China Uses Ship Inspections as a Weapon — And the Panama Canal Is at the Center of It

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Washington Calls Out Beijing for Targeting Panama's Shipping Fleet

U.S. Secretary of State Marco Rubio accused China of economic "bullying" on April 2, 2026, after a dramatic surge in Chinese port detentions of Panama-flagged vessels. The move is widely seen as retaliation after Panama stripped a Hong Kong-linked company of its rights to operate two key ports near the Panama Canal.

"China's decision to detain or otherwise impede Panama-flagged vessels engaged in lawful trade destabilizes supply chains, raises costs, and erodes confidence in the global trading system," Rubio said on social media. He added that the United States stands with Panama against what he described as retaliatory actions targeting its sovereignty.

What Triggered the Crisis?

The dispute goes back to January 2026, when Panama's Supreme Court annulled the port concession contracts held by Panama Ports Company, a subsidiary of Hong Kong conglomerate CK Hutchison, at the Balboa and Cristóbal terminals — the two main container ports flanking the Panama Canal. The ruling found the legal framework underpinning the concession unconstitutional, following an audit that alleged unpaid amounts, accounting errors, and the existence of a so-called "ghost" concession operating within the ports since 2015.

Under an interim arrangement, APM Terminals — a unit of Danish shipping giant Maersk — took over operations at the Balboa port on the Pacific side, while MSC's Terminal Investment subsidiary assumed control of Cristóbal on the Atlantic side. Both companies have closer ties to the West, a shift that clearly displeased Beijing.

CK Hutchison, which had operated the ports since 1997, rejected the ruling as unlawful and launched an international arbitration case against Panama, claiming damages of more than $2 billion.

The Numbers Behind China's Pressure Campaign

In March 2026, there were 179 vessel detentions under the Tokyo MOU — the regional maritime inspection body covering the Asia-Pacific region — with 123 taking place in Chinese ports. Of those, 91 were Panama-flagged ships, meaning more than half of all vessels detained in the entire Asia-Pacific region that month were Panamanian ships held in China.

The U.S. Federal Maritime Commission (FMC) stated that China imposed the surge in detentions "under the guise of port state control, far exceeding historical norms," and that the intensified inspections "were carried out under informal directives and appear intended to punish Panama after the transfer of Hutchison's port assets."

Port state control (PSC) refers to the internationally recognized right of countries to inspect foreign ships in their ports for safety and compliance — a legitimate tool that critics say China is now using as a political weapon.

Sources familiar with the matter told Lloyd's List that Chinese authorities began issuing verbal instructions to ports on March 8 to intensify inspections of Panama-flagged vessels, with the first week described as a trial period — with enforcement expected to escalate further.

"No Other Country Does This"

FMC Chair Laura DiBella said the commission "is not aware of any other country in recent history conducting vessel safety inspections and detentions in a punitive manner."

Panama holds the world's largest ship registry, with more than 4,700 bulk and container vessels accounting for roughly 15 percent of global tonnage. That makes Beijing's targeting of the Panamanian flag particularly far-reaching. Lloyd's List warned there could be "substantial implications for global shipping," and suggested that shipowners may begin registering their vessels elsewhere to avoid the Chinese inspections.

Chinese officials from the Ministry of Transport also summoned representatives of Maersk and MSC to Beijing to discuss what they called "international shipping business conduct" — an unmistakable signal of displeasure over the two companies taking over the Hutchison ports.

The Bigger Geopolitical Picture

The Panama Canal is one of the world's most critical shipping routes, handling around 5 percent of global maritime trade. Control over the ports at its two ends — Balboa and Cristóbal — carries enormous strategic and commercial significance.

By late March 2025, China's antitrust regulator had already launched a comprehensive review of the proposed $22.8 billion deal between CK Hutchison and a BlackRock-led consortium, effectively blocking the sale and warning that "no concentration of undertakings shall be implemented without approval" — a move widely seen as a political intervention to prevent strategic assets from falling under Western control.

Beijing's Ministry of Foreign Affairs had pledged to "resolutely safeguard the legitimate rights and interests of its enterprises" after Panama's top court annulled the port concession. China's embassy in Washington, meanwhile, dismissed U.S. criticism as an attempt to seize control of the canal.

Panama's foreign minister, Javier Martínez, sought to play down the tensions, saying in March that he believed the increased detentions were "part of routine maritime industry practices, because detentions also occur in other ports and to other flags." He also stressed that Panama wants to maintain a respectful relationship with China.

What Happens Next?

Industry analysts warn that if Beijing proceeds with retaliatory measures targeting Panama-flagged vessels, it could add "further uncertainty to a sector already adjusting to disruptions from the closure of the Strait of Hormuz and tariff-related shifts in trade patterns."

The FMC has the legal authority to investigate whether foreign government practices harm U.S. trade — though it has not yet announced specific countermeasures. Rubio said Washington "looks forward to increasing economic and security cooperation" with Panama, signaling continued U.S. engagement in the region.

What is clear is that the Panama Canal has become a new flashpoint in the broader U.S.-China rivalry — and Beijing has shown it is willing to use the global shipping system as leverage.

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Sources

1. U.S. Federal Maritime Commission – Statement of Chairman DiBella on China's Detention of Panama-Flagged Vessels: https://www.fmc.gov/ftdo/statement-of-chairman-dibella-on-chinas-detention-of-panama-flagged-vessels/
2. ABC News – Rubio accuses China of 'bullying' for holding up Panama-flagged ships: https://abcnews.com/Politics/wireStory/rubio-accuses-china-bullying-holding-panama-flagged-ships-131669676
3. South China Morning Post – China raises pressure on Panama amid canal row with ship inspection wave: https://www.scmp.com/economy/global-economy/article/3346767/papers-please-china-raises-pressure-panama-amid-canal-row-ship-inspection-wave
4. gCaptain / The Loadstar – Panama-Flagged Ships Dominate China Detentions in Sudden March Spike: https://gcaptain.com/panama-flagged-ships-dominate-china-detentions-in-sudden-march-spike/
5. CNBC – Panama officially voids CK Hutchison contracts, hands canal terminals to Maersk, MSC: https://www.cnbc.com/2026/02/24/panama-officially-voids-annuls-ck-hutchison-contracts-interim-control-maersk-msc-canal-dispute.html
6. FreightWaves – U.S. 'monitoring' China retaliation against Panama ships: https://www.freightwaves.com/news/u-s-monitoring-china-retaliation-against-panama-ships
7. Newsroom Panama – Could 2026 Be the Make-or-Break Year of CK Hutchison's Panama Ports Deal?: https://newsroompanama.com/2026/01/03/could-2026-be-the-make-or-break-year-of-ck-hutchisons-panama-ports-deal/

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