Introduction: The Silent Takeover of a Critical Chokepoint
For over a century, the Panama Canal has been one of the most strategically vital waterways in the world, connecting the Atlantic and Pacific Oceans and serving as a crucial artery for global trade. The canal, initially constructed by the United States and long seen as a symbol of American dominance, is now at the center of a geopolitical struggle—one that Washington seems to have largely ignored.
China, through aggressive infrastructure investment, economic diplomacy, and calculated geopolitical maneuvering, has slowly but steadily gained influence over the Panama Canal and other critical trade routes worldwide. While U.S. companies have shown little interest in Panama over the past decades, Beijing has been strategically investing billions to expand its foothold.
As tensions between the U.S. and China escalate, Washington is finally starting to realize that by neglecting its former backyard, it has allowed its greatest global rival to gain a strategic advantage in one of the world’s most important trade chokepoints. This article explores how China positioned itself so effectively in Panama, the historical mistakes that led to this shift, and what it means for global trade and security.
The Panama Canal: A Prize of Global Strategic Importance
The Panama Canal, completed in 1914, was one of the most significant engineering feats of the 20th century. It allowed ships to avoid the lengthy and treacherous trip around Cape Horn at the southern tip of South America, significantly reducing transit times for global commerce.
For the U.S., the canal was much more than just an economic asset—it was a strategic military stronghold. Control over the canal allowed the U.S. Navy to quickly shift forces between the Atlantic and Pacific Oceans, a crucial advantage in both World War II and the Cold War.
However, in 1999, the U.S. formally handed control of the canal over to Panama, following a controversial treaty negotiated under President Jimmy Carter. The handover was meant to ease tensions with Latin America and improve U.S.-Panamanian relations, but with hindsight, it is clear that Washington underestimated the risks of relinquishing control over such a critical chokepoint.
How China Gained a Foothold in the Panama Canal
1. U.S. Neglect Left a Power Vacuum
After the U.S. handed over control of the canal, American interest in Panama faded. For decades, the region was considered Washington’s “backyard”, but as other geopolitical crises took priority (Middle East wars, the rise of China, Russia’s resurgence), Latin America became an afterthought.
By the 2000s and 2010s, the U.S. largely ignored investment opportunities in Panama. American companies were not interested in large infrastructure projects in the region, leaving the door wide open for a foreign power to step in.
2. China’s Strategic Investments in Ports and Infrastructure
Recognizing an opportunity, China began pouring billions into Panama through direct investments and strategic infrastructure deals. Some key developments:
- Two of the largest ports on either side of the Panama Canal are operated by a Hong Kong-based company.
- In 2016, Panama completed a decade-long expansion project to allow for larger ships. U.S. companies showed no interest, and the work was done entirely by European firms.
- The first ship to pass through the newly expanded canal was Chinese, a major propaganda victory for Beijing.
- China pledged a $900 million investment in the port of Colón, located on the Caribbean side, to increase cargo capacity and improve infrastructure.
- Plans for a high-speed rail system between Panama City and David were initiated with Chinese financing.
3. Diplomatic Influence: Panama Joins China’s Belt and Road Initiative
Perhaps the most symbolic shift occurred in 2017, when Panama officially cut diplomatic ties with Taiwan and instead recognized China. This move was followed by Panama’s endorsement of the Belt and Road Initiative (BRI), China’s ambitious plan to dominate global trade through infrastructure investment.
In response, China:
- Pushed major diplomatic efforts to further strengthen ties with Panama.
- Funded and built a massive new embassy right along the Panama Canal—ensuring that every passing ship would see the Chinese flag.
- Announced even more investments in ports, railways, and logistics hubs in Panama.
4. U.S. Awakens to the Threat – But Is It Too Late?
By 2020, U.S. policymakers started raising concerns about China’s growing presence in Panama. Washington pressured Panama to reconsider its deals with China, leading to several projects being canceled or revised:
- Plans for a new Chinese embassy near the canal were scrapped after U.S. intervention.
- The high-speed rail project was abandoned, citing concerns over excessive Chinese debt-trap diplomacy.
- In 2025, Panama officially withdrew from the Belt and Road Initiative, following pressure from the U.S.
While these moves indicate that Washington is trying to regain lost ground, the reality is that China still holds key economic and logistical advantages in Panama.
Why China’s Presence in the Panama Canal Matters
1. Economic Leverage
China is the largest exporter in the world, and 95% of its exports travel by sea. Control over global shipping routes gives Beijing immense leverage over trade flows, allowing them to prioritize their interests while limiting access to competitors.
2. Strategic Military Positioning
Chinese investments in ports worldwide—including those in Panama, Sri Lanka, Djibouti, and Greece—raise concerns about dual-use capabilities. In the event of a major conflict, these ports could potentially be used for military operations, giving China a stronger global naval footprint.
3. Cybersecurity and Intelligence Risks
Many of the security systems at ports controlled by China use Chinese-made technology, raising fears of potential cyber espionage or electronic warfare capabilities. In a conflict scenario, China could monitor U.S. naval movements or disrupt critical shipping logistics.
Can the U.S. Counter China’s Influence?
Despite China’s gains, the U.S. still has the upper hand—if it chooses to act decisively. Some factors that work in Washington’s favor:
✔ Public Opinion in Panama: Surveys show that 68% of Panamanians consider the Chinese government untrustworthy, the highest in Latin America.
✔ U.S. Economic Influence: The United States remains Panama’s largest trading partner and investor.
✔ Military and Security Ties: The U.S. still wields influence over Panama’s military training and intelligence-sharing programs.
The key question is whether the U.S. will reinvest in Latin America to counterbalance China’s influence or continue to overlook the region while Beijing tightens its grip.
Conclusion: A New Cold War Battleground?
The battle for influence in Panama is a microcosm of a much larger global struggle between the United States and China. Washington’s neglect allowed Beijing to gain a strategic foothold in a critical chokepoint, but there is still time to reverse course.
The Panama Canal is not just a trade route—it is a geopolitical prize. The question is: Will the U.S. fight to maintain its dominance, or will China cement its control over one of the world’s most important waterways?
