Does China ‘run’ the Panama Canal, as Trump says?

During his inaugural address, President Donald Trump doubled down on his claim that China controls the Panama Canal.

“China runs the Panama Canal and we didn’t give it to China. We gave it to Panama and we’re taking it back,” he said.

The 51-mile (82 km) long Panama Canal cuts through the Central American country and is the main link between the Atlantic and Pacific oceans.

Up to 14,000 ships use it each year as a shortcut to journeys that, before the canal was built, would have taken them on a lengthy and expensive journey around the tip of South America.

Mentioning 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 the “wonderful soldiers of China” were “lovingly but illegally operating the Panama Canal” – a claim quickly denied by officials in Panama City and Beijing.

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

Trump has also threatened to reclaim the canal by force, citing “exorbitant” fees allegedly charged for American ships to pass through it – another claim rejected by Panamanian authorities.

After Trump’s inaugural address, President Mulino reiterated that “there is no nation in the world that interferes with our administration” of the Panama Canal.

The strategic waterway, which covers about 5% of global maritime trade, is managed by the Panama Canal Authority, an agency of the Panamanian government, not Chinese soldiers.

However, Mr Trump’s inaccurate claim reflects concerns among some US officials about significant Chinese investment in the canal and surrounding infrastructure.

Historically, the US has played a key role in building and managing the passage connecting the Atlantic and Pacific oceans.

After an unsuccessful attempt by the French to build it, the US secured the rights to undertake the project. The construction of the canal was completed in 1914.

It remained under US control until 1977, when then-President Jimmy Carter signed a phasing-out agreement to Panama, which Trump called “foolish.”

Since 1999, the Panama Canal Authority has had sole control over the operation of the waterway.

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

There is no public evidence to suggest that the Chinese government controls the canal or its military. However, Chinese companies are significantly present 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 near the canal.

Two of the five canal ports, Balboa and Cristóbal, 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 state-owned by China, says Ryan Berg, director of the US program at the Center for Strategic and International Studies, there have been concerns in Washington about how much Beijing will be able to control the company.

A wealth of potentially useful strategic information about ships passing through the waterways flows through these ports.

“There is a growing geopolitical tension of an economic nature between the US and China,” says Mr. Berg. “Such cargo information would be very useful in the event of a supply chain war.”

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

According to Andrew Thomas, a University of Akron professor who wrote a book about the canal, the bids to operate those ports were virtually uncompetitive. “The US didn’t really care about these ports at the time and Hutchison had no objection,” he says.

Chinese companies, both private and state-owned, have also strengthened their presence in Panama through billions of dollars in investment, including a cruise terminal and a bridge to be built across the canal.

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

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

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

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

A few months later, Panama became the first Latin American country to join China’s Belt and Road Initiative, a global infrastructure and investment initiative worth trillions of dollars.

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

China slowly expanded its soft power by opening its first Confucius Institute in the country and providing grants for railway construction. Chinese companies have also sponsored “media training” for Panamanian journalists.