Does China 'operate' Panama Canal, as Trump says?

In his inaugural address, President Donald Trump reiterated his claim that China controls the Panama Canal. He asserted, "China is operating the Panama Canal; we didn't give it to China. We gave it to Panama, and now we want it back."

The Panama Canal, spanning 82 kilometers (51 miles) across the Central American nation, serves as a major passage connecting the Atlantic and Pacific Oceans. Up to 14,000 ships utilize the canal annually, as a shortcut to avoid the lengthy and costly journey around the tip of South America. Trump's mention of Panama in his inaugural address was not the first time he had focused on the Central American country and its transoceanic canal.

On Christmas Day, Trump posted on social media that "brilliant Chinese soldiers" were "lovingly but illegally operating the Panama Canal," a claim immediately refuted by officials in Panama City and Beijing. At the time, Panamanian President José Raúl Mulino called the claim "nonsense" and emphasized that there was "absolutely no Chinese interference" in the Panama Canal. Trump also threatened to seize the canal by force, citing "exorbitant" fees charged to American ships using the canal, which was also rejected by Panamanian authorities.

Following Trump's inaugural address, President Mulino again stressed that "no country in the world interferes in our management of the Panama Canal." The strategic waterway, which handles approximately 5% of global maritime trade, is operated by the Panama Canal Authority, a Panamanian government agency, not by Chinese soldiers. However, Trump's false statements reflect concerns among some U.S. officials about China's substantial investments in the canal and its surrounding infrastructure.

Historically, the United States played a pivotal role in the construction and management of this Atlantic-Pacific passage. After a failed French attempt to build the canal, the U.S. acquired the rights to undertake the project. Construction of the canal was completed in 1914. It remained under U.S. control until 1977 when then-President Jimmy Carter signed treaties to gradually transfer it to Panama, which Trump has called "stupid." Since 1999, the Panama Canal Authority has had exclusive control over the waterway's operation.

The treaties signed between the U.S. and Panama stipulate that the canal should remain permanently neutral, but the U.S. retains the right to use military force under the agreement to defend against any threat to the canal's neutrality. There is no public evidence that the Chinese government exercises control over 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 the Panama Canal's transiting cargo, making it the second-largest user after the U.S.

In recent years, China has also made substantial investments in ports and docks near the canal. Two of the five ports near the canal, Balboa and Cristobal, located on the Pacific and Atlantic sides respectively, have been operated by subsidiaries of Hutchison Ports Holdings Limited since 1997. This company is a subsidiary of Hong Kong-listed CK Hutchison Holdings Limited, founded by Hong Kong businessman Li Ka-shing. The company operates port facilities in 24 countries, including the United Kingdom.

Ryan Berg, director of the Americas Program at the Center for Strategic and International Studies, stated that while the company is not state-owned by China, Washington has been concerned about the degree of control Beijing could exert over the company. The potential amount of useful strategic information about vessels passing through the waterway via these ports is vast. "There is a growing geopolitical tension of an economic nature between the U.S. and China," Berg said. "Information about cargo would be very useful in the event of a supply chain war." CK Hutchison did not respond to a request for comment from the BBC.

According to Andrew Thomas, a professor at the University of Akron who has written a book on the canal, there was little competition for the bids to operate these ports. "The U.S. didn't really care about the ports at the time, and Hutchison didn't face any opposition," he said. Chinese companies, both private and state-owned, have also increased their presence in Panama through billions of dollars of investments, including a cruise terminal and a bridge to be built over the canal.

This "package of Chinese activity," as described by Thomas, may have contributed to Trump's claim that the canal is "owned" by China, but he emphasizes that operating the ports is not the same as ownership. Beijing has repeatedly stated that its relations with Latin America are characterized by "equality, mutual benefit, innovation, openness, and benefit to the people." Panama's strategic location means that China has been working to increase its influence in the country for years and expand its footprint on a continent traditionally seen as the U.S. "backyard."

In 2017, Panama severed diplomatic ties with Taiwan and established formal relations with China, a major diplomatic victory for China. Months later, Panama became the first Latin American country to join China's signature Belt and Road Initiative, a multi-trillion-dollar global infrastructure and investment initiative. The Dominican Republic, El Salvador, Nicaragua, and Honduras have also followed suit, cutting ties with Taipei in favor of Beijing.

China has gradually expanded its soft power by opening the first Confucius Institute in the country and providing grants for the construction of railways. Chinese companies have also sponsored "media training" for Panamanian journalists.