Trade or tactics? Why China’s Chancay Port in Peru has the US on edge

As China’s President Xi Jinping begins a diplomatic tour of Latin America, his goal is clear: to show the world how China’s Belt and Road Initiative is expanding China’s influence globally, especially through large infrastructure projects. One of the key events on this trip is the opening of the new Chancay Port in Peru. Inauguared on Thursday by President Xi and his Peruvian counterpart Dina Boluarte on by video link, this port is a major project that gives China more control over important shipping routes and trade in developing economies.

Chancay Port: Economic importance and key location

Chancay Port, located 80 kilometres north of Lima, has been built with $3.5 billion in funding, mostly from China’s COSCO Shipping Corporation. The port is anticipated to become a key connection between Latin America and Asia, cutting shipping time between Peru and China by approximately 10 days. It will handle up to one million containers and 160,000 vehicles each year, allowing Peru to export resources like lithium, copper, iron and soybeans. Other South American countries, like Brazil and Chile, may also benefit since they exported $135 billion worth of goods to China in 2023.

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Chancay is now part of a global network of 18 ports where China holds a majority stake extending China’s reach and influence through the Belt and Road Initiative (BRI). China’s state-owned companies, like COSCO, are leading these investments, giving China more control over important trade routes and economic power through these key ports.

However, there are concerns from local communities and environmentalists about the impact of such a large project. Some worry about potential damage to the environment and the risk that such investments could put countries in debt, forcing them to make economic or political compromises. While Peru’s current economic stability lowers the immediate risk, concerns remain about the environment and how local authorities will manage the project’s impact.

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China’s expanding global port network

China’s investment in Chancay Port isn’t an isolated project. China has funded ports in key areas worldwide, including the Indian Ocean, the Middle East, Africa, Europe and South America. These ports are located at important trade routes, like Djibouti (near a vital passage for ships), Gwadar in Pakistan and Piraeus in Greece.

In Myanmar, China’s investment in the Kyaukpyu Port is a crucial part of its BRI. This port provides China direct access to the Indian Ocean, helping it reduce dependence on the narrow Strait of Malacca for energy imports. Through Kyaukpyu, China can transport oil and gas directly from Myanmar into its Yunnan Province, boosting energy security and influence in Southeast Asia. However, there are concerns that Myanmar could become too reliant on China due to these large infrastructure investments.

China’s network of ports worldwide strengthens its control over global trade routes and builds diplomatic ties giving it potential influence over major shipping pathways.

For example, in Djibouti, China’s commercial investments led to the creation of a naval base close to a US military base. Although Chancay Port is currently focussed on trade, its location on the Pacific Ocean raises questions about whether it could be used for intelligence or military activities if tensions between nations rise.

Dual-use ports and security concerns

By controlling ports, China could monitor the movements of other countries, including US naval activities. Although China claims these ports are purely for economic purposes, there are cases of Chinese naval ships using them, hinting at potential military applications. This “dual-use” capability raises security concerns, particularly in regions where China hasn’t traditionally been active and could impact the movement of US and allied forces.

China’s network of ports aligns with a strategy known as the “String of Pearls,” which involves positioning ports along key trade routes to protect Chinese trade and expand its influence. Ports like Gwadar in Pakistan and Hambantota in Sri Lanka are examples of economic projects that could also serve military purposes. With Chancay Port located close to the Americas, there are worries it might increase China’s influence over Pacific trade routes.

Traditionally, the US has dominated trade routes and military influence in Latin America, but China’s recent investments could alter this balance pushing the world toward a more multipolar order. Ports like Chancay, strategically located on Latin America’s Pacific coast, showcase China’s growing reach beyond Asia and emphasise the need for the US to reassess its interests in the region.

The US has responded with initiatives like the Build Back Better World programme aimed at providing sustainable infrastructure alternatives to the BRI. However, China’s extensive BRI investments still surpass these efforts, which may lead Washington to strengthen diplomatic ties with Latin American nations and explore expanded military partnerships.

Economic implications for host countries

China’s investments in ports help develop infrastructure, boost trade and create jobs. However, they can also make countries economically dependent on China. For example, Sri Lanka’s debt led it to lease the Hambantota Port to a Chinese company to help repay what it owed. In Latin America, there are fears that relying too much on Chinese infrastructure could limit their freedom in foreign policy making their economies more vulnerable to pressure from China.

Countries need to weigh the benefits of these investments against potential long-term risks. For Peru, the new Chancay Port could strengthen its role as a trade centre on the Pacific, but it might also bring challenges with controlling regulations, managing debt and protecting the environment.

A multipolar maritime world

China’s rapid expansion of its global port network is changing the balance of power on the seas, going beyond just economics. When countries like Peru partner with China on important trade projects, they support China’s larger plan for economic connections through the BRI. For China, ports like Chancay help secure access to resources, strengthen economic ties and build influence in a world once dominated by Western trade and military alliances.

For the US and its allies, China’s growing control over ports is a complicated issue. As President Xi Jinping opens another BRI port in Peru, the question of China’s true intentions is important. Ports like Chancay represent a new era where infrastructure isn’t just about trade. It’s also a tool of global power shifting the world toward a system where economic influence and strategic locations are as important as traditional military alliances.