouraged him to invest.
In the late 1990s, Jiang stayed at Li’s Harbour Grand Hotel in Hung Hom during official visits to Hong Kong. Li, his sons and Jiang had breakfasts at the hotel.
When state leaders celebrated the 30th anniversary of the Shenzhen special economic zone in 2010, Hu gave Li a high-profile reception before the ceremony.
However, there is no public information about any one-on-one meeting between Xi and Li. It would appear the political tide began turning when Xi took the helm in 2012. Observers said Xi has since shaken up the so-called triumvirate of tycoons, government officials and the Beijing representatives in town.
Relationships still ‘good’
Li’s more circumspect stance towards the central government, they said, was in stark contrast to an earlier era when he was among the first business tycoons from Hong Kong to fly to Beijing to shake hands and invest after the 1989 Tiananmen crackdown.
He also offered a helping hand when Communist Party princelings ventured into the financial sector. In 2011, Li Ka-shing invested in Boyu Capital, the US$1 billion private equity fund that counts among its partners Alvin Jiang, the grandson of Jiang Zemin.
But sources were quick to dismiss any change in Li’s ties with Beijing. One source close to him told the Post the tycoon still firmly believed in Hong Kong as home, and had maintained “good relationships” with state leaders.
Although no specific reasons were given why Li did not attend the parade, the source said it was not the first time he missed such an occasion. He skipped an event on National Day in 2009.
Li Ka-shing joined a 70-member delegation to Beijing this time last year to meet Xi, the source said. “Li was standing next to [former chief executive] Tung Chee-hwa, who was next to Xi,” the source added.
Led by Tung, who is now a vice-chairman of the Chinese People’s Political Consultative Conference, the visit took place less than a week before the Occupy protests began.
As leaders change, so could business calculations, said analysts. Joseph Cheng Yu-shek, who recently retired as a political science professor at City University, said all business connections with leaders of “an authoritarian regime” were subject to changes.
And sometimes business and politics need not be as closely linked as before, he said. “Business ties change with the times; it is not necessary to be closer with any new leaders after a change.”
But the intriguing question remains: if Li did not have problems with the central government, could local political or business factors be behind his decision to reorganise his empire?
Sources were less forthcoming on this score, only pointing out that in the election of the chief executive in 2012; Li supported Henry Tang, who lost.
The strongest signal yet of Li Ka-shing losing interest in Hong Kong was in January, when he revealed a restructuring of his business empire that switched its base of incorporation to the tax-friendly Cayman Islands.
The shake-up, completed in June, merged all non-property businesses formerly owned by Li’s two flagships – Hutchison Whampoa and Cheung Kong (Holdings) – into Cayman Islands-based CK Hutchison.
All property businesses in the two companies were injected into another new entity, Cheung Kong Property Holdings.
Surprise AS Watson sell-off
In March last year, Li Ka-shing sold nearly 25 per cent of his retail arm – AS Watson – to Singapore’s sovereign fund, Temasek, for HK$44 billion, a surprise move that halted the planned US$6 billion listing of Watson.
In the same month, Hutchison Whampoa agreed to take over British mobile phone services operator O2 UK for £9.25 billion (about HK$106.75 billion at the time). In January, CKI and Cheung Kong spent £2.5 billion (HK$29.3 billion) for rolling stock operating company Eversholt Rail in the UK.
Lam Pun-lee, an economist and former associate professor at Polytechnic University, once described the Li family’s hefty exposure to Hong Kong’s property, container port, telecoms and retail sectors as “Li’s magnetic field”. He said the recent string of deals signalled Li’s “withdrawal” from Hong Kong and the mainland. “He is giving up,” Lam said.
Lam said Li’s empire was funnelling more capital to overseas markets such as the UK, Canada and Australia while the Hong Kong market matures.
Eric Wong Chun-yu, managing director of property investment firm Bricks & Mortar, said it appeared to be purely a business decision on Li’s part to hedge against his empire putting all its proverbial eggs in two baskets.
“Pulling out of the market now is what a rational businessman would do,” Wong said, adding that Hong Kong’s tough regulatory regime is business unfriendly and that the mainland’s stock and property markets are “on the expensive side of a cycle”.
“His companies are like a huge hedge fund, taking advantage of all opportunities globally,” Wong said. “China’s stock and property market is so expensive that even if Li Ka-shing did not pull out, I would recommend him to do so.”
Until he speaks, it would appear for now that Superman Li is just doing his sums.
Additional reporting by Eddie Lee
Milestones
1928: Li Ka-shing born in Chaozhou, Guangdong.
1950: Founded Cheung Kong Industries, producing plastic flowers.
1977: Hutchison Whampoa Limited (HWL) established after merger between Hutchison International Limited and Hongkong and Whampoa Dock Company Limited.
1979: Li bought substantial shareholding in HWL, becoming first Chinese to take control of a British-style ‘hong’.
1985: HWL acquired substantial interest in Hongkong Electric Holdings for HK$2.9 billion.
1999: HWL struck largest deal in company’s history, agreeing to conditional offer from Mannesmann AG for all shares in Orange plc. (44.81 per cent) for about HK$113 billion.
2010: Consortium led by Cheung Kong Infrastructure Holdings Ltd (CKI) and Hongkong Electric Holdings Ltd completed transaction with Electricité de France (EDF) to acquire 100 per cent of EDF Energy plc.’s network activities in United Kingdom for £5.775 billion (HK$70 billion).
2011: Consortium led by CKI acquired Northumbrian Water Group plc. which operated water supply, sewerage and waste water business in UK for £4.8 billion (HK$58.8 billion).
July 2013: Cheung Kong sold Kingswood Ginza Property to Fortune Real Estate Investment Trust for HK$5.85 billion.
October 2013: HWL and Cheung Kong sold Oriental Financial Centre in Shanghai to Bank of Communications for HK$8.96 billion.
March 2014: Li sold nearly 25 per cent of retail arm – AS Watson – to Singapore’s sovereign fund, Temasek, for HK$44 billion, which halted planned US$6 billion listing.
May 2014: Cheung Kong, CKI and Power Assets joined to acquire Envestra, an Australian gas pipeline firm worth A$2.37 billion (HK$17 billion).
November 2014: HWL sold 71.36 per cent stake in Hutchison Harbour Ring, which owned office towers in Shanghai, to Shenzhen-listed Oceanwide Holdings for HK$3.82 billion.
January 2015: CKI and Cheung Kong agreed to spend £2.5 billion (HK$29.3 billion) for rolling stock operating company Eversholt Rail in UK.
March 2015: HWL takes over British mobile phone services operator O2 UK for £9.25 billion (about HK$106.75 billion).
June 2015: Cheung Kong and HWL create CK Hutchison Holdings Ltd, which holds non-property businesses of both groups, and Cheung Kong Property Holdings Ltd, which holds property businesses.
Superman Li Ka – shingis the richest businessman in Asia