- The Washington Times - Wednesday, April 5, 2000

Chinese businessman Li Ka-shing was planning to take over operation of the Panama Canal before the pullout last year of the United States, according to a declassified Pentagon intelligence report.
The Army intelligence report contradicts statements by President Clinton and Panamanian government officials that the Atlantic and Pacific port facilities leased in Panama by Mr. Li and his Hong Kong-based Hutchison Whampoa Ltd. will have no role in Panama Canal operations.
The Army report, from April 22, 1998, contains an article with the headline, "Panama: China Awaits U.S. Departure" and is based on a Defense Intelligence Agency intelligence information report.
"According to a DIA Intelligence Information Report, Li Ka-shing, the owner of Hutchison Whampoa Lt. (HW) and Cheung Kong International Holdings Ltd. (CK) is planning to take control of Panama Canal operations when the U.S. transfers it to Panama in December 99," the report from the office of the deputy chief of staff for intelligence states.
"Li is directly connected to Beijing and is willing to use his business influence to further the aims of Chinese government," the report states. It is labeled "SECRET/ NOFORN" the latter term meaning no access to the intelligence by foreign nationals.
The released portions of the report provided no further details on how Mr. Li planned to take over the strategic waterway.
Mr. Li's multinational company leased two ports near entrances at each end of the Panama Canal in 1997 for 25 years. They are run by the Panama Ports Co., a Hutchison Whampoa subsidiary.
A spokesman for Hutchison Whampoa could not be reached for comment in Hong Kong.
However, the director of its Panama subsidiary, Hutchison Port Holdings, has dismissed fears of Chinese control.
"We're a public company operating a container port facility," John Merideth, group managing director of Hutchison Port Holdings, told the Associated Press in December. "The most extraordinary comments are being made. It's a bit time consuming, but it doesn't affect us."
According to Army intelligence, Mr. Li, Hutchison's chairman, plans to position his son, Victor Li, to take over certain operations of the two companies, "such as HW's Hong Kong International Terminals."
The report said the Hutchison's corporate revenue was declining because of a drop in raw materials from within China, a decline in freight rates and the Asian financial crisis.
"Consequently, China is looking to expand into new markets," the report said.
An Army analyst commented in the report that "Li's interest in the canal is not only strategic, but also a means for outside financial opportunities for the Chinese government."
"China, the canal's third-largest user, consequently has a significant amount of influence," the report said. "If China were to assume control of canal operations, it would have to abide by the neutrality requirements of the Torrijos-Carter treaties." The 1977 treaty gave Panama sovereignty over what was the U.S. Canal Zone.
The Army report is the second declassified in recent weeks under Freedom of Information Act requests by Judicial Watch, a conservative public-interest law firm.
"It's one more piece of evidence that the Clinton administration was lying about communist Chinese intentions in Panama," Judicial Watch President Tom Fitton said.
In January, a three-page report produced by the U.S. Southern Command stated that Hutchison Whampoa "could provide a conduit for illegal shipments of technology or prohibited items from the West to the [People's Republic of China], or facilitate the movement of arms and other prohibited items into the Americas."
The Army report is likely to increase the confusion surrounding recent statements by President Clinton about China's role in the Panama Canal.
In November, Mr. Clinton told reporters, "I think the Chinese will, in fact, be bending over backwards to make sure that they run it in a competent and able and fair manner."
He added that he "would be very surprised if any adverse consequences flowed from the Chinese running the canal."
The following week Mr. Clinton said he "may have misstated this" and that "the canal itself will be operated and controlled entirely by the government of Panama."

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