The diplomatic spat between China and Panama is worsening over the Central American nation’s decision last week to strip Hong Kong’s CK Hutchison of its rights to operate two ports. 

Panama’s president, José Raúl Mulino, declared the government will never again award the Balboa and Cristobal port concessions to a single company after the Supreme Court last week annulled CK Hutchison’s nearly 30‑year contracts for giving exclusive privileges and tax exemptions. Mulino called the ruling definitive and insisted, “Panama is a dignified country and will not allow itself to be threatened by any country on earth.”

For now, CK Hutchison’s Panama Ports Company will continue running both terminals, the president said, while the legal status is clarified. Mulino said the state will decide a future concession scheme “much later.” 

CK Hutchison’s Panama Ports Company has launched international arbitration, a process likely to take years.

The ruling has already provoked diplomatic and commercial ripples. Beijing warned of “heavy prices” and reportedly ordered state firms to pause new Panama projects, while Chinese customs have stepped up inspections of Panamanian imports.

An opinion piece published in state-run China Daily today argued the Supreme Court decision was “a textbook case of how external pressure can corrupt judicial independence and undermine the foundations of international investment”.

The fallout between the two nations has led to one renowned container shipping consultant, Lars Jensen, the founder of Vespucci Maritime, to mull whether Beijing might dust off plans for a rival canal in Central America.

“The question is …whether the geopolitical turmoil surrounding the Panama Canal might lead to a rekindling of the Nicaragua Canal project as a means of geopolitical leverage from China,” Jensen wrote in a LinkedIn post, noting the last time talk of such a construction in Nicaragua by Chinese interests disappeared just over a decade ago was around the same time as Panama severed ties with Taiwan and instead established relations with mainland China.