A container ship operated by the Taiwanese company Evergreen has got stuck at Egypt’s Suez Canal, causing daily loss of US$9.6 billion in trade and disrupting the shipping of energy and consumer goods. The incident is unlikely to spark a global economic crisis, but it has prompted reflections on the strategic significance of canals around the world.

There are two leading canals in the world, one is the Suez Canal and the other the Panama Canal. The Suez connects the Red Sea and the Mediterranean Sea and is in practice a hub facilitating sea trade in Asia and Europe, while the Panama Canal is a channel which containers ships pass through to reach the Pacific or the Atlantic.

For many years, rumors had it that Li Ka-shing was in control of the Panama Canal. But as a matter of fact, no country in their right mind will sell such an important infrastructure to foreigners. What happened was that before the Panama Canal was handed back to Panama from the US, the Panamanian government put out to tender the 25-year right to operate Balboa and Cristobal, two ports on both ends of the canal. In 1997, Panama Ports Company, a unit of Hutchison Whampoa, won the bid.

After Li won the concession, some US congressmen voiced concerns that China might have a stranglehold of the Panama Canal and the canal might serve as a launching pad for missiles imported from China and targeting the US. At the time, then US president Bill Clinton said he “would be very surprised if any adverse consequences flowed from the Chinese running the canal”. Li also pointed out that his company could not possibly control the canal and that it was only involved in the container terminal.

In 2005, Hutchison Whampoa invested US$1 billion in a Panama Canal expansion project. It also acquired 90 percent stakes in two ports from the Panamanian government. Michael Chertoff, then US secretary of homeland security, later noted that Li was willing to allow the US to inspect his company accounts, which was a departure from normal practice. That effectively stifled any speculations surrounding the “China threat theory”. As a matter of fact, Li had for years been going between China and the US, enabling both sides to make gains.

In 2012, however, Chinese businessman Wang Jing set up a company in Hong Kong called HK Nicaragua Canal Development Investment Co. to build a new canal. Nicaragua is located in the north of Panama. Wang went so far as to sign an exclusive business deal with the Nicaraguan government. In effect, Wang made it clear that he was a rival of Li. But just like many nouveau riche Chinese companies, his company Xinwei Group, a publicly listed company in the mainland, later got into trouble. Between 2017 and today, it has lost a total of RMB 20 billion. In 2018, the Chinese government publicly stated that it had not participated nor invested in the canal expansion project.

Interestingly, Panama was not among the 53 countries that voiced support for Beijing’s move to impose the national security law on Hong Kong last year. But Nicaragua was one of these countries. The Suez Canal blockage may prompt the US and China to re-examine the strategic importance of the Panama Canal. It will be interesting to see whether China will look for an agent to restart the canal project in Nicaragua.

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