PRC Dominance Over Global Port Infrastructure

Executive Summary:

• Beijing’s economic control of port operations at strategic chokepoints across the world, many of which are part of the Maritime Silk Road initiative, pose a threat to the United States and its allies.
• Two Chinese state-owned firms, COSCO and China Merchant Ports, control 12.6 percent of global throughput. Beijing could also exert significant influence on the third-largest Chinese player, privately-owned Hutchison Port Holdings, which works extensively with PRC state-owned enterprises and has participated in strategically significant projects.
• Hutchison also controls two ports on the Panama Canal. Under pressure from the United States, Panama’s President Murillo announced his government will not renew the memorandum of understanding on the Maritime Silk Road signed with Beijing in 2017.
• Leveraging the economic power of state-owned shipping firms is part of Beijing’s strategy to become a strong maritime power.

On February 2, President Murillo of Panama announced that his government will not renew the memorandum of understanding on the Maritime Silk Road signed in 2017 with the People’s Republic of China (PRC). At a press conference that followed shortly after a meeting with U.S. Secretary of State Marco Rubio, Murillo said that Panama is going to study “the possibility of whether it can be completed sooner or not. I think it is due for renewal in one or two years,” he explained (X/ECOtvPanamá, February 2). [1] The Maritime Silk Road refers to the maritime portion of the PRC’s One Belt One Road (一带一路) initiative. The PRC was quick to respond. Assistant Minister for Foreign Affairs Zhao Zhiyuan (赵志远) made solemn representations to the Panamanian government, saying that his country “deeply regrets” (对此深表遗憾) the announcement, and warning that Panama would be running counter to the expectations of the Chinese and Panamanian peoples by “‘driving backwards’ and sailing against the wind on ‘One Belt One Road’” (在“一带一路”上“开倒车”、行逆风船违逆中巴人民期待) (FMPRC, February 8).

The flashpoint around the Panama Canal centers on Hutchison Port Holdings (和記港口), a private firm headquartered in Hong Kong that has operated the two of the canal’s five ports since 1997. While this does not equate to U.S. President Donald Trump’s assertion that the PRC controls the Panama Canal, the evolution of the PRC’s maritime strategy in recent decades and Hutchison’s moves to closer align with Beijing in the last few years reflect longstanding and valid concerns in the United States about Beijing’s strategic investments in global port infrastructure (White House, January 20; The Wire China, February 9). Already, Panama’s supreme court has agreed to consider a request filed by a lawyer to nullify the contract to CK (AFP, February 22).

Economics is Key to PRC Maritime Power

Becoming a “strong maritime power” (海洋强国) was set as a guiding ambition by former Chinese Communist Party (CCP) general secretary Hu Jintao in his report to the 18th National Congress in 2012, and Xi Jinping later incorporated this vision into his signature policies, including the “China dream” (中国梦) and the One Belt One Road (一带一路) initiative (People’s Daily, November 18, 2012, November 20, 2017).

The CCP’s conception of maritime power, especially as put forward by Hu, is in large part about naval strength, but the economic dimension has become increasingly vital. According to Xi Jinping’s Economic Thought, “an economically strong nation must be a strong maritime nation and a strong shipping nation” (经济强国必定是海洋强国、航运强国) (Xi Jinping Economic Thought Research Center, April 19, 2024).

Port infrastructure is key to building this strength. As the world’s largest trading nation, the network effects of the PRC’s extensive control over maritime shipping infrastructure are invaluable. By securing ownership stakes and operational leases in port infrastructure, Chinese firms can streamline global operations and grow their influence over supply chains while providing greater market access and reduced shipping costs for other Chinese companies. After a terminal operating contract is signed with a Chinese firm, total trade with the PRC increases about 21 percent, according to a study by the Mercator Institute of China Studies, a German think tank. The study also notes that PRC firms buy more goods than they sell to host countries after operating agreements are signed and that much of the cost savings go to PRC firms (MERICS, December 4, 2023).

The PRC has dramatically expanded its interests in maritime shipping infrastructure under the policy umbrella of One Belt One Road. Like many aspects of the One Belt One Road, this expansion preceded Xi Jinping’s official announcement of the initiative in 2013 but has gathered steam over the past decade. Counterintuitively, it is the “belt” part of the initiative’s name that describes the continental portion, while the “21st Century Maritime Silk Road,” announced by Xi Jinping at the Indonesian parliament in October 2013, is the portion that covers the seafaring element (ASEAN-China Centre, October 3, 2013).

The commercial aspect of the PRC’s maritime strategy is closely tied to key “national champion firms” (国家冠军企业). The policy of nurturing these firms through preferential access to capital and state support became institutionalized in the 2000s and is also a key objective of One Belt One Road (The China Project, September 11, 2024). For instance, the city of Ningbo, Zhejiang Province, dubbed the “city of [national] champions” (冠军之城), explicitly links PRC industrial policy to One Belt One Road. Noting that its firms depend on external markets, an article by the city’s customs office says, “Serving the construction of ‘One Belt, One Road,’ Ningbo has established friendships with 117 cities in 60 countries, and its ‘circle of friends’ continues to expand” (服务共建“一带一路”，已与60个国家117个城市建立友城关系，宁波“朋友圈”持续扩容). It also quotes a popular saying among local businesses: “Rely on policies, seize opportunities” (依靠政策，抓住机遇) (Ningbo Customs, January 8).

Top Firms’ Strategic Posture

Two players have been essential to establishing the PRC’s overseas port empire, China Merchants Port Holdings Company Limited (CMP; 招商局港口控股) and COSCO Shipping Ports Limited (COSCO; 中远海运港口), the port subsidiary of China COSCO Shipping Corporation (中远海运集运). While CMP and COSCO operate as separate, commercially run companies in their day-to-day functions, they are ultimately controlled by the State-owned Assets Supervision and Administration Commission (SASAC) under the PRC State Council. This structure has two significant international consequences. First, these companies enjoy substantial advantages that would be considered highly irregular or even illegal in Western systems, such as wide-ranging state aid and an ecosystem of allied state-owned enterprises. Second, Beijing retains ultimate control over these national champions. On occasion, COSCO and CMP might resist interventions that run counter to commercial imperatives and Beijing realizes the risk of undermining these champions through overt influence. Nevertheless, SASAC holds the ultimate power to weaponize port operations if it so chooses, for example, by interfering in price setting or controlling capacity allocation.

According to the “Vision for Maritime Cooperation under the Belt and Road Initiative,” issued in June 2017 by the National Development and Reform Commission (NDRC) and the State Oceanic Administration, the maritime silk road consists of three “blue passages.” These passages go between the PRC to Africa and the Mediterranean via the Indian Ocean, to the South Pacific, and to Europe via the Arctic (Xinhua, June 20, 2017).

PRC firms have established port operations across these major arteries and at strategic choke points such as the Malacca Strait, the Suez Canal, and the Panama Canal. These include 23 European ports; 13 North and Central American ports; 11 ports in the Middle East; 8 ports in Africa; 8 in Southeast Asia; and 4 each in South Asia, East Asia, and Australia (MERICS, November 7, 2024). They have done so under One Belt One Road, leveraging access to billions in state financing, securing operating concessions and then investing in expansion projects, or, alternatively, by winning expansion projects first and subsequently taking on the operational responsibilities. In some cases, they have also gained a foothold through larger acquisitions. The most notable of these is CMP’s 2013 acquisition of a 49 percent stake in Terminal Link, a subsidiary of French shipping company CMA CGM (CMA CGM, June 11, 2013). This deal provided CMP with interests in 15 container terminals across eight countries, and in 2019, CMA CGM and CMP reached an agreement for Terminal Link to acquire stakes in an additional 10 port terminals (CMA CGM, December 20, 2019). In some cases, CMP and COSCO have also acquired equity stakes in the ports. These include in the ports of Piraeus in Greece, the Port of Rotterdam in the Netherlands, Chancay Port in Peru, Port of Abu Qir, Egypt, and Kuantan Port, Malaysia (China Brief, March 14, 2024).

The world’s seven largest firms now control 40 percent of global throughput, adjusted for equity, according to the latest Global Container Terminal Operators Annual Review and Forecast from the independent global maritime advisory and research organization Drewry. [2] Trailing Singapore’s PSA International with 7.2 percent of global share, COSCO and CMP reported 6.4 percent and 6.2 percent, respectively, though due to their shared ownership they can be considered collectively (Drewry, August 12, 2024). Combining these two firms means that SASAC indirectly controls 12.6 percent of global throughput. The degree of vertical integration in COSCO—the world’s third largest operator and one of the largest container shipping companies—and in the broader ecosystem of PRC state-owned enterprises makes Beijing’s control of global shipping and maritime infrastructure particularly formidable. This gives Beijing even greater leverage to shape global maritime trade flows.

Adding Hutchison’s throughput to a collective Chinese total is difficult to justify—though such assessments may be increasingly reasonable. Although it is the third most significant PRC actor involved in overseas ports, as a private firm headquartered in Hong Kong it has been excluded from most analyses of Beijing’s global port expansion. However, as the CCP expands its control over the national economy and erodes Hong Kong’s independence, the distinctions between state-owned and private enterprises—and between Hong Kong and the mainland as separate jurisdictions—are becoming increasingly blurred (China Brief, January 19, 2024, March 1, 2024). Although Hutchison remains much more similar to a private Western firm than CMP or COSCO, Beijing could still exert significant influence if it chose to do so. Hutchison works extensively with PRC state-owned enterprises and has participated in strategically significant projects. For instance, it has collaborated with the Egyptian navy (Hutchinson Ports Abu Qir, August 27, 2020). While Hutchison is in a different league to COSCO and CMP, it is reasonable to consider its assets in an assessment of PRC influence today.

The significance of the PRC’s control over throughput also extends beyond shipping. Ports are critical nodes in global commodities supply chains, where PRC state-owned firms have entrenched positions. Entire supply chains, from extraction and processing to logistics and trade, are vertically integrated with PRC SOEs, banks, and trading houses, ensuring that control over ports translates into broader leverage over the global flow of resources, from iron ore to soy beans.

Conclusion

U.S. concern about the PRC’s global port footprint tends to focus on the military potential of these interests (DoD February 5; SOUTHCOM, February 20). To date, the PRC has only one confirmed overseas military base, in Djibouti. [3] By comparison, the United States has bases in dozens of countries around the world. Nevertheless, concerns about harder security dimensions are valid. Under the military-civil fusion development strategy, ports are strategic dual‑use assets that serve both economic and defense objectives (China Brief, April 14, 2023). In addition to this dual-use potential, there are legitimate reasons to suspect that commercial investments might provide footholds for a military presence (China Brief, October 19, 2020).

The geopolitical consequences of the PRC’s economic control poses an arguably greater threat, however. While the United States dominates global maritime security, there is a huge disparity in the other direction when it comes to influence over maritime trade. Unlike the PRC, which controls around 12.6 percent of global port throughput through COSCO and CMP, the United States has no state-backed firms among the world’s leading terminal operators. In terms of global port influence, the United States would likely rank behind not only the PRC but also the United Arab Emirates (DP World), France (CMA CGM/Terminal Link), and Singapore (PSA International).

The United States currently lacks the means to reduce the PRC’s global port footprint, even within the Western Hemisphere. Within the United States itself, PRC firms continue to exercise property rights at five ports. The first Trump administration successfully removed PRC ownership of U.S. ports when it forced COSCO to divest its shares in the Long Beach Container Terminal, but contracts to operate the ports remain in PRC hands (Freight Waves, July 8, 2018). In 2022, when COSCO’s contract for another terminal at Long Beach came up for expiry in 2022, no other operator reportedly had the technical ability to replace COSCO (MERICS, November 7, 2024). In the near term, European port operators that have expertise and global presence could erode some of Beijing’s influence if paired with U.S. capital. For now, there may be little that President Trump can do to challenge Beijing’s port presence—even in what he considers America’s backyard.

Notes

[1] Original: “Vamos a estudiar la posibilidad de si se puede terminar antes o no. Creo que le toca en uno o dos años la renovación.”

[2] Throughput refers to the amount of cargo or number of vessels that a port handles over a specific period of time. Adjusted for equity here means that, for example, a 50 percent stake in any given terminal would contribute 50 percent of total throughput.

[3] Despite concerns over PRC involvement renovating Cambodia’s Ream Naval Base, it currently appears unlikely that the PRC will use it for military purposes (Lowy Institute, December 4, 2024).