Panama and China’s Partnership Highlights Years of Strategic Investment

Experts say China has spent years laying the groundwork for its current influence near the Panama Canal.

Chinese Cosco Shipping Rose container ship sails near the new Cocoli locks in the Panama Canal, Panama, on Dec. 3, 2018. Luis Acosta/AFP via Getty Images

President Donald Trump’s promise to take back control of the Panama Canal has put a spotlight on the expanding relationship between China and the Central American nation.

Security analysts say U.S. officials are right to be concerned about Panama’s deepening strategic partnership with China. This partnership has been fueled by a years-long lack of U.S. investment in key sectors of the Latin American country.

Beijing hasn’t been shy about making moves to further its economic and political interests in the Americas.

The communist regime has been successful in creating a web of influence through large-scale infrastructure projects and “debt trap” loans to countries that allow China to gain influence over local governments that end up in default.

“To me, the real issue is influence through economic relationships, human ties, and with that, the opportunity for the Chinese to sort of bend Panama’s government to their will,” Evan Ellis, an analyst and research professor for the U.S. Army War College, told The Epoch Times.

Some of this persuasion has been gained through China’s controversial Belt and Road Initiative (BRI). Panama was the first Latin American country to join the BRI just months after breaking diplomatic relations with Taiwan in 2017.

Historically, the United States has been Panama’s top trade partner and largest provider of foreign direct investment at $3.8 billion.

However, China has curried favor in Panama through a willingness to invest in large-scale development projects such as bridges, loans, and support for some of the country’s more neglected sectors.

An example of the latter is the $2 million in health care support and supplies China sent Panama between February and June 2020, as the COVID-19 pandemic put enormous strain on the country’s hospitals. The following year, local officials renewed the 25-year contract for Panama Ports Company, a division of the Hong Kong-based CK Hutchison Holdings, which owns two maritime facilities.

Through its subsidiary, CK Hutchison Holdings operates ports on the Pacific and Caribbean sides of Panama—close to the canal—making them a focal point of concern among U.S. officials.

Opportunity Knocks

According to Ellis, the effect of China’s mega projects and quiet support for underdeveloped areas of Panama’s economy cannot be overstated.

He said a lot of capital for economic development in the 1980s and 1990s went to Asia rather than Latin America, laying the foundation for China’s current position in Panama. In recent years, a lack of active conflict requiring U.S. attention has hindered “deep strategic thinking” in terms of how Washington allotted resources to Panama.

And while Panama sat on the back burner, China readily stepped in with its checkbook.

According to the Inter-American Dialogue think tank, Beijing invested more than $187 billion in Latin America and the Caribbean between 2003 and 2022. In 2023 alone, China’s foreign direct investment in Panama totaled $1.4 billion.

Now, major banks such as the Industrial Commercial Bank of China and an abundance of Chinese businesses operate in nearly every sector of Panama.

The logo of the Industrial and Commercial Bank of China at the entrance to its branch in Beijing on April 1, 2019. Florence Lo/Reuters

“You have tens, if not hundreds, of Chinese companies working there,“ Ellis said. ”There’s different kinds of influence that come with that money.”

This sentiment was reiterated by Gen. Laura Richardson, former head of the U.S. Southern Command. In a 2024 statement delivered to the House Armed Services Committee, Richardson identified China as a strategic competitor without “regard for international law or norms.”

Richardson said: “The PRC has not extended itself into the Western Hemisphere to offer win-win, high-quality investment. They have come to extract, and they intend to gain access and influence.”

The Panama Canal accounts for nearly half of U.S. maritime container traffic, and around 6 percent of all ocean trade passes through its locks.

It’s one of the world’s most important shipping routes, and some believe the neutrality agreement established under the Torrijos-Carter Treaty has been violated. The historic accord grants the United States the use of military force to defend the canal against any perceived threat to its neutrality.

Trump wrote on Jan. 28 on Truth Social that Panama was “with great speed” removing signage written in Chinese displayed in the free trade zone areas. The U.S. president pointed to this as evidence supporting his claim that China has de facto control over the Panama Canal.

“As China invests more in the region, it could lead to more military cooperation or influence over certain countries’ defense policies, even if it doesn’t involve outright military bases initially,” national security analyst and founder of Scarab Rising, Irina Tsukerman, told The Epoch Times.

Trump and defense experts aren’t alone in their concerns over China’s influence on canal operations. In a Jan. 28 Senate hearing, legislators discussed the critical waterway’s impact on U.S. trade and national security.

“Serving 40 percent of U.S. seaborne container trade, the Panama Canal is vital to American economic and national security interests. The United States paid for and built the Panama Canal, but Panama is treating America unfairly and ceding control of key infrastructure to China,” Sen. Ted Cruz (R-Texas) said.

Dual-Use Facilities

Gaining strategic, even military, influence over maritime ports through investment isn’t a novel idea. China has been using this tactic for years in countries where it either owns or holds the majority share of port facilities near critical shipping routes.

“China has already established a military base in Djibouti [Africa], so they have a blueprint for expanding their military reach through strategic partnerships and infrastructure development,” Tsukerman said.

She said the existing Chinese ports near the Panama Canal would make an ideal location to replicate this move.

Though China may not specifically build naval ports, it leans heavily on dual-use infrastructure in key maritime locations that have the potential to serve as military or espionage facilities, according to Tsukerman.

The Asia Society Policy Institute also highlighted this point in a report that examined the weaponization of China’s BRI. The report observed that Chinese laws dictate that overseas infrastructure must meet military standards.

“These laws authorize the military to commandeer ships, facilities, and other assets of Chinese-owned companies. China’s push for civil-military integration builds in dual-use commercial and military functionality in BRI infrastructure and associated technologies,” the analysis stated.

Crew members stand on the deck of a Chinese container ship as it arrives at the newly inaugurated Cocoli locks (Panama Canal Expansion) during Chinese leader Xi Jinping's visit to the Panama Canal on Dec. 3, 2018. Luis Acosta/AFP via Getty Images

Tsukerman agrees with this and believes China’s port facilities near the Panama Canal have the potential to facilitate future naval operations.

“While these facilities may be commercially oriented initially, they could be leveraged for military use down the line. This would give China proximity to U.S. naval and commercial operations and potentially compromise U.S. control over such a critical chokepoint,” she said.

In the wake of Trump’s comments on the Panama Canal and intense media scrutiny over the adjacent Hong Kong ports, the Panama Maritime Authority announced a formal audit of both facilities on Jan. 20.

The internal scrambling of Panamanian officials comes ahead of U.S. Secretary of State Marc Rubio’s highly anticipated visit to the country.

Ellis said Panama will need to answer “important questions” about what China’s current influence over the canal implies and whether it violates the neutrality agreement signed with former U.S. President Jimmy Carter.

“That question is what makes [Panamanian President Jose Raul] Mulino and the canal authorities so nervous,” Ellis said.

On Jan. 30, Mulino stated there would be no negotiation with the United States in terms of ownership of the canal.

“That is done. The canal belongs to Panama,” he told reporters during a press conference.

The Associated Press contributed to this report.