Panama Canal - China
In 1854, a ship carrying Chinese workers, many from South China's Guangdong province, landed in Panama to work on the Panama Canal Railway. Their journey kicked off more than 160 years of exchange between the peoples of China and Panama, culminating in the signing of a joint communiqué on June 13, 2017, which formally established diplomatic ties between the two countries. More than 300,000 people of Chinese descent, or 10 percent of the total population, currently live in Panama, according to the Overseas Chinese Affairs Office of the State Council, but the Central American country's connection with China goes back to the Qing Dynasty (1644-1911).
Panama is China's largest trading partner in Central America. China is Panama's second largest trading partner worldwide as well as the second largest user of Panama Canal. When the Third Set of Locks of the Panama Canal Expansion was completed, it doubled the capacity of the Panama Canal through integrated components including two Post-Panamax lock facilities, one on the Atlantic and one on the Pacific side. The project doubled the canal's capacity, providing significant benefits to local, regional and global economies. The canal was made deeper and larger to allow the passage of ships three times larger than before, called the “New Panamax.”
"COSCO Shipping Panama" was listed in the history of international carriage as the world's first ship to pass through the new lock of the Panama Canal. A crowd gathered on Jun 26, 2016, the day of transit, when over 10,000 people in Panama witnessed the historic moment.
On 26 June 2016, Panama became the first country visited by then-Taiwanese President Tsai Ing-wen after taking office. During her visit, Tsai attended the completion ceremony of the Panama Canal expansion and wrote an inscription. President Tsai said she was honored to lead a delegation to attend the inauguration ceremony for the Panama Canal Expansion at the invitation of Panama's President Juan Carlos Varela Rodriguez. Noting that the Panama Canal is one of the world's great transportation arteries, President Tsai stated that to be taking part in such a momentous event together with heads of state, representatives from other countries, and the government and people of Panama felt a lot like traveling a long distance to attend a good friend's happy occasion, with hearts full of anticipation and happiness. President Tsai emphasized that official diplomatic ties between the Republic of China and Panama date back more than a century.
However, just one year later, Panama announced that it would sever diplomatic ties with Taiwan and establish diplomatic ties with the People's Republic of China. President Juan Carlos Varela personally laid the foundation stone for the Colon Container Terminal project built by China, and also announced that China would invest US$750 million in construction and create a large number of jobs.
In November 2017, Varela visited China and signed a series of memoranda of understanding on economy and trade with the Chinese government. He was praised as "the first Latin American country to join the Belt and Road Initiative". Expansion built a new lane of traffic along the Panama Canal through the construction of a new set of locks, which will double capacity and allow more traffic and longer, wider ships. The new Pacific Locks access channel will ultimately connect the Gaillard Cut to the new Pacific Locks.
Panama was the first country in Latin America and the Caribbean to sign a memorandum of understanding with China on the Belt and Road Initiative (BRI) cooperation. The two countries have agreed to take the opportunity of aligning the BRI with the National Logistics Strategy of Panama 2030, to strive for more highlights of bilateral cooperation.
On 03 December 2018, Chinese President Xi Jinping paid a 20-hour state visit to Panama after attending the G20 summit in Argentina. Xi Jinping paid a visit to the Panama Canal and witnessed the passage of a fully-loaded Chinese container ship through the waterway's new locks. Xi and his wife, Peng Liyuan, were accompanied by Panamanian President Juan Carlos Varela and First Lady Lorena Castillo Garcia during the tour. When they arrived, Shipping Rose, a vessel of China Ocean Shipping Company (COSCO), was waiting at the first locks.
China is the second-largest client of the Panama Canal after the United States. A number of Chinese companies, including Huawei, also have established their branches in Panama, known as the "hub of the Americas". On 29 July 2018, a group made up of China Communications Construction Co Ltd and China Harbour Engineering Co Ltd won a $1.42 billion contract to build the fourth bridge over the canal.
In October 2020, China COSCO Shipping set up an overseas warehouse in CFZ, covering more than 20,000 square meters, to better leverage the CFZ's geographical advantage and the company’s shipping line strengths, in response to the growing needs of Chinese companies operating in Latin America. The full-process comprehensive logistics service developed by China COSCO Shipping combines shipping, warehousing and customs clearance. It has made significant contributions to Panama's employment and shipping industry. The Colon Free Zone (CFZ) in Panama, one of the world's busiest FTZs, is located at the Atlantic gateway to the Panama Canal. It boasts an advantageous maritime location and many tax incentives. Re-export trade is its core business.
On the campus of International Maritime University of Panama, there is a building donated by China COSCO Shipping. The university's simulator and application technology center is also equipped with devices aided by the company.
On June 30, 2022, President of the National Assembly of Panama Crispiano Adames Navarro and Panamanian Foreign Minister Erika Mouynes met with visiting Special Representative of the Chinese Government on Latin American Affairs Qiu Xiaoqi respectively. The two sides exchanged in-depth views on bilateral relations, pragmatic cooperation between the two countries, exchanges between legislative bodies, and other topics. Chinese Ambassador to Panama Wei Qiang attended the meetings. Panamanian Minister of Commerce and Industries Federico Alfaro Boyd, Minister Counselor for Public Health Affairs Eyra Ruiz, Minister Counselor for Agricultural Affairs Carlos Augusto Salcedo Zaldivar and Vice Minister of Public Works Librada De Frías were present when Foreign Minister Mouynes met with Qiu Xiaoqi.
An article published in the People's Daily in August 2024 stated that "the Belt and Road Initiative has brought tangible benefits to Panama." The article said that after passing through the Panama Canal, China Ocean Shipping Group's cargo ships docked at the Port of Colon on the Atlantic coast, and then the containers were transported to COSCO Shipping's overseas warehouse in the Colon Free Trade Zone, and eventually entered the homes of thousands of Latin American consumers. In addition, COSCO Shipping has hired a considerable number of local employees at multiple terminals in Panama, and cooperated with local maritime colleges and institutions to provide and donate various types of ship equipment.
The article states that China has long maintained its position as the largest supplier of goods to the Colon Free Trade Zone and the second largest user of the Panama Canal. In fiscal year 2023, more than 64 million tons of goods came from and were shipped to China, accounting for 22.7%.
Li Ka-shing's Hong Kong Hutchison Whampoa controls two of Panama's five main regional ports, Balboa and Cristobal, on either side of the waterway. Chinese companies are completing construction of the Pacific Coast Cruise Terminal in Amador. Previously, China's Landbridge Group spent $900 million in 2016 to acquire control of Margarita Island, the largest port on Panama's Atlantic side. China Communications Construction Company is also building a deep-water port. After at least five years of debate, a consortium of Chinese state-owned enterprises will soon restart construction of a fourth, $1.3 billion bridge across the Panama Canal, according to the U.S. trade publication Engineering News-Record.
After former Panamanian President Varela was ousted in a corruption scandal, many infrastructure projects he advocated were canceled or modified. However, China has established a foothold in this small Central American country: many Chinese companies, including Huawei, have set up regional distribution centers in Panama's free trade zone, and several Chinese banks have obtained business licenses in Panama.
Donald Trump's remarks put this key waterway in South America under the spotlight, after he threatened to reassert US control over the Panama Canal. He accused Panama of charging excessive rates to use the Central American passage and drew a sharp rebuke from Panamanian President Jose Raul Mulino.
Panamanian President Jose Raul Mulino quickly responded to Trump's threat. He said the process of assessing tariffs for the canal was not random, but careful and open, based on supply and demand and maintenance costs, including the 2016 expansion. Mulino said in a statement issued on December 22: "Every square meter of the Panama Canal and its surroundings belongs to Panama and will always belong to Panama. Our country's sovereignty and independence are non-negotiable. The canal is not directly or indirectly controlled by China, the European Union, the United States or any other major power."
In response, Trump said, "We'll see!" and attached a photo of an American flag flying over the canal, saying, "Welcome to the American Canal!" Mulino also responded to accusations of Chinese influence, saying: "China does not control or manage the canal. When it comes to our canal and our sovereignty, we will all unite under the flag of Panama." Also supporting the Panamanian president was Mexican President Claudia Sheinbaum, who said at a Dec. 23 press briefing: “The Panama Canal truly belongs to the Panamanians.”
Colombian President Gustavo Petro also refuted on social platform X. He said: "President Trump made a mistake and contradicted himself. If he wants to stop countless migrants from crossing the Darien rainforest (a rainforest in Panama that connects Central America and South America), or even more people from Panama to Mexico, he must realize that the solution lies in promoting the prosperity and freedom of our people."
On 23 December 2024, when asked about Trump's remarks on Panama, Chinese Foreign Ministry spokesperson Mao Ning said that China will, as always, respect Panama's sovereignty over the canal and recognize the canal as a permanently neutral international waterway. She said: "China has always supported the Panamanian people's just struggle to safeguard the sovereignty of the canal. As early as the 1960s, large-scale demonstrations were held across China to actively support the Panamanian people's struggle to regain sovereignty over the canal zone."
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