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Cruise ship Disney Adventure transits the Panama Canal on 2 February 2026, the latest passenger vessel to pass the interoceanic waterway (Daniel A. Gonzalez/Anadolu via Getty Images)

Up the canal without a paddle: The lessons from Panama for Australia

A case study in the costs of being seen to cross China.

Carolin Kautz

5 February 20264 min read

The Panama Canal is seemingly far away from Australia and also not on the most crucial trade and logistics routes for Australian businesses. Nevertheless, after the Supreme Court of Panama last week cancelled the managing contracts of the Hong Kong company CK Hutchinson and its subsidiary, the Panama Ports Company, developments around the canal should be getting attention in Australian politics and business.

This is only the most recent case of disagreements over the control of strategic assets by a Chinese company after the case of Nexperia in the Netherlands. These offer valuable lessons for Australia’s own issues with infrastructure controlled by Chinese companies, most obviously the Port of Darwin, but also Australia’s green energy transformation.

Control over the Panama Canal has been a contested issue since the Trump administration claimed undue influence by China over the operation of the canal and the alleged unfair treatment of American companies. To be clear, like in the case of Nexperia, the current Supreme Court ruling in Panama does not reference any political considerations in its decision and we do not have any specific evidence that it was made following political pressure. Rather, the decision was made following a review and court case lodged by Panama’s comptroller general over allegations of irregularities in the renewal of the contracts with CK Hutchinson signed in 2023.

Independent of whether this seen as a purely legal matter or a case of geopolitical pressure, the potential political and economic ramifications are enormous. That includes for Australia.

Ending investment contracts in critical infrastructure is increasingly seen as a political move and triggers political reactions with very tangible economic consequences.

The first issue is the question of investment credibility. In an editorial, Chinese state-controlled newspaper Global Times stated that “if commercial contracts can be nullified at the whim of politicians or under pressure from allies, then no long-term investment within the Western system is truly safe”. Also, the Hong Kong government issued a strongly worded statement that concluded with the words that “given the current situation in Panama, Hong Kong enterprises should carefully review their existing and future investments there” and the company itself, CK Hutchinson, has started international arbitration proceedings over the ruling against Panama.

After recent comments China’s ambassador to Australia made about the government’s plans to take back control over the Port of Darwin, announcements such as these send a chilling message. Government entities in China are willing to pull the plug on Chinese investment into a country and file legal action if a government or a court takes a decision unfavourable to a Chinese company. Since Prime Minister Anthony Albanese’s visit to China last year, Australia has high hopes for expanding cooperation and investment partnerships with China. An official recommendation from the Chinese government to curb investment would be a serious hit, especially for Australia’s ambitions in the green economy.

The second issue is the question of specific trade retaliations. In the case of Panama, a spokesperson for the Chinese Foreign Ministry reiterated that “China will take all measures necessary to firmly protect the legitimate and lawful rights and interests of Chinese companies”. This is very similar to the wording they used a few days earlier in response to a question on Australia’s plan to take back control over the Port of Darwin. In Nexperia’s case last year, we saw initial restrictions on the exports of chips to European companies that had these companies struggling to maintain their supply chains and production.

In relation to the Panama Canal, we have not yet seen any direct trade measures or restrictions and we will have to observe this over the next few days and weeks to see whether China will implement any trade measures against Panama.

For Australia, the case of the Panama Canal offers another real-life case study of the ramifications of foreign, especially Chinese investment, into critical infrastructure and core technologies. In times of heightened geopolitical tensions, foreign investment in critical infrastructure and core technologies is always tricky. This can even be the case if the investor is a close ally that might suddenly rethink its policy priorities and alliance commitments.

It follows from this point that rolling back investment can and likely will lead to repercussions. Ending investment contracts in critical infrastructure is increasingly seen as a political move and triggers political reactions with very tangible economic consequences. Whether that is in the form of threatening to withdraw investment (Panama), stopping the delivery of core technological products (Nexperia) or threatening to implement tariffs such as the US administration likes to do.

For Australia, this means ensuring a risk-informed approach to both approving and terminating investment. Australia needs a stronger public debate and ideally a bipartisan consensus on what its national interests are and how they can best be protected. There has to be a clearer understanding of what critical infrastructure is, who can invest in it and how to protect it. Otherwise, Australia will see a repetition of the cycle of approving investment and walking it back – with potentially disastrous consequences for foreign and trade relations on all ends.

About the author

Carolin Kautz

Carolin Kautz holds a PhD in contemporary China studies with a political science focus from the University of Goettingen/Germany.

Topics

China Australia The Americas Economy