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The slow death of the conglomerate has been a theme in the developed world, exemplified this year by the decline of General Electric Co. to a shadow of its former self. By contrast, Asia’s sprawling family-controlled groups have continued to thrive. That’s not to say they’re free of challenges.
Victor Li, 54, sits atop a global empire spanning telecom, ports, real estate, retail and energy that was built by his father, the legendary Hong Kong billionaire Li Ka-shing. Seven months after taking over from CK Group’s 90-year-old founder, the younger Li must confront a more protectionist landscape that poses a threat to its strategy of diversifying away from its home city and China.
The core of the Stanford University-educated engineer’s problem is this: Being a Hong Kong company no longer shields CK from a backlash against Chinese expansion.
That became clear last month when Australia blocked CK’s $9.5 billion bid for gas pipeline operator APA Group on national-security grounds. The group would have gained control of pipelines delivering about half of the country’s gas.
The rejection of what would have been CK’s biggest acquisition came amid growing concerns about Chinese investment in critical industries. In August, Australia’s government banned China’s Huawei Technologies Co. and ZTE Corp. from supplying next-generation wireless equipment to the nation’s telecom operators. It wasn’t CK Group’s first brush with rejection. In 2016, Canberra blocked bids by State Grid Corp. of China and a CK unit for state-owned electricity company Ausgrid. However, a year later Australian regulators convinced investors all was well when it approved the group’s $5.5bn purchase of energy network operator Duet Group. It’s become clear that the CK Group and Li have an image problem, one that mirrors that of Hong Kong itself.
These days, CK Group’s business is largely the fruit of expansion into utilities, retail, telecom and infrastructure assets in Europe and Australia, along with its stake in a Canadian oil firm. That means it can’t afford to be seen as too closely allied with China, where the group also has big investments.
The group still has a lock on much of Hong Kong’s economic life, from a duopoly in electricity supply to large chunks of the city’s real estate, retail business and ports. But competition from mainland Chinese companies is likely to increase as the clock ticks down to 2047, when One Country, Two Systems is scheduled to expire.
—Bloomberg