Does China 'operate' Panama Canal, as Trump says?
2025-01-23
Category: economic

During his inaugural address, President Donald Trump doubled down on his assertion that China runs the Panama Canal."China is operating the Panama Canal and we didn't give it to China. We gave it to Panama and we're taking it back," he said.The 51-mile (82km) Panama Canal cuts across the Central American nation and is the main link between the Atlantic and Pacific oceans.Up to 14,000 ships use it each year as a shortcut to a journey which, before the canal was built, would have taken them on a lengthy and costly trip around the tip of South America.
What has Trump said about the canal?
The mention of Panama in his inaugural speech is not the first time he has focused on the Central American nation and its transoceanic canal. On Christmas Day, Trump posted on social media that the "wonderful soldiers of China" were "lovingly, but illegally, operating the Panama Canal" - a claim which was swiftly denied by officials in Panama City and Beijing.At the time, Panamanian President José Raúl Mulino described the claim as "nonsense", stressing that there was "absolutely no Chinese interference" in the canal.Trump has also threatened to take the canal back by force, citing "exorbitant" fees being allegedly charged for US vessels to pass through it - another claim rejected by Panamanian authorities.Following Trump's inauguration address, President Mulino again stressed that there was "no presence of any nation in the world that interferes with our administration" of the Panama Canal.The strategic waterway, which handles about 5% of global maritime trade volume, is operated by the Panama Canal Authority, an agency of the Panamanian government, not Chinese soldiers.However, Mr Trump's inaccurate claim reflects the concerns of some US officials over China's significant investments in the canal and its surrounding infrastructure.
What is the history of Panama Canal?
Historically, the US played a pivotal role in the construction and administration of the passage, which links the Atlantic and Pacific oceans.After a failed attempt by the French to build it, the US secured the rights to undertake the project. The canal's construction was completed in 1914.It remained under US control until 1977, when then President Jimmy Carter signed a treaty to gradually hand it over to Panama, which Trump has referred to as "foolish".Since 1999, the Panama Canal Authority has held exclusive control over the operations of the waterway.The treaties signed by both the US and Panama stipulated that it shall remain permanently neutral, but the US reserves the right to defend any threat to the canal's neutrality using military force under this deal.
What is China's role in the operations of the canal?
There is no public evidence to suggest that the Chinese government exercises control over the canal, or its military. However, Chinese companies have a significant presence there. From October 2023 to September 2024, China accounted for 21.4% of the cargo volume transiting the Panama Canal, making it the second-largest user after the US.In recent years, China has also invested heavily in ports and terminals near the canal.
Two of the five ports adjacent to the canal, Balboa and Cristóbal, which sit on the Pacific and Atlantic sides respectively, have been operated by a subsidiary of Hutchison Port Holdings since 1997.The company is a subsidiary of the publicly listed CK Hutchison Holdings, a Hong Kong-based conglomerate founded by Hong Kong businessman Li Ka-shing. It has port operations in 24 countries, including the UK.Although it is not state-owned by China, says Ryan Berg, director of the  Americas Program at the Centre for Strategic and International Studies, there have been concerns in Washington over how much control Beijing would be able to exert over the company. A wealth of potentially useful strategic information on ships passing through the waterway flows through these ports."There is an increasing geopolitical tension of economic nature between the US and China," Mr Berg says. "That kind of information regarding cargo would be very useful in the event of a supply chain war."CK Hutchison did not respond to the BBC's request for comment. The bids to operate those ports faced almost no competition, according to Andrew Thomas, a professor at the University of Akron who has written a book on the canal. "The US at the time didn't really care about these ports and Hutchison faced no objection," he says.Chinese companies, both private and state-owned, have also strengthened their presence in Panama through billions of dollars in investments, including a cruise terminal and a bridge to be built over the canal.This "package of Chinese activities", as described by Mr Thomas, might have prompted Trump's assertion that the canal is "owned" by China, but operation of those ports does not equate to ownership, he stresses.Beijing has repeatedly said that China's ties with Latin America are characterised by "equality, mutual benefit, innovation, openness and benefits for the people".
What are China's broader interests in Panama?
Panama's strategic location means China has been vying to increase its influence in the country for years and expand its footprint on a continent that has traditionally been considered the "backyard" of the US.In 2017, Panama broke diplomatic ties with Taiwan and established formal relations with China – a huge win for Chinese diplomacy.Months later, Panama became the first Latin American country to join China's signature Belt and Road Initiative, a trillion-dollar global infrastructure and investment initiative.The Dominican Republic, El Salvador, Nicaragua, and Honduras followed suit and also severed ties with Taipei in favour of Beijing.China has slowly expanded its soft power by opening its first Confucius Institute in the country and providing a grant to build a railway. Chinese companies have also sponsored "media training" for Panamanian journalists.