Why diplomatic ties with Panama are so important to Beijing
Panama’s decision to switch diplomatic relations from Taipei gives mainland China a huge boost both commercially and diplomatically
The establishment of full diplomatic links between Panama and mainland China after the central American country broke its ties with Taiwan has both geostrategic and commercial value to Beijing, at once giving Beijing an ally in a key location to pursue its ambitious global trade expansion plans and increase its influence in a region once dubbed the US’ backyard, while further tightening the screws on a Taiwan whose government Beijing strongly mistrusts.
The commercial value
As China promotes its ambitious “Belt and Road Initiative” to expand global trade links and create new markets for its goods, the normalisation of diplomatic ties with Panama will help Chinese companies increase investment around the Panama Canal, a key waterway linking the Atlantic and Pacific oceans and a major international trade route. Last year a Chinese firm, Landbridge Group, bought Panama’s largest port, Margarita Island, and announced it wanted to expand and modernise the facilities. According to China’s commerce ministry, there are over 30 Chinese firms with a presence in Panama, including Bank of China, shipping firm COSCO, Huawei, ZTE, China Harbour Engineering and China Railway Construction Corp. More companies and investment could now follow, expanding Chinese influence over the canal, which was once almost exclusively in the sphere of influence of the United States.
The diplomatic value