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China angles for Central America influence

With ambitious plans for a canal through Nicaragua and a Honduran hydroelectric dam, Chinese firms are increasingly testing the waters in Central America, a region long considered the United States' backyard.

The audacious canal project, which would rival the US-built Panama Canal, underlines China's growing global power but has also highlighted the pitfalls that go with it.

The $US50 billion ($A54.10 billion) project, awarded to a Hong Kong-based company, has sparked protests and attracted a host of opponents, from naysayers who call it a future white elephant to Nicaraguans who fear a land-grab and environmental catastrophe.

"If you add up the 15 marches organised in the past two-and-a-half months, we've had 40,000 people," said lawyer and activist Monica Lopez Baltodano -- not a trifling figure for a country of six million.

"I have my doubts" about the feasibility of the project, said Jaume Gine, a China expert at Spain's ESADE business school.

"When the Panama Canal was inaugurated 100 years ago, it was the Americans' canal. Now it seems the Chinese want to repeat that, saying 'We're going to build the Nicaragua Canal' with money from the potential superpower of the 21st century," he told AFP.

"So, it's an image-building exercise, whether they finish the canal or not."

James Bosworth, an analyst at US consulting firm Southern Pulse, said the pharaonic project by Hong Kong Nicaragua Canal Development (HKND) "still faces major hurdles," including engineering challenges and local opposition.

But the plan is "about much more than the proposed canal," he said.

The project includes a host of infrastructure schemes: ports, roads, a tourist resort and a renovated airport.

"Unlike the proposed canal, those projects are certainly economically viable and should be profitable for the investors who back them," Bosworth said.

While Chinese firms currently have a small presence in Nicaragua compared to US and Canadian companies, that will change if the canal gets built, said Ronald Arce, a researcher at the Latin American Center for Competitiveness and Sustainable Development (CLACDS) in Costa Rica.

"The presence of Chinese firms across the region would multiply," he said.

China's presence elsewhere in Central America is already established, though investments remain modest.

Panama is currently the main destination for Chinese investment in Central America, according to a CLACDS study published in August.

But China only accounted for 2.5 per cent of Panama's foreign direct investment in 2011.

In Costa Rica and Guatemala, the figure was less than one per cent.

But experts say the superpower may be angling to expand its role.

"Aside from the canal, the investments aren't major. But it allows them, in a gradual way, to get to know a region they didn't know," said Gine.

"It's as if they were feeling the stones to cross the river, as the Chinese saying goes," he added.

"Now China wants to try to position itself in the entire Central American and Caribbean region."

Its targets: energy, telecommunications and infrastructure.

In Costa Rica, the China National Petroleum Corporation plans to build a $US1.3 billion ($A1.41 billion) oil refinery.

In Honduras, Sinohydro wants to build a $US350 million hydroelectric dam to match the one it already has in Belize.

Both projects have been placed on hold after being criticised locally, but look set to resume.

In another Honduras project, the China Harbour Engineering Company is studying the feasibility of a $US20 million railway to connect the Atlantic and Pacific Oceans, a project that would also compete with the Panama Canal.

"There are also political interests at stake, because we're talking about the United States' backyard," said Gine.

"This enables China to reinforce its geopolitical weight worldwide."