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

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

“China is operating the Panama Canal and we didn’t give it to China. We gave it to Panama and we are going to get it back,” he said.

The 51-mile (82-kilometer) 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 for a journey that, before the canal was built, would have taken them on a long and expensive journey around the tip of South America.

The mention of Panama in his inaugural speech 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 denied by officials in Panama City and Beijing.

At the time, Panamanian President José Raúl Mulino called the statement “nonsense” and stressed that “there was absolutely no Chinese interference” in the channel.

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

Following Trump’s inauguration speech, President Mulino again emphasized that there was “no presence of any nation in the world to interfere 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, a Panamanian government agency, not Chinese soldiers.

However, Trump’s inaccurate claim reflects concerns among some U.S. officials about China’s significant investments in the canal and surrounding infrastructure.

Historically, the United States played a critical role in the construction and management of the passage, which links the Atlantic and Pacific oceans.

After a failed attempt by the French to build it, the United States obtained the rights to carry out 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 had exclusive control over the waterway’s operations.

The treaties signed by both the United States and Panama stipulated that it would remain permanently neutral, but the United States reserved the right to defend any threat to the canal’s neutrality using military force under this agreement.

There is no public evidence to suggest 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 cargo volume that transited the Panama Canal, making it the second largest user after the United States.

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

Two of the five ports adjacent to the canal, Balboa and Cristobal, which are 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 traded 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 United Kingdom.

It has port operations in 24 countries, including the United Kingdom.

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

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

“There is growing geopolitical tension of an economic nature between the United States and China,” says Berg. “That kind of 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.

Bids to operate those ports faced almost no competition, according to Andrew Thomas, a University of Akron professor who wrote a book about the canal. “The United States at the time didn’t really care about these ports 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 investments, including a cruise terminal and a bridge to be built over the canal.

This “package of Chinese activities,” as Thomas describes it, might have led Trump to claim that the canal is “owned” by China, but the operation of 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 benefits for the people.”

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

In 2017, Panama broke diplomatic relations 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 Belt and Road Initiative, a trillion-dollar global infrastructure and investment initiative.

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

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