Nearly a decade after the Panama Papers leak revealed that Panama’s offshore financial networks harbored vast amounts of Chinese elite wealth, the repercussions are now unfolding on the global stage. The scandal has reemerged as a backdrop to a heated dispute over the Panama Canal—a critical artery of global trade and a symbol of shifting geopolitical power.
The Panama Canal, completed in 1914, has long been recognized as a strategic masterpiece. By linking the Atlantic and Pacific Oceans, the Canal revolutionized maritime trade and bolstered U.S. economic and military might. Under the Torrijos–Carter Treaties, control of the Canal was transferred to Panama on December 31, 1999, with a guarantee that the waterway would remain neutral and open to all nations. Today, the Canal handles about 5% of global maritime trade, making it indispensable for both trade and security.
The 2016 Panama Papers leak cast a long shadow over Panama’s reputation by exposing a vast network of offshore shell companies. Notably, the leaked documents revealed that Chinese politicians and tycoons were major players in these schemes. Relatives of at least eight current and former Politburo members, including figures connected to President Xi Jinping’s family, were found to hold offshore accounts. High-profile cases, such as that of Jasmine Li – granddaughter of a former senior leader – illustrated how offshore entities were used to channel substantial wealth while circumventing domestic scrutiny. In response, the Chinese government swiftly censored discussions of the leak, aiming to contain its impact on President Xi’s anti-corruption campaign.
These revelations underscored Panama’s longstanding role as a discreet financial hub for Chinese assets—a role that is now central to the current dispute over the Canal.
U.S. officials have grown increasingly anxious about Chinese economic involvement in Panama. In February 2025, Secretary of State Marco Rubio warned President José Raúl Mulino that continued Chinese investments at the Canal could undermine its neutrality. U.S. concerns focus on a Hong Kong–based company, CK Hutchison Holdings, which has operated the ports at both entrances of the Canal since 1999. Although Hutchison is privately owned, American lawmakers argue that its ties to Beijing could, in a crisis, provide China with leverage over this strategic waterway. Senator Ted Cruz and other critics have cited these developments as potential security risks, suggesting that any further Chinese expansion might eventually threaten U.S. maritime and economic interests. While President Donald Trump has made provocative statements about “taking back” the Canal, Washington’s strategy remains centered on diplomatic and economic pressure rather than overt military intervention.
From Beijing’s viewpoint, Panama is a key partner in expanding China’s global economic outreach. After severing ties with Taiwan in 2017, Panama embraced formal relations with the People’s Republic of China and joined the Belt and Road Initiative (BRI). Chinese firms now operate major port terminals at the Canal’s Atlantic and Pacific entrances. High-profile projects, such as the canal bridge project awarded to China Harbour Engineering Company in 2018, have been financed by Chinese state-owned enterprises. Chinese banks and businesses use Panama as a hub for Latin American operations, reinforcing its status as a gateway for trade.
Chinese officials maintain that their activities are purely commercial and emphasize that Panama’s sovereignty is inviolable. They argue that Beijing respects the Canal’s neutral status and that any suggestion of military or political control is unfounded. However, recent U.S. pressure has led Panama to reconsider its ties with China, with President Mulino recently announcing plans to withdraw from the BRI—a move that Beijing decries as the result of “coercive” U.S. tactics.
In response, Panama’s President Mulino vehemently rejected these claims, declaring, “The canal belongs to Panama and will remain under Panamanian control. Demonstrations erupted in Panama City during Secretary Rubio’s visit, with protesters denouncing “external interference” and asserting national sovereignty. These protests underscored the deep-rooted sense of pride and independence among Panamanians regarding their management of the Canal.
BlackRock, the world's largest asset manager, has agreed to acquire two strategic ports at the Panama Canal's Atlantic and Pacific entrances from Hong Kong-based CK Hutchison Holdings in a $22.8 billion deal. This decision follows pressure from the Trump administration to counter perceived Chinese influence over the critical waterway.
As part of a broader acquisition of 43 ports across 23 countries, the transaction transfers control of the Balboa and Cristobal terminals to a U.S.-led consortium, aligning with President Trump's repeated calls for increased oversight of the canal. While Panama retains sovereignty over the canal itself, the deal addresses U.S. security concerns regarding Chinese-linked infrastructure near the passage, which handles 4% of global maritime trade.
Although CK Hutchison emphasized the purely commercial nature of the transaction, it occurred after Panama withdrew from China's Belt and Road Initiative and amid Secretary of State Marco Rubio's diplomatic efforts to reduce Beijing's regional influence. BlackRock CEO Larry Fink coordinated with the White House on the agreement, aligning the deal with Trump's agenda despite it being executed without formal U.S. intervention. While the acquisition awaits regulatory approval, it marks a significant shift in hemispheric infrastructure control amid escalating great-power competition.
The unfolding standoff over the Panama Canal is emblematic of a broader global power struggle. The Canal, a vital trade artery for roughly 5% of world commerce, has become a litmus test for U.S.-China rivalry. For Washington, ensuring the Canal’s neutrality is critical to protecting economic and security interests. For Beijing, maintaining robust economic ties with Panama is a cornerstone of its global strategy.
The stakes are high. Any disruption to the Canal’s operations could reverberate throughout global supply chains, raising shipping costs and unsettling international markets. Both superpowers insist that the Canal must remain a neutral, internationally governed resource—a principle enshrined in the Torrijos–Carter Treaties. Yet, as diplomatic pressures intensify, Panama finds itself walking a tightrope between economic opportunity and geopolitical coercion.
In a world where trade corridors can quickly become flashpoints for international conflict, Panama’s ability to navigate these turbulent waters will be critical. The hope remains that through careful diplomacy and vigilant governance, the Canal will continue to serve as a conduit of commerce rather than a battleground for great power rivalry.