Panama - China Relations

China has important economic interests in Panama; Hong Kong-based companies operate two of the four ports on both the Atlantic and Pacific terminus of the Panama Canal and the PRC is the second most frequent user of the waterway. The PRC is also the largest supplier of goods to the Colon Free Zone (CFZ), the world's second largest free trade zone. Panama has privatized and developed some former US military ports and other related facilities. Port services grew dramatically from about 200,000 containers per year in the early 1990s to two million by 2003. Panama now boasts the leading complex of port facilities in Latin America. Panama wanted to foster its growing commercial relationship with the PRC, as more and more China trade passes through the Canal, and as China is poised to become the Canal's number-two user nation.

A company called Panama Ports Company, affiliated with Hutchison-Whampoa Limited through its owner, Dr. Li Ka-Shing, maintains control of four of the Panama Canal's major ports. Now, Panama Ports Company is 10 percent owned by China Resources Enterprises, the commercial arm of China's Ministry of Trade and Economic Cooperation.

On July 16, 1997, Senator Fred Thompson was quoted by the South China Morning Post as stating that China Resources was "an agent of espionage, economic, military, and political, for China." Further, this same newspaper article said that China Resources "has solid relations with the Lippo Group." In 1992 it acquired 50 percent of the Hong Kong Chinese Bank, which is also 50 percent owned by Lippo, and sold its stake to its listed arm, China Resources Enterprises. Hutchison-Whampoa Limited is listed on the London Stock Exchange. Hutchison-Whampoa controls countless ports around the world.

Admiral Thomas H. Moorer, US Navy (Retired), Former Chairman, Joint Chiefs Of Staff, testified "the Communist Chinese ... have virtually accomplished, without a single shot being fired, a stronghold on the Panama Canal, something which took our country so many years to accomplish. The building and control of the Panama Canal along with military and commercial access is in our own hemisphere.... included in the deal with Hutchison is U.S. Naval Station Rodman, a portion of U.S. Air Station Albrook, Diablo, Balboa, a Pacific U.S.-built port, Cristobal, an Atlantic U.S.-built port, the island of Telfers... the Panamanian authorities receive $22 million each year from Hutchison, a known Communist Chinese-controlled company, in their 25 year agreement, renewable for an additional 25 years, for a total of 50 years."

Representative Dana Rohrabacher [ a leading advocate that the United States should maintain some military presence in the Canal] said 07 December 1999 "A Beijing front company controlling ports at both ends of the Panama Canal increases the security risks to the United States of America. That would seem evident. In addition, their control of the ports and cargo stevedoring, the loading and unloading of millions of container boxes of ships departing from and traveling to the United States, this also intensifies the U.S. Customs concern regarding the two-way flow of sensitive weapons-related technologies as well as drugs and other contraband. The expanding numbers of Chinese personnel entering the Canal Zone enhances the potential for sabotage, especially in the event of a conflict with China over Taiwan or the South China Sea, should such a conflict occur."

Panama was Taiwan's most important formal diplomatic relationship. Rivalry between the PRC and Taiwan in Panama has been intense. The ethnic Chinese community in Panama remained publicly agnostic on the issue of official recognition for the PRC. "Chino-Panamanos" number between 130,000 and 200,000 (roughly 4-6% of the population) and are ubiquitous in the convenience store or "mini-super" industry. Taiwan and Panama signed a free trade agreement in 2003. The government of Taiwan has historically used financial incentives to sweeten its relationship with Panama: by one estimate, aid was $125 million per year during the administration of President Martin Torrijos. Scholarships for study in Taiwan and grants to various ministries are among the ways Taiwan has donated to Panama. The longstanding financial aid has been derided on both sides of the Pacific as "checkbook diplomacy" and there is a traditional lack of transparency in how the money received from Taiwan is spent.

In February 2010 Panama renewed its commitment to Panama's longstanding relationship with Taiwan, despite public statements by President Ricardo Martinelli in 2009 that Panama would opt for formal diplomatic ties with the People's Republic of China (PRC). Martinelli attempted to follow through with his plan for recognizing the PRC but was told to back off by the Chinese. Taiwan has used financial incentives to retain the backing of the Martinelli administration, generating controversy over the recent "donation" of a $22 million business jet for the government's official use.

Panamanian President Juan Carlos Varela announced 12 June 2017 his Central American country would switch diplomatic ties from Taiwan to China, a move analysts said is a major success to Beijing in its drive to isolate the self-governing island it claims as its own territory. Varela said Panama, which has strategic significance to China, was upgrading its commercial ties with Beijing and establishing full diplomatic links with the second most important customer of its key shipping canal. "I'm convinced that this is the correct path for our country," he said.