Does China ‘operate’ Panama Canal, as Trump says?

In his inaugural address, President Donald Trump disputed his claim that China runs the Panama Canal.

“China is working on the Panama Canal and we did not give it to China. We gave it to Panama and we are giving it back,” he said.

The 51-mile (82 km) Panama Canal runs through Central America 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 trip that, before the canal was built, would have taken them on a long and expensive trip around the tip of South America.

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

On Christmas Day, Trump tweeted that “the amazing Chinese military” was “lovingly, but illegally, using the Panama Canal” – a claim quickly denied by officials in Panama City and Beijing.

At the time, Panamanian President José Raúl Mulino described the claims as “absurd”, stressing that “there is no Chinese interference” in the canal.

Trump has also threatened to take back the canal by force, citing the “exorbitant” fees he allegedly charges for US ships to pass through it – another move rejected by Panamanian officials.

After Trump’s speech, President Mulino emphasized that “there is no country in the world that interferes with our administration” in the Panama Canal.

The waterway, which handles about 5% of the world’s maritime trade, is controlled by the Panama Canal Authority, a Panamanian government agency, not the Chinese military.

However, Mr Trump’s false claims reflect the concerns of some US officials about China’s investment in the canal and surrounding infrastructure.

Historically, the US has played an important role in the construction and management of this passage, which connects the Atlantic and Pacific oceans.

When the French failed to build the building, the US got the right to do the project. The construction of the canal was completed in 1914.

It remained under US control until 1977, when President Jimmy Carter signed an agreement to gradually hand it over to Panama, which Trump called “ridiculous”.

Since 1999, the Panama Canal Authority has been managing the canal’s operations.

The agreement signed by the US and Panama states that it will not participate in all parties, but the US reserves the right to defend against threats to the canal’s neutrality by using military force under the agreement.

There is no public evidence that the Chinese government controls the tunnel, or its military. However, Chinese companies have a large presence there.

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

In recent years, China has also invested heavily in ports and terminals along the canal.

Two of the five canal ports, Balboa and Cristóbal, located on the Pacific and Atlantic sides respectively, have been operated by Hutchison Port Holdings since 1997.

The company is a subsidiary of CK Hutchison Holdings, a Hong Kong-based group founded by Hong Kong businessman Li Ka-shing. It has port operations in 24 countries, including the UK.

It has port operations in 24 countries, including the UK.

Although it is not the Chinese government, says Ryan Berg, director of the Americas Program at the Center for Strategic and International Studies, there has been concern in Washington about the amount of control that Beijing can exercise over the company.

Most of the information that can be useful for ships passing through the waterway passes through these ports.

“There is an economic tension between the US and China,” Berg said. “This kind of information about assets can be very useful in the event of a bidding war.”

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

Applications to use the ports have not met with competition, according to Andrew Thomas, a University of Akron professor who wrote a book on the canal. “The US at the time didn’t care about the ports and Hutchison didn’t object,” he says.

Chinese companies, both private and public, have also boosted their presence in Panama through multibillion-dollar investments, including a cruise terminal and a bridge over the canal.

These “Chinese actions”, as Thomas explains, may have led Trump to say that the canal is “Chinese”, but the ports do not equate to ownership, he emphasizes.

Beijing has repeatedly said that China-Latin America relations are characterized by “equality, mutual benefit, innovation, openness and benefit to people”.

Panama’s strategic location means that China has been seeking to expand its influence in the country for years and expand its footprint in a continent that was once seen as the US’s “behind the scenes”.

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

A few months later, Panama became the first country in Latin America to join China’s signature Belt and Road Initiative, a trillion-dollar global investment initiative.

The countries of the Dominican Republic, El Salvador, Nicaragua, and Honduras also followed suit and stopped cooperating with Taipei in favor of Beijing.

China has gradually expanded its soft power by opening its first Confucius Institute in the country and providing aid for railway construction. Chinese companies also sponsored “journalism training” for Panamanian journalists.