China’s Assistant Foreign Minister Zhao Zhiyuan on Friday (February 7) summoned Panama’s Ambassador to China to lodge “solemn representations” over its decision to not renew the Memorandum of Understanding on the Belt and Road Initiative (BRI). At a press briefing, a Chinese Foreign Ministry spokesperson also said the country “firmly opposes the United States using pressure and coercion to smear and undermine Belt and Road cooperation,” adding, “The US side’s attacks… once again expose its hegemonic nature.” Panama’s move regarding China’s flagship infrastructure funding project comes as US President Donald Trump has made repeated claims about Chinese influence on the Panama Canal. One of the world’s most important commercial waterways, the canal greatly cuts the time it takes to move goods between the Atlantic and Pacific Oceans. The decision also follows US Secretary of State Marco Rubio’s visit to Panama earlier this month, even as Panamanian President Jose Raul Mulino denied that the United States demanded its withdrawal from BRI. In a thinly veiled reference to the US, Zhao said that China-Panama relations are never targeted at any third party and should not be disturbed by any third party. In 2017, Panama became the first Latin American country to officially join the BRI. Is there any truth to Trump’s claims about Chinese influence in the region? We explain. First, a recap of Trump’s claims about Panama, China In December 2024, Trump threatened a takeover of the Panama Canal, saying, “Our Navy and Commerce have been treated in a very unfair and injudicious way… This complete ‘rip-off’ of our Country will immediately stop.” He alleged that Panama charged US ships large sums for using the canal and that Chinese soldiers were “lovingly, but illegally, operating the Panama Canal”. He also said that when the US ceded the canal’s control in the late ’90s, “it was solely for Panama to manage, not China, or anyone else.” The US was instrumental in building the canal between 1904 and 1914, and subsequently enjoyed the advantages of controlling it. Charging low rates from ships using the canal helped American producers and consumers grow, too. But over time, mismanagement and increasing costs made ceding control a more attractive proposition. The Torrijos–Carter Treaties of 1977 also gave the US the power to militarily defend the Panama Canal against “any threat to its neutrality”. Thus, its geopolitical interests were secured without having to directly control the canal. How has Panama responded? President Mulino, in a briefing in December, refuted claims of Chinese control. He said irrespective of nationalities, “All are welcome who want to invest in the country. There is no discrimination here in foreign investment.” He added, “There are no Chinese soldiers in the canal, for the love of God… It's nonsense. There is not a single Chinese soldier in the canal.” However, this seemed to have little effect on assuaging US concerns. During Rubio’s visit in early February, he underlined US opposition to China playing a role in the canal. According to a Reuters report, “Mulino, after the talks with the top U.S. diplomat in Panama City, signaled he would review agreements involving China and Chinese businesses, and announced further cooperation with the U.S. on migration, but reiterated that his country’s sovereignty over the world's second busiest waterway is not up for discussion.” What is known about China’s presence in the Panama Canal? Essentially, the canal is operated by the Panama Canal Authority, an autonomous agency of the Panamanian government. It includes several ports, container terminals and other structures owned by private companies. Since 1997, the Panama Ports Company (PPC) has operated the Ports of Balboa and Cristobal located at the northern and southern ends of the Panama Canal, respectively. PPC is a member of the Hong Kong-based Hutchison Port Holdings (HPH) with operations in multiple ports across Asia, Europe and the Americas. In 2021, it was given a 25-year extension. However, an audit into the suitability of that extension is already underway and could lead to a rebidding process, the Associated Press earlier reported. Following Rubio’s visit, Mulino indicated a review could happen. Over the years, however, Chinese influence in the country has increased in the canal and the country of Panama as well. R. Evan Ellis, a Latin America Research Professor with the U.S. Army War College, wrote in The Diplomat this year that the People’s Liberation Army (PLA) maintains relationships with Panama’s Border Protection Service, its Air and Naval Service, and its National Police. China Ocean Shipping (Group) Company or COSCO, is also “one of the Panama Canal’s biggest users and most important customers.” Other Chinese companies are also active in construction projects. Notably, COSCO was also given the contract for the $3 billion Chancay Port in Peru, completed last year under the BRI. For the US, which has regarded South America as its regional backyard for wielding influence, these developments raise strategic concerns. It has also objected to Chinese private companies, saying China's Communist government could dictate them to act how they want at any given moment. Rubio also said in January that “a foreign power today possesses, through their companies - which we know are not independent - the ability to turn the [Panama] canal into a choke point in a moment of conflict, and that is a direct threat to the national interest and security of the United States.”
