Does China ‘operate’ the Panama Canal, as Trump said?

During his inaugural address, President Donald Trump repeated his claim that China runs the Panama Canal.

He said, “China is operating the Panama Canal and we did not give it to China. We gave it to Panama and we are taking it back.”

The 51-mile (82 km) Panama Canal bisects the Central American nation and is the main link between the Atlantic and Pacific oceans.

More than 14,000 ships each year use it 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 inaugural address is not the first time he has focused on the Central American nation and its transoceanic canal.

On Christmas Day, Trump posted on social media that “China’s wonderful soldiers” were “lovingly, but illegally, operating the Panama Canal” – a claim that was quickly rejected by officials in Panama City and Beijing. .

At the time, Panamanian President José Raúl Mulino dismissed the claim as “nonsense”, insisting that there was “absolutely no Chinese interference” in the canal.

Trump has also threatened to take back the canal by force, citing the “exorbitant” fees allegedly charged to American ships to pass through it – another claim that Panamanian officials have rejected.

Following Trump’s inaugural address, President Mulino again stressed that “there is no presence of any country in the world that interferes with our administration” of the Panama Canal.

The strategic waterway, which handles about 5% of global maritime trade volume, is operated by the Panama Canal Authority, an agency of the Panamanian government, not Chinese troops.

However, Mr Trump’s false claim reflects some US officials’ concerns over China’s significant investment in the canal and its surrounding infrastructure.

Historically, the United States played a key role in the construction and administration of the passage that connects the Atlantic and Pacific oceans.

After a failed attempt by the French to build it, the US secured the right to undertake the project. Construction of the canal was completed in 1914.

It remained under US control until 1977, when then-President Jimmy Carter signed a treaty to gradually hand it over to Panama, which Trump has called “foolish.”

Since 1999, the Panama Canal Authority has held exclusive control over the operation of the waterway.

Treaties signed by both the US and Panama state that it will remain permanently neutral, but the US reserves the right under this agreement to defend against any threats to the canal’s neutrality by using military force.

There is no public evidence to suggest that the Chinese government controls the canal or its military. However, Chinese companies have a significant presence there.

From October 2023 to September 2024, China accounted for 21.4% of cargo volume transiting 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 ports adjacent to the canal, Balboa and Cristobal, located on the Pacific and Atlantic sides respectively, have been operated by a subsidiary of Hutchison Port Holdings since 1997.

The company is a subsidiary of publicly listed CK Hutchison Holdings, a Hong Kong-based conglomerate 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 Chinese-owned, there are concerns in Washington about how much control Beijing will be able to exercise over the company, says Ryan Berg, director of the Americas program at the Center for Strategic and International Studies.

A wealth of potentially useful strategic information on ships transiting the waterway passes through these ports.

“Geopolitical tensions of an economic nature are increasing between the US and China,” says Mr Berg. “This kind of information regarding cargo would be very useful in the event of a supply chain war.”

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

Bids to operate those ports faced almost no competition, according to Andrew Thomas, a University of Akron professor who wrote a book on the canal. “At the time, America didn’t really care about these ports, and Hutchison didn’t mind,” he says.

Private and state-owned Chinese companies have also strengthened their presence in Panama through billions of dollars of investment, including a cruise terminal and a bridge over the canal.

This “package of Chinese activities,” as described by Mr. Thomas, may have inspired Trump’s claim that the canal is “owned” by China, but operation of those ports does not equate to ownership, he stressed.

Beijing has repeatedly said that China’s relations with Latin America are characterized by “equality, mutual benefit, innovation, openness and benefit for the people.”

Panama’s strategic location means that China has for years been racing to increase its influence in the country and expand its footprint on the continent that has traditionally been considered America’s “backyard.”

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

Months later, Panama became the first Latin American country to join China’s signature Belt and Road Initiative, a $1 trillion global infrastructure and investment initiative.

The Dominican Republic, El Salvador, Nicaragua and Honduras also followed suit and severed ties with Taipei in favor of Beijing.

China has gradually expanded its soft power by opening its first Confucius Institute in the country and giving grants to build railways. Chinese companies have also sponsored “media training” for Panamanian journalists.