China is asking its state-owned companies to stop discussions about new projects in Panama. This decision is part of a broader response from Beijing after Panama canceled CK Hutchison Holdings Ltd.'s contract to manage two ports along its important canal, according to sources familiar with the situation.
This move could jeopardize potential investments worth billions of dollars, the sources stated, speaking on condition of anonymity. Additionally, Beijing is advising shipping companies to think about rerouting cargo to other ports if it doesn’t involve large extra costs.
Chinese customs officials are intensifying inspections on imports from Panama, including products like bananas and coffee. Projects that are already in progress might also be affected, although no final instructions have been issued yet.
Neither the State-owned Assets Supervision and Administration Commission, responsible for overseeing Chinese state firms, nor China’s General Administration of Customs responded to requests for comments. CK Hutchison also did not reply to requests for comments.
This situation arose after Panama’s top court ruled in favor of President Donald Trump's campaign to reduce Chinese influence over critical infrastructure in the Americas, which prompted strong criticism from Beijing. China, the second-largest user of the Panama Canal after the US, warned earlier this week that Panama would face a “heavy price” for yielding to what it describes as American dominance.
China's reaction comes after a similar stance taken last year when CK Hutchison announced in March the sale of its global port assets, including its operations at Balboa and Cristóbal in Panama, to a consortium led by Italian billionaire Gianluigi Aponte’s Terminal Investment Ltd. and US investment firm BlackRock Inc. Back then, Beijing criticized the sale as a response to American pressure and advised state-owned companies to refrain from collaborating with businesses connected to CK Hutchison’s Hong Kong billionaire founder, Li Ka-shing, and his family.
It is still unclear whether China’s current actions will significantly impact Panama. The US remains Panama’s largest trade partner and investor, although China has been gaining ground in the Latin American region over the years. Panama’s agricultural products account for only a small portion of its total exports to China, and avoiding the Panama Canal often leads to increased costs and delays.
Moreover, Panama withdrew from China’s Belt and Road Initiative last year, which could further limit cooperation in infrastructure projects. Currently, Chinese state firms are involved in several infrastructure projects in Panama, including a $1.4 billion fourth bridge over the canal, a cruise terminal built by China Harbour Engineering Co., and part of a metro line constructed by China Railway Tunnel Group Co.
Meanwhile, CK Hutchison, which has been managing the two Panama terminals since 1997, is pursuing damages through international arbitration in response to the court ruling.