"I don't see that as a competition issue," Alberto Aleman Zubieta, the head of the Panama Canal Authority, told AFP. "We are a very important freight shipment hub, and shipping by sea is the most efficient (method)."

The Financial Times reported on Sunday that China was looking to construct a new 220-kilometre (136-mile) railway from the Pacific to a new city near Cartagena in northern Colombia.

Chinese goods would be assembled for re-export throughout the Americas and raw materials would make the return journey to China, the report said.

"It's a real proposal... and it is quite advanced," Colombian President Juan Manuel Santos was quoted as saying in Monday's Financial Times.

"The studies (the Chinese) have made on the costs of transporting per tonne, the cost of investment, they all work out."

China has ramped up investment and lending to the developing world, including Latin America, a strategy widely viewed as aimed partly at securing access to the raw materials needed to fuel its fast-growing economy.

Trade between China and Colombia in the first eight months of 2010 reached $4.8 billion, an increase of more than 73 percent over the same period in 2009, according to the Chinese commerce ministry.

The Panama Canal -- long considered an engineering marvel -- was built between 1904 and 1914 by the United States after an initial French attempt failed. It was returned to Panama's control 11 years ago.

Each year, around five percent of all international trade passes through the 80-kilometer (50-mile) man-made artery linking the Atlantic to the Pacific, with around 40 ships passing through the canal each day.

Last year, work began on a 5.2-billion-dollar project to enlarge the canal by constructing a third set of locks to ensure that today's super-size container ships, cruise liners and oil tankers -- many of which are too wide for the canal -- will be able to navigate the waterway in the future.

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