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

In his inaugural address, President Donald Trump doubled down on his assertion that China runs the Panama Canal.

“China is exploiting 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) Panama Canal runs through the Central American nation 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 journey that would have taken them a long and expensive journey around the tip of South America before the canal was built.

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

On Christmas Day, Trump posted on social media that “wonderful Chinese soldiers” were “lovingly, but illegally, operating the Panama Canal,” a claim that officials in Panama City and Beijing quickly denied.

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

Trump has also threatened to retake the canal by force, citing “exorbitant” tolls allegedly being charged to US ships to pass through it – another claim that Panamanian authorities have pushed back.

After Trump’s inauguration speech, President Mulino reiterated that “no nation has a presence in the world that interferes with our administration” in the Panama Canal.

The strategic navigation, which handles about 5% of the world’s maritime trade volume, is not managed by the Chinese military by the Panama Canal Authority, an agency of the Panamanian government.

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

Historically, the US played a key role in the construction and administration of the passageway connecting the Atlantic and Pacific Oceans.

After a failed 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 President Jimmy Carter signed a treaty to gradually hand it over to Panama, which Trump called “stupid”.

Since 1999, the Panama Canal Authority has had exclusive control over the waterway’s operations.

The treaties signed by the US and Panama stipulated that it will remain neutral forever, but the US has the right to defend the canal against any threat to its 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 have a significant presence there.

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

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

Two of the five ports along the canal, 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 publicly traded subsidiary of CK Hutchison Holdings, a Hong Kong conglomerate founded by Hong Kong businessman Li Ka-shing. It has ports in 24 countries, including the UK.

It has ports in 24 countries, including the UK.

Although it is not owned by China, says Ryan Berg, director of the Americas Program at the Center for Strategic and International Studies, there has been concern in Washington about how much control Beijing may have over the company.

There is a wealth of useful strategic information about ships passing through these ports.

“There is a growing geopolitical tension of an economic nature between the US and China,” says Berg. “That kind of information about 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 virtually no competition, according to Andrew Thomas, a University of Akron professor who has written a book on the canal. “At the time the US didn’t really care about those ports and Hutchison didn’t object,” he says.

Chinese companies, both private and state-owned, have strengthened their presence in Panama through multibillion-dollar investments, including a cruise terminal and a bridge to be built over the canal.

That “package of Chinese activities,” as Mr. Thomas described it, could have prompted Trump’s assertion that the canal is China’s “property,” but that the operation of those ports does not equate to ownership, he stressed.

Beijing has repeatedly said that China’s ties with Latin America are based on “equality, mutual benefit, innovation, openness and people-to-people benefits.”

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

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

A month later, Panama became the first Latin American country to join China’s signature Belt and Road Initiative, a trillion-dollar global infrastructure and investment initiative.

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

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