China’s Strategic Move in Panama Canal Operations

China is poised to expand its influence over the Panama Canal following the collapse of a significant deal between U.S.-based BlackRock and Hong Kong’s CK Hutchison. The original agreement aimed to transfer control of numerous international ports, including two critical ones in Panama, to a consortium involving BlackRock. This move was initially supported by President Donald Trump, who advocated for reducing Chinese influence over the canal and even suggested the U.S. might “take back” the strategic waterway. However, Beijing’s opposition has shifted the dynamics of this deal.

Beijing’s Push for Direct Involvement

China’s government expressed its desire for a more direct role in the canal’s operations by advocating for state-owned shipping giant Cosco to be included in the transaction. This push indicates China’s strategic interest in having a direct stake rather than an indirect one through CK Hutchison, which is based in Hong Kong. Amidst growing pressure from China and potential anti-monopoly investigations, CK Hutchison announced that its exclusive negotiation window with BlackRock had expired. However, the company remains open to restructuring the deal to include a major strategic investor from China.

Implications of the $23 Billion Deal

The original $23 billion deal involved transferring ownership of 43 ports across 23 countries, including two vital Panamanian ports at Balboa and Cristobal. CK Hutchison has managed these ports since 1997 and is owned by Li Ka-shing, Hong Kong’s wealthiest individual. The potential inclusion of Cosco in this deal could significantly increase China’s footprint in global port operations.

U.S. Concerns Over China’s Expanding Influence

China’s growing presence in Latin American infrastructure has raised bipartisan concerns in Washington. Former President Trump stands out as the first modern U.S. president to suggest reclaiming the Panama Canal, which was completed by the U.S. in 1914 and handed over to Panama in 1999 under a treaty signed during President Carter’s administration.

Future Prospects and Strategic Implications

Analysts suggest that while China may be excluded from Panama port holdings, it could gain control over other assets within the larger deal. Dane Chamorro, head of Global Risk Analysis at Control Risks, notes that Cosco’s participation could lead to it becoming the dominant global port owner and operator. This aligns with China’s status as the world’s largest trading and manufacturing economy.

Panama’s Sovereignty and Operational Control

Despite these developments, Panama asserts its full sovereignty over the canal and maintains that Hutchison’s operation of port facilities does not grant China any influence over canal operations. The failed BlackRock-Hutchison deal highlights the precarious position of Hong Kong businesses under increasing pressure from Beijing to prioritize national loyalty over Western partnerships.