Growing Chinese influence in Sri Lanka

Owing to Sri Lanka’s strategic location at the intersection of major shipping routes, China has heavily invested in its infrastructure (estimated at $12 billion between 2006 and 2019).

Hambantota port: Currently, China is the largest bilateral creditor to Sri Lanka. Unable to service its debt, in 2017, Sri Lanka lost the unviable Hambantota port to China for a 99-year lease.

Increased reliance on Chinese credit: Further, Sri Lanka has increasingly relied on Chinese credit to address its foreign debt burden. For instance, recent syndicated loan for budgetary support of $1.3 billion from China Development Bank and a $1.5 billion currency swap pact with the People’s Bank of China this March.

China’s exports to Sri Lanka surpassed those of India in 2020 and stood at $3.8 billion (India’s exports were $3.2 billion).

Recently, Sri Lanka passed the Colombo Port City Economic Commission Act. It provides for establishing a special economic zone around the port and also a new economic commission, to be funded by China.

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