China has issued unusually sharp warnings after Panama’s Supreme Court ruled that a Hong Kong–backed company’s concession to operate key ports at the Panama Canal was unconstitutional, signalling that Panama could “pay a heavy political and economic price” if the decision is not reversed.

The ruling has rapidly escalated into a major geopolitical flashpoint, placing the Panama Canal at the centre of an intensifying power struggle between China and the United States over strategic infrastructure in the Western Hemisphere.

Panama Court Targets Hutchison Ports Concession

At the heart of the dispute is CK Hutchison, a Hong Kong–based multinational that operates ports worldwide through its Hutchison Ports subsidiary. The company has long managed two strategically vital terminals at opposite ends of the Panama Canal under a concession agreement.

Panama’s Supreme Court ruled late last month that the contract granted to Hutchison’s local unit violated the country’s constitution, following a government audit of its operations. The decision effectively threatens the company’s right to continue operating the ports.

Hutchison Ports’ Panama Ports Company has since launched international arbitration proceedings, arguing that the ruling is part of a coordinated state campaign against it.

Beijing Condemns Ruling as “Hegemonic Bullying”

China’s response was swift and unusually combative. In an 800-word statement, Beijing’s office overseeing Hong Kong affairs described the ruling as “truly shameful and pathetic,” accusing Panama of bowing to US pressure and acting as “an accomplice to hegemony.”

China said it “firmly opposes economic coercion and hegemonic bullying” and warned that the decision would severely damage Panama’s business environment and long-term economic development.

The strong language underscores how closely Beijing is watching the case—and how seriously it views Washington’s efforts to roll back Chinese influence in Latin America.

US Pressure and Trump’s Canal Narrative

The ruling comes amid an aggressive push by the administration of Donald Trump to deny “non-Hemispheric competitors” control over strategically vital assets in the Western Hemisphere.

Trump has repeatedly claimed—without evidence—that “China is operating the Panama Canal,” vowing in his inaugural address to “take it back.” On his first day in office, Panama launched an audit of Hutchison’s port operations, though President José Raúl Mulino publicly rejected Trump’s assertions.

For Washington, the Panama Canal—through which roughly 40 percent of US container traffic transits annually—has become a critical test case in its broader effort to counter Chinese economic and logistical footholds close to US territory.

China’s Deep Economic Footprint in Latin America

Over the past two decades, China has built extensive economic ties across Latin America and the Caribbean, generating more than $500 billion in annual trade. Chinese firms are deeply embedded in the region’s power grids, telecommunications networks, mining projects, and port infrastructure.

Panama occupies a particularly sensitive position. China overtook the United States as Panama’s largest trading partner in 2019, according to UN data through 2024. Beijing also scored a diplomatic win in 2017 when Panama became the first Latin American country to join Chinese leader Xi Jinping’s Belt and Road Initiative.

That relationship has since deteriorated under mounting US pressure, with Panama formally withdrawing from the Belt and Road framework earlier this year.

The BlackRock Deal and Beijing’s Dilemma

Tensions escalated further when CK Hutchison announced plans last year to sell stakes in more than 40 ports across two dozen countries—including the Panama Canal terminals—to a consortium led by US investment giant BlackRock.

Trump hailed the proposed sale as a US victory. Beijing, however, insisted it would “conduct reviews and supervision” of any such asset transfer. Since then, the deal appears to have stalled, and analysts say Panama’s court ruling could further complicate or derail the transaction.

While Hutchison is not a Chinese state-owned enterprise—it is controlled by Hong Kong billionaire Li Ka-shing—Beijing views the case as a precedent that could deter Chinese firms from investing in strategically sensitive regions.

Economic Retaliation or Strategic Restraint?

China has a well-established record of using economic leverage to retaliate against governments it believes have crossed political red lines, from restricting tourism to Japan over Taiwan tensions to imposing trade barriers on Australian and Norwegian exports.

Analysts say Panama could face similar pressure through trade, investment slowdowns, or regulatory hurdles. However, Beijing also faces a strategic dilemma: heavy-handed retaliation could undermine China’s efforts to present itself as a stable, non-coercive alternative to US leadership, particularly among emerging economies.

Beijing may also tread carefully ahead of an expected visit by Trump later this spring, as both sides seek to stabilise a fragile US–China relationship.

A Test Case for Regional Influence

For US policymakers, Panama’s ruling is already being framed as evidence that sustained political and legal pressure can roll back Chinese influence. Analysts in Washington say the decision is likely to embolden further challenges to Chinese-linked infrastructure projects elsewhere in the region.

At the same time, Chinese strategists are warning that the episode will make state-owned and private Chinese firms far more cautious about committing capital near US-controlled chokepoints.

As the legal battle continues, the Panama Canal dispute has become far more than a commercial disagreement—it is now a high-stakes test of how US–China rivalry will play out across Latin America, and whether strategic infrastructure can remain insulated from great-power competition.