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Trade, FDI, and fast-tracking projects: A subdued China belatedly proposes five-point assistance program for Sri Lanka

Beijing also seems nervous as its earlier run, largely on the back of support of the now-discredited Rajapaksa brothers, appears to have come to an end. Unlike earlier, a crisis-hit Sri Lanka in need of assistance is more eager than any time before in recent years to embrace India, the West, and the United States.

May 31, 2022
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While Sri Lanka was slipping deeper into crisis, China, one of Colombo’s most important bilateral partners, made little attempt to assist the island country in the past few weeks crucial weeks. Colombo’s repeated requests for restructuring debts and even activating the existing line of credit were unheeded. Now, China has floated a five-point proposal to help Sri Lanka.

After weeks of silence over details of possible assistance, Chinese Ambassador Qi Zhenhong proposed fast-tracking ongoing projects, more foreign direct investment, and trade, bilateral debt settlement, and support to Sri Lanka in its talks with the International Monetary Fund (IMF). This came even as Sri Lankan President Gotabaya Rajapaksa had on Monday issued an extraordinary gazette notification bringing the Board of Investment and the Colombo Port City Economic Commission under the Defence Ministry controlled by himself, the Daily Mirror said.

This comes at a time when there is growing realization among common Sri Lankans of how India was their “true friend”. From medicines, food to fuel, and other essential items, New Delhi has been providing much-needed assistance to Colombo. Its assistance has crossed over $3 billion this year alone.

Lately, there have been a number of debates in local media about China’s passive response to Sri Lanka in its worst economic crisis since its independence in 1948 as compared to India being a real friend in need.

Earlier this week, Chinese envoy Zhenhong embarked on a three-day visit to Sri Lanka’s eastern part, a predominantly ethnic Tamil area where India is known for enjoying considerable influence.

During the visit, the ambassador also provided food packages to over 10,000 families in Trincomalee, Batticaloa, and Ampara Districts. He also met with political leaders, officials, and representatives of the local business community.

This is his second visit to the northeast part of Sri Lanka since December last year, when he visited Jaffna and signaled China’s intent to assert its influence in the region where India enjoyed considerable soft power.

Beijing also seems nervous as its earlier run, largely on the back of support of the now-discredited Rajapaksa brothers, appears to have come to an end. Unlike earlier, a crisis-hit Sri Lanka in need of assistance is more eager than any time before in recent years to embrace India, the West, and the United States. This would certainly limit Beijing's strategic influence, ambition, and options in an important Indian Ocean country.

Another move that made the Chinese even more apprehensive was Colombo’s decision to move the IMF. Of the total $51 billion in external loans that Sri Lanka announced a premature default on, almost $5 billion are Chinese loans. And the involvement of the IMF in loan restructuring talks is not going to go down well with China.

(SAM)

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