China’s Recipe For Sri Lanka’s Economic Recovery


During his visit to Sri Lanka on January 8 and 9, the Chinese Foreign Minister, Wang Yi, had clearly indicated that China is keen on going beyond infrastructural development to investing in industries in the island nation to help it industrialize and develop a “Made in Sri Lanka” brand.

He also urged an early conclusion of the long drawn out negotiations on a Sino-Lankan Free Trade Agreement so that the island’s economy is put on a more solid and modern footing, based on investment and trade.

These proposals are meant to strengthen the Sri Lankan economy and enable to it to earn enough to repay debts even as they release China from the charge across the world that it is on a lending spree in poor countries with the aim of taking over their assets if they fail to repay the loans. China is widely accused of practicing “debt trap diplomacy.”

In Sri Lanka, so far, China has built massive infrastructural facilities like the Hambantota port, the Mattala airport, the Colombo International Container Terminal, the Colombo Port City, the Lotus Tower, a kidney Disease hospital in Polonnaruwa and several highway and railway links. With the result, today, China is the single largest lender to Sri Lanka having displaced Japan. But still, China accounted for only a little over 10% of Sri Lanka’s external debt of US$ 51 billion in 2021.

Yet, the taking over of the Hambantota port on a 99-year lease following the inability of the Lankan government to pay back the US$ 1.1 billion loan taken from China to build the harbor, is widely cited as a classic case of China’s “debt diplomacy”. However, over time, these projects, barring a few like the Lotus Tower, have started generating income. Even the classic White Elephants, the Hambantota port and the Mattala Airport derided by Forbes as the “World’s Emptiest Airport”, are earning money now.

If they took so long to yield returns it was not the fault of China or the assets, but the Sri Lankan government’s lack of interest in making use of the assets in a creative way. For instance, India had submitted a plan to use Mattala airport for domestic flights through a joint venture, but the previous Mathripala Sirisena-Ranil Wickremesinghe government used it for “grain storage”. However, since the Rajapaksa came back to power, the airport has been attracting flights.