Political Awareness

Note: Political Awareness’s published communication is never authorized by any candidate or their committees.

China and the Panama Canal

The Panama Canal is considered to be one of the choke points of the world. It connects the Atlantic and the Pacific Oceans and over 6% of the world’s trade passes through it. Originally built and completed by the U.S in 1914, it represented American technological prowess and economic power. It was formally relinquished to Panama from the U.S in 1999. Since 1911, Panama has maintained diplomatic relations with China until the end of the Chinese Civil War. It then only recognized and had relations with Taiwan. It remained one of their top allies until 2017, when Panama officially established diplomatic relations with China in 2017. They were the first country in the region to sign a cooperative agreement with China’s Belt Road Initiative (BRI). Since then China has increased its influence and oversight over the Canal.

China’s Entry into Panama and the Belt and Road Initiative

Panama has expanded its canal in 2016, which has since seen 14,000 transits annually. The first ship to cross this newly expanded canal was COSCO, a Chinese shipping company. The canal’s role in shipping has only increased since Covid-19. As of 2024, the United States remained the top user of the Panama Canal at 74%, with second place being China at 21%. Despite the U.S being the top user, China is the largest provider of goods going through the Colón Free Trade Zone, which is located at the northern entrance of the canal. It is the most important free trade zone in the Americas and the second largest in the world. In 2017, the zone imported $1.344 billion worth of goods from China alone.

In 2016, the Hong Kong company CK Hutchison Holdings announced they will begin construction of a container port in the Colon area and the Shanghai Gorgeous group invested $900 million into the project. The company in charge was China Communications Construction Company (CCCC). 2 ports, Cristóbal and Balboa have been built on both sides of the canal and are operated by the Hong Kong company. These ports have allowed for increased Chinese activity over the past few years, from shipping, to construction projects, and other investors participating in canal related projects. The chairman of CK Hutchison serves as a member of the national committee of the Chinese People’s Political Consultative Conference (CPPCC). The CPPCC is China’s top political advisory body with thousands of members. They work to aid government influence domestically and internationally.

Deal on the Table

Earlier this year, the U.S company Blackrock was meant to sign a deal on April 2nd with CK Hutchison, which essentially sold the port to the company, but Chinese pressure has halted the signing. The deal is still under review, and the ports are still operated by CK Hutchison Holdings.

Other Chinese projects include water management efforts to combat droughts, which allows Chinese investors to increase their presence in the region. China has also provided Panama with $2 million in health care aid to combat Covid-19. The Panamanian government awarded China $1.4 billion to build a fourth bridge over the canal in 2018. The President of Panama at the time called it the “fifth most important project in the history of the country”.

Chinese Presence at the Panama Canal

Despite delays, construction has picked up since January of 2025. Amador Cruise Terminal built by a Chinese engineer company, is an extension of Panama City Metro, which will run under the south end of the canal. Despite these projects, Panama has claimed that since their signing onto BRI, they have rejected various projects involving China, including railways, more ports, and a Chinese embassy. Panama has said that China does not own the canal, and that they are not as satisfied with China’s projects as they hoped when they first signed onto BRI. It is possible that Chinese influence can decrease in the future, but with the amount of Chinese companies invested in the region, this seems unlikely.

Chinese national security law, specifically one passed in 2020 concerning Hong Kong, could allow the CCP to force businesses based in Hong Kong to comply with Beijing’s national security demands, based on the legal documentation of the law. This includes the ports owned by CK Hutchison. In an extreme case, since their ports are on both sides of the canal, Beijing can efficiently close the canal if it wanted to. In a more likely scenario, it can be selective on what ships can pass through in the event of conflict. Since Panama has become more reliant on Chinese investments and aid, they can be used as leverage to meet Beijing’s demands. Panama has since left the BRI following U.S pressure earlier this year, but Chinese companies still operate in the area.

China’s BRI project has stirred alarm in the United States, in which 60% of the goods travelling from the canal come from the U.S or end up in U.S markets. With U.S China tensions only increasing, the canal’s increased influence by China has raised national security and economic concerns. China does not own the canal, however their two ports are on either end. Chinese company’s increased involvement has allowed them to have some control over transhipment cargo operations, in which many head for the United States.

Bibliography

“ Columbus Free Zone Imported from China plus $1.34 Billion.” Panamá América, November 21, 2017. https://www.panamaamerica.com.pa/economia/zona-libre-de-colon-importo-de-china-mas-1340-millones-de-dolares-1089143.

Aggarwal, Mithil. “Trump Was Touting His Panama Victory. Then China Stepped In.” NBCNews.com, April 8, 2025. https://www.nbcnews.com/news/world/trump-panama-canal-take-back-military-china-blackrock-rcna199438. 

“Building the Panama Canal, 1903–1914 .” Milestones in the History of the U.S. Foreign Relations. Accessed July 15, 2025. https://history.state.gov/milestones/1899-1913/panama-canal. 

“China Increases Its Presence in the Panama Canal Environment.” University Of Navarra. Accessed July 15, 2025. https://en.unav.edu/web/global-affairs/detalle/-/blogs/china-aumenta-su-presencia-en-el-entorno-del-canal-de-panama.

“Hong Kong National Security Law: What Is It and Is It Worrying?” BBC News, March 19, 2024. https://www.bbc.com/news/world-asia-china-52765838. 

Koop, Fermín. “Belt and Road: The New Face of China in Latin America.” Dialogue Earth, September 25, 2023. https://dialogue.earth/en/business/26121-belt-and-road-the-new-face-of-china-in-latin-america/. 

Murphy, Matt, Jake Horton , and Erwan Rivault  . “Mapping China’s Influence around the Panama Canal.” BBC News, February 24, 2025. https://www.bbc.co.uk/news/resources/idt-943c9a5e-32c0-4eae-8abb-4d9c4c6eae1e. 

Newman, Jeffery A. “What China Is Doing to Exert Its Growing Control over the Panama Canal.” Jeff Newman Law, February 3, 2025. https://jeffnewmanlaw.com/what-china-is-doing-to-exert-its-growing-control-over-the-panama-canal/. 

“Panama Awards $1.4 Bn Bridge Project to Chinese Group.” France 24, December 5, 2018. https://www.france24.com/en/20181205-panama-awards-14-bn-bridge-project-chinese-group. 

Runde, Daniel F., and Amy Doring. “Key Decision Point Coming for the Panama Canal.” Center for Strategic and International Studies, May 21, 2021. https://www.csis.org/analysis/key-decision-point-coming-panama-canal.

“These Are the Main Users of the Panama Canal in 2024.” Newsroom Panama, December 25, 2024. https://newsroompanama.com/2024/12/25/these-are-the-main-users-of-the-panama-canal-in-2024/.