Beijing
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China has wavered after a Panama high court ruling denying a Hong Kong-backed company the right to operate the Panama Canal’s main ports, vowing that the government would “pay a heavy political and economic price” if it did not change course.
The outrage incident is the latest inflection point in the saga over Chinese interests in the strategic waterway, through which about 40% of all U.S. container traffic passes each year, and a focal point of the Trump administration’s goal of ousting the rival power from the Western Hemisphere.
Hong Kong-based multinational CK Hutchison operates ports around the world through its Hutchison Ports business and subsidiaries. They include the two main terminals of the Panama Canal, one at each end. It’s a concession that the Central American country’s highest court deemed unconstitutional in a ruling late last month.
The “truly shameful and pitiful” ruling “succumbs to hegemony and becomes an accomplice to evil,” the Chinese government’s office overseeing Hong Kong affairs said in an 800-word response to the court’s decision. “China firmly opposes economic coercion and hegemonic bullying.”
The rebuttal, released Tuesday, underlines how intently China is focused on the incident and the White House’s broader efforts to stamp out its influence in the region.
China has expanded deeply into Latin America and the Caribbean for years, now trading more than $5 trillion a year, with state-owned enterprises and national champions embedded in power grids, communications networks, and mines.
The Panama Canal is now the most pressing test of how the power struggle will play out, as President Donald Trump’s administration vows to “refuse non-hemispheric competitors to control” “strategic assets” in the Western Hemisphere and drive out foreign companies building infrastructure there.
The Chinese government has said it will protect Chinese companies, stressing in its latest statement that it has “sufficient means, means, strength and capabilities to maintain a fair and just international economic and trade order.”
But this moment also creates strategic challenges for the Chinese government. Particularly as China seeks to stabilize its own relations with the United States ahead of President Trump’s expected visit later this spring, and considers how strong a message it wants to send to partners it sees as siding with the United States.
President Trump has already undermined Beijing’s carefully built relationship with Panama, increasing pressure on the country over its relationship with China from his first day in office.
In his inaugural address, he falsely claimed that “China runs the Panama Canal” and vowed that the United States would “take it back.” On the same day, Panama began an audit of Hutchison Ports’ operations at its two canal ports, but President Jose Raul Mulino denied Trump’s claims.
The company is not one of China’s many state-owned enterprises operating overseas, but a major global port operator affiliated with a conglomerate run by Hong Kong’s richest man, Li Ka-shing. China has defended its operations, and Beijing has dismissed claims of interference in the canal.
But as the White House ramped up pressure on Panama, the Panamanian government announced it would withdraw from Chinese leader Xi Jinping’s global infrastructure project, One Belt, One Road. It was a blow to Beijing’s ambitions in the region, especially since Panama was the first Latin American country to sign up to the initiative in 2017.
Since then, the altercation has grown even louder.
CK Hutchison announced last spring that it would sell interests in more than 40 ports in about 20 countries, including two near the Panama Canal, to a group led by American firm BlackRock, a deal that President Trump hailed as a victory for the United States.
But the deal appears to have stalled since then, with the Chinese government saying any asset sale by the company would need to be “examined and supervised.” It is unclear what impact the latest court ruling will have.
The ruling, which found that the contract awarded to Hutchison’s Panama Ports Company violated the Panamanian constitution and followed an official audit, has caused friction once again.
Hutchison Ports Panama Port Company announced Tuesday that it has begun arbitration against Panama, calling the ruling part of the nation’s “campaign” against Panama.
It is well known that the Chinese government has turned to economic stimulus strategies to apply pressure. Japan’s tourism industry has been plagued by flight cancellations and travel warnings from China in recent months due to political tensions over Taiwan. And businesses from Australian winemakers to Norwegian salmon farmers have had their businesses frozen in recent years from the huge Chinese market as their governments defied Beijing.
China also has economic influence over Panama. Panama overtook the United States in 2019 to become Panama’s largest trading partner, according to United Nations data through 2024.
In a statement on Tuesday, the Chinese government said it would “suffer the consequences” of the ruling, which “seriously damages” Panama’s business environment and economic development.
Analysts say Beijing may be considering trade, investment and other measures to discourage other countries in the region from taking similar measures.
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However, there are reasons why the Chinese government is proceeding cautiously. For one thing, even though they feel pressured by the US’s heavy-handed policies in Latin America, they also see opportunities.
Beijing already views this U.S. attitude, most notably in the U.S. detention of Venezuelan leader Nicolás Maduro, as a form of imperialism and bullying. And while the U.S. strategy may put further pressure on China’s involvement in the region in the short term, its policy thinkers calculate that over time more Latin American countries will choose to cooperate with China.
Retaliating with major economic measures against Panama could undermine Xi’s broader efforts to position China as an alternative leader to the United States, especially for emerging countries that Beijing says are underserved by a U.S.-led world.
The Chinese government may also not want to cause too much trouble ahead of President Trump’s anticipated visit.
But Beijing, and Chinese companies as well, will be keeping an eye on developments.
“Chinese state-owned enterprises will instead become increasingly cautious about making large-scale strategic investments around the United States, given that President Trump is very keen to assert his control over key geographical points and key locations in the region,” said Brian Wong, a geopolitical analyst at the University of Hong Kong.
And the United States will also take strategic notes, analysts in Washington say.
There, the court’s decision could be interpreted as “positive evidence that sustained pressure works,” said Craig Singleton, a senior fellow at the Foundation for Defense of Democracies think tank.
“Decisions like Panama are likely to strengthen President Trump’s view that China’s influence in the hemisphere is reversible and encourage further challenges where legal, political, and regulatory pressures may apply.”
