Panama and China Forge Strategic Partnership Through Years of Investment

January 30, 2025 TruthUSA

Experts suggest that China has long been laying the foundations for its current influence near the Panama Canal.

President Donald Trump’s promise to take back control of the Panama Canal has drawn attention to the strengthening relationship between China and Panama.

Security analysts warn that U.S. officials are justified in being worried about Panama’s deepening strategic partnership with China, a partnership driven by limited U.S. investment in critical sectors of the Latin American nation for several years.

China has actively advanced its economic and political interests in the Americas through significant infrastructure projects and “debt trap” loans that enable China to sway local governments that eventually default.

Analyst and research professor Evan Ellis from the U.S. Army War College stated, “The real issue lies in influence through economic ties, human connections, and the potential for the Chinese to manipulate Panama’s government.

China’s controversial Belt and Road Initiative (BRI) has been instrumental in gaining influence in Panama, especially after Panama joined BRI following a fallout with Taiwan in 2017.

In history, the United States has been Panama’s primary trade partner, providing the most foreign direct investment totaling $3.8 billion.

Nevertheless, China has earned favor in Panama by investing in significant development projects like bridges, loans, and aiding neglected sectors within the country.

For instance, China sent $2 million in healthcare assistance and supplies to Panama between February and June 2020 during the strain of the COVID-19 pandemic on the country’s healthcare system. Additionally, Panama Ports Company, a division of Hong Kong-based CK Hutchison Holdings and owner of two maritime facilities, had its 25-year contract renewed by local officials the following year.

Operating ports near the Panama Canal, CK Hutchison Holdings, through its subsidiary, has sparked concern among U.S. officials.

Opportunity Knocks

According to Ellis, China’s mega projects and support for underdeveloped sectors of Panama have significant implications.

He noted that much of the funding for economic development in the 1980s and 1990s favored Asia over Latin America, laying the groundwork for China’s current role in Panama. He added that a lack of active conflict necessitating U.S. intervention had hindered strategic planning revolving around Panama.

Meanwhile, China seized the opportunity by stepping in with its financial resources.

Reports from the Inter-American Dialogue think tank indicated that Beijing had invested over $187 billion in Latin America and the Caribbean between 2003 and 2022, with $1.4 billion in foreign direct investment in Panama alone in 2023.

Now, major Chinese banks like the Industrial Commercial Bank of China and various Chinese enterprises have a presence in almost 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

“There are dozens, if not hundreds, of Chinese businesses operating there,” Ellis emphasized, emphasizing the various forms of influence that come with such investments.

This viewpoint was echoed by General Laura Richardson, former head of the U.S. Southern Command, who, in a 2024 statement to the House Armed Services Committee, identified China as a strategic competitor disregarding international law and norms.

Richardson emphasized, “China has not engaged in the Western Hemisphere to provide mutually beneficial, high-quality investment. Instead, they aim to extract gains and gain access and influence.”

The Panama Canal hosts nearly half of U.S. maritime container traffic and approximately 6 percent of global ocean trade, making it one of the most crucial shipping routes globally. Concerns have been raised that the neutrality agreement outlined in the Torrijos-Carter Treaty may have been breached, which grants the United States the right to use military force to safeguard the canal’s neutrality.

On Jan. 28, Trump stated on Truth Social that Panama was swiftly removing Chinese signage within free trade zones, using this as evidence to support his assertion that China effectively controls the Panama Canal.

“As China deepens its investments in the region, it may lead to increased military collaboration or influence over defense policies of certain countries, even if no military bases are established initially”, national security analyst and Scarab Rising founder Irina Tsukerman told The Epoch Times.

Trump and defense experts aren’t alone in expressing concerns about China’s influence on canal operations. During a Jan. 28 Senate hearing, legislators deliberated on the canal’s significance for U.S. trade and national security.

Senator Ted Cruz (R-Texas) stated, “The Panama Canal, which serves 40 percent of U.S. seaborne container trade, is pivotal to American economic and national security interests. Though America constructed and financed the Panama Canal, Panama appears to be treating the U.S. unfairly and surrendering control of critical infrastructure to China.”

Dual-Use Facilities

China’s practice of gaining strategic, and potentially military, influence in maritime ports through investment is not a new concept. This tactic has been employed for years by China in countries where it owns or dominates port facilities near vital shipping routes.

According to Tsukerman, “China already has a military base in Djibouti [Africa], providing a blueprint for extending military reach through partnerships and infrastructure development.” She highlighted that the existing Chinese ports near the Panama Canal could serve as future naval bases.

While these facilities may initially focus on commercial activities, they hold the potential for military usage in the future, offering China close proximity to U.S. naval and commercial operations, potentially jeopardizing U.S. control over a critical chokepoint, Tsukerman explained.

The Asia Society Policy Institute also addressed this in a report examining the weaponization of China’s BRI, stating that Chinese laws dictate overseas infrastructure must meet military standards.

The report noted, “These laws empower the military to take charge of ships, facilities, and other assets of Chinese-owned companies. China’s push for civil-military integration imbues dual-use commercial and military capabilities in BRI infrastructure and related technologies,” as observed in the analysis.