The US demand that Panama end its partnership with China that resulted in the country withdrawing from the Belt and Road Initiative is the first act in a new US strategy to curtail China’s vast network of commercial ports.
This network underpins its huge trade surpluses as it is a key link in global supply chains.
On the way to the G20 summit in Rio de Janeiro in November, Chinese President Xi Jinping met with Peruvian President Dina Boluarte to inaugurate a new US$3.6 billion deepwater mega-port in Peru called Chancay.
China’s state-owned shipping giant Cosco had bought a 60% stake in the port for $1.6 billion, giving the company exclusive use of the port for 60 years.
Days later, the first ship departed for Shanghai loaded with blueberries, avocados and metals.
Chancay is part of China’s vision for a 21st-century “maritime silk road” that would connect China’s manufacturing hubs with its trading partners around the world.
This has included major investments in ports in many countries, which has alarmed the West about China’s expanding influence on global shipping routes.
US President-elect Donald Trump made these concerns clear when he claimed that China was in fact “running” the Panama Canal and the US intended to regain control of it.
However, China does not officially operate the canal. Instead, a Hong Kong-based company operates two ports on either side of the canal.
COSCO Blacklisted
The US Department of Defense said in January that it had added COSCO Shipping to a list of companies it said were working with the Chinese military, a move seen by the shipping industry as a move to deter US companies from doing business with the Chinese company.
COSCO, one of the world’s largest shipping groups, said none of its listed units were military companies, that its global operations were continuing smoothly and that it would resolve the matter with US authorities.
The US blacklist does not carry the weight of legal sanctions on the commercial sector, but it has alarmed Greece, as Piraeus, one of the largest ports in the Mediterranean, has already suffered a decline in trade due to the crisis in the Red Sea, where Yemen’s Houthis are targeting commercial shipping.
A COSCO subsidiary also operates ports in Spain and Italy.
While the blacklist does not entail legal sanctions, it can act as a deterrent for many importers. The blacklist was a move in a power play between China and the US.
In 2019, the US imposed sanctions on two COSCO subsidiaries, prompting shipping companies to temporarily suspend chartering their ships until the sanctions were lifted.
Investment boom
The scale and scope of the Maritime Silk Road is impressive. China has invested in 129 ports in dozens of countries through its state-owned enterprises, mostly in the Global South.
Seventeen of these ports are majority-owned by Chinese entities. According to estimates, Chinese companies invested $11 billion in overseas port development from 2010–19.
More than 27% of global container trade now passes through terminals where leading Chinese companies have direct stakes.
Latin America and raw materials push
China has aggressively entered Latin America, becoming the region’s leading trading partner. Its port strategy has clearly signaled a long-term goal of accessing exports essential to its food and energy security: soybeans, corn, beef, iron ore, copper, and battery-grade lithium.
Last year, for example, Portos do Paraná, a Brazilian state-owned enterprise that acts as the port authority in the state of Paraná, signed a letter of intent with China Merchants Port Holdings to expand the Paranaguá Container Terminal, the second largest terminal in South America.
China may invest in even more Brazilian ports, as 22 terminals are scheduled to be auctioned before the end of 2025. In Africa, Chinese investment has grown from two ports in 2000 to 61 facilities in 30 countries by 2022.
And in Europe, Chinese companies have full or majority ownership of two key ports in Belgium and Greece – the so-called “dragon’s head” of the Belt and Road Initiative in Europe.
Strategy for economic dominance
China’s emergence as a maritime and shipping power that controls trade routes is central to Xi’s ambition for global economic dominance.
First, China requires stable access to key trade routes to continue meeting demand for Chinese exports worldwide, as well as the imports Beijing needs to keep the economy on a growth trajectory.
Control of ports also allows China to create economic zones in other countries that give port owners and operators preferential access to goods and services.
Some fear that this could allow China to cut off the supply of certain goods or even exert influence over the politics or economies of other countries. Another key driver of this strategy is the metals and minerals needed to fuel China’s rise as a technological superpower.
Beijing has concentrated its port investments in areas where these critical resources are located. For example, China is the world’s largest importer of copper ore, mainly from Chile, Peru, and Mexico.
It is also one of the world’s largest importers of lithium carbonate, mainly from Chile and Argentina. And its port facilities in Africa give it access to rare earths and other critical minerals.
Moreover, tapping into Latin America offsets the trade tensions that China has recently faced with Europe. It also raises concerns about the consequences of tariffs imposed on Chinese products by Trump.
Geopolitical Concerns – Ports Could Become Military Bases
These moves have raised concerns in Washington that China is challenging American influence in its backyard. China says its port diplomacy is market-oriented. However, it has built a naval base in the strategically located African nation of Djibouti.
And it is believed to be building another naval base in Equatorial Guinea. According to a recent report by the Asia Society Policy Institute, strategic analysts believe that China is seeking to use the Belt and Road Initiative as a weapon.
One way it can do this is by requiring commercial ports to invest in making them equally capable of serving as naval bases.
So far, 14 of the 17 ports in which it has a majority stake have the potential to be used for military purposes.
These ports can then serve a dual function, supporting the Chinese military’s logistics network and allowing Chinese naval vessels to operate further from their bases.
US officials also worry that China could use influence over private companies to disrupt trade during wartime.
The Western Response
While China’s investments raise suspicions, Western willingness to invest in ports of this scale is limited.
The US International Development Finance Corporation, for example, has a much slower, more rigorous process for its investments, which generally leads to fairer outcomes for both investors and host countries.
However, some Western companies are acquiring stakes in established and newly built ports in other countries, although not to the extent of Chinese firms.
French shipping and logistics company CMA CGM’s global port development strategy, for example, includes investments in 60 terminals around the world. In 2024, it acquired control of South America’s largest container terminal in the port of Santos, Brazil.
Donald Trump will use tariffs as a way to counter China’s global maritime power. One of his advisers has proposed 60% tariffs on any product passing through the port of Chancay in Peru or any other port owned or controlled by China in South America.
But rather than making nations reluctant to sign port agreements with Beijing, such actions simply erode Washington’s regional influence.
And China has already begun retaliating, such as banning the export of critical minerals to the United States. Host countries such as Peru and Brazil, meanwhile, are using the competition for port investments to their advantage.
Attracting interest from both the West and China, they are increasingly asserting their autonomy and adopting a strategy of using ports to increase their role on the world stage.
