Is China “exploiting” the Panama Canal, as Trump says?

During his inaugural address, President Donald Trump reiterated his assertion that China manages the Panama Canal.

“China operates 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 82 km long Panama Canal passes through this Central American country 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 that, before the canal was built, would have taken them on a long and expensive journey around the tip of South America.

The mention of Panama in his inaugural address is not the first time he has focused on the Central American country and its transoceanic canal.

On Christmas Day, Trump posted on social media that “wonderful Chinese soldiers” were “lovingly, but illegally, operating the Panama Canal” – a claim that was quickly denied by Panama City and U.S. officials. Beijing.

At the time, Panamanian President José Raúl Mulino called the claim “absurd,” emphasizing that there was “absolutely no Chinese interference” in the canal.

Trump also threatened to take back the canal by force, citing “exorbitant” fees that would be charged to American ships to pass through it – another claim rejected by Panamanian authorities.

After Trump’s inauguration speech, President Mulino again emphasized that there is “no presence of any nation in the world interfering with our administration” of the Panama Canal.

The strategic waterway, which handles about 5 percent of the world’s maritime trade volume, is operated by the Panama Canal Authority, an agency of the Panamanian government, and not by Chinese soldiers.

However, Mr. Trump’s inaccurate claims reflect concerns among some U.S. officials about China’s significant investment in the canal and surrounding infrastructure.

Historically, the United States has played a central role in the construction and administration of the passage that connects the Atlantic and Pacific Oceans.

After an unsuccessful attempt by the French to build it, the United States obtained the necessary rights to undertake the project. Construction of the canal was completed in 1914.

It remained under U.S. control until 1977, when President Jimmy Carter signed a treaty to gradually cede it to Panama, which Trump called “insane.”

Since 1999, the Panama Canal Authority has held sole control over the operation of the waterway.

Treaties signed by the United States and Panama stipulated that the country would remain neutral at all times, but the United States reserves the right to defend any threat to the canal’s neutrality through the use of military force under this agreement. .

There is no public evidence to suggest that the Chinese government has control over the canal or its military. However, Chinese companies are very present there.

From October 2023 to September 2024, China accounted for 21.4% of the volume of goods passing through the Panama Canal, making it the second largest user after the United States.

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, located 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 publicly traded 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 United Kingdom.

It has port operations in 24 countries, including the United Kingdom.

Although it is not owned by the Chinese state, says Ryan Berg, director of the Americas program at the Center for Strategic and International Studies, concerns have been raised in Washington about the degree of control Beijing could exert over the business.

A wealth of potentially useful strategic information about ships using the waterway passes through these ports.

“There is growing geopolitical tension of an economic nature between the United States and China,” Mr. Berg said. “This type of information regarding freight would be very helpful in the event of a supply chain war.”

CK Hutchison did not respond to the BBC’s request for comment.

Bids to operate these ports have faced virtually no competition, according to Andrew Thomas, a professor at the University of Akron and author of a book on the canal. “At the time, the United States didn’t really care about these ports and Hutchison had no objections,” he says.

Chinese companies, both private and state-owned, have also increased their presence in Panama with billions of dollars in investments, including a cruise terminal and a bridge to be built across the canal.

This “set of Chinese activities”, as described by Mr Thomas, could have prompted Trump to assert that the canal “belongs” to China, but the operation of these ports does not equate to ownership, stresses – he.

Beijing has repeatedly said that China’s ties with Latin America are characterized by “equality, mutual benefit, innovation, openness and benefits for the people.”

Panama’s strategic location means that China has for years sought to increase its influence in the country and expand its presence on a continent that is traditionally considered the “backyard” of the United States.

In 2017, Panama severed diplomatic ties with Taiwan and established formal relations with China – a huge victory for Chinese diplomacy.

A few months later, Panama became the first Latin American country to join China’s Belt and Road Initiative, a multibillion-dollar global infrastructure and investment initiative.

The Dominican Republic, El Salvador, Nicaragua and Honduras followed suit and also cut ties with Taipei in favor of Beijing.

China has slowly expanded its soft power by opening its first Confucius Institute in the country and providing a subsidy for the construction of a railway. Chinese companies have also sponsored “media training” for Panamanian journalists.