Wide Angle focuses on China -Sri Lanka Maritime economy

• 5opn1
• January 19, 2025
• Weekly Political Review
• Wide Angle focuses on China -Sri Lanka Maritime economy
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Weekly Political review

By Rohana Jith
Sri Lanka’s Political Tightrope: Balancing Between China, India, and Economic Turmoil
China’s Waning Financial Support and Strategic Maneuvers

China’s historic role as a financial lifeline for Sri Lanka has diminished, particularly in the realm of large-scale infrastructure projects. Since 2021,

Beijing has limited its financial assistance to symbolic gestures, including a $1.5 billion currency swap and $76 million in humanitarian aid during Sri Lanka’s worst economic crisis in 2022. Crucially, it withheld support for Sri Lanka’s $4 billion bailout request and only concluded debt restructuring for $2.5 billion in loans in late 2024.

China’s focus has shifted to other strategic avenues. Its continued engagement through initiatives like the Belt and Road Forum, the Global Security Initiative (GSI), and the Global Development Initiative (GDI) underscores its intent to maintain regional influence, particularly in the Indian Ocean, despite reduced financial involvement.

Chinese-backed projects, including the Central Expressway and Hambantota Port oil refinery, have stalled or faced controversy. While Sri Lanka recently renewed a currency swap agreement worth $1.4 billion with the People’s Bank of China, concerns over debt sustainability have made Beijing cautious about further lending.

Sri Lanka’s Balancing Act with India and China

President Anura Kumara Dissanayake (AKD) faces the delicate task of navigating ties with China and India. His recent visit to China sought to rekindle development finance and investments, including stalled Free Trade Agreement (FTA) negotiations.

However, this has raised eyebrows in New Delhi, particularly with language in joint statements suggesting closer maritime cooperation with China. India views such developments as potentially threatening, especially with China’s controversial research vessels frequently docking in Sri Lanka.

While President AKD has assured India that Sri Lanka will not be a security risk, India remains vigilant. Concurrently, India continues to strengthen its ties with Sri Lanka, providing $780 million in development aid and leading key infrastructure and energy projects, such as the Sampur Solar Project and LNG supply lines. The proposed visit of Indian Prime Minister Narendra Modi to Sri Lanka is expected to bolster these relations further.

Economic Recovery and Public Discontent

Domestically, the AKD government’s economic policies are stirring public frustration. While campaigning, the JVP/NPP pledged to lower food costs, prevent rice shortages, and make vehicles affordable. However, rising food prices, a severe rice shortage, and a proposed tax hike on vehicle imports have left citizens disillusioned.

The government’s revenue generation strategies, including import taxes expected to raise vehicle prices by 300–600%, have drawn criticism from both citizens and opposition figures. Meanwhile, claims by the Telecommunications Regulatory Commission (TRC) denying data package price hikes have not eased public skepticism.

Adding to the unease, opposition MP Ravi Karunanayake has warned of potential economic instability from resuming vehicle imports. Former MP Patali Champika Ranawaka has also criticized the government’s ambitious revenue targets, predicting further financial burdens on citizens.

Governance Challenges and Public Perception

The AKD administration has struggled to translate campaign promises into governance. Criticism has intensified following symbolic missteps, such as awarding a former prisons commissioner implicated in the 2012 Welikada Prison riot. Civil activists and opposition leaders have condemned such actions, calling them contrary to the government’s stated principles of justice and accountability.

Investors, too, have expressed frustration over bureaucratic hurdles. Despite government claims of seeking public-private partnerships (PPPs) and foreign investments, private sector stakeholders report difficulties in securing meetings with key officials.

Internal Political Dynamics

The JVP/NPP’s internal struggles have also come to light. The party, once dominant in cooperative body elections, has faced recent defeats at the hands of opposition groups like the Samagi Jana Balawegaya (SJB). Former President Ranil Wickremesinghe remarked that the government is now facing opposition from the public rather than political rivals, highlighting the disconnect between campaign rhetoric and governance realities.

Strategic Implications of China’s Maritime Cooperation

China’s growing interest in maritime cooperation with Sri Lanka remains a contentious issue. A joint statement following President AKD’s visit to China emphasized collaboration on marine conservation, disaster relief, and training, sparking concerns about potential Chinese military presence disguised as civilian initiatives. India, wary of such developments, has consistently raised objections to Chinese “spy ships” docking in Sri Lanka.

Future Prospects: Reform, Recovery, and Regional Politics

Amid these challenges, Sri Lanka’s path forward will require balancing domestic reforms, economic recovery, and regional geopolitics. The AKD government’s ability to deliver on its promises, manage public discontent, and navigate complex international dynamics with India and China will be critical in shaping the nation’s future.

On the all-important Indian Ocean-related issues—the impasse over port calls and research visits by Chinese vessels to Sri Lankan waters—one of the most challenging issues faced by the previous Wickremesinghe Government with India and the United States in the fray at the time objecting, the JS states:

The two sides agreed to sign an MoU on “Ocean Cooperation toward a Blue Partnership“. At this stage, one can only assume the details were likely discussed at a separate bilateral meeting, but how these modalities for cooperation with China on ocean matters will synchronise with the President’s assurances to India only last month not to do anything inimical to its security and regional stability will be something to be watched.

The signing for a Chinese oil refinery next to the Hambantota Port and China’s pledge to develop an economic zone in the vicinity guarantees Chinese ships calling over regularly.

Extensive Chinese presence in the domestic sphere, intensifying political contact, training, and capacity building; research; scientific and technical exchanges; professional and vocational training; sister cities; and digitalisation of education, health, agriculture, tourism, judiciary, law enforcement, security, culture, and media; and Buddhist activities are all in the package together with an endorsement to expedite an FTA (Free Trade Agreement).

Overall, given their extensive steps in infrastructure connectivity and economic cooperation as well as strategic and security dimensions, the two Joint Statements with India and China are similar in content and intention. Both aspirants for global power status and leadership roles in the Global South are wooing Sri Lanka through a strategic lens: India through its ‘Neighbourhood First and SAGAR’ framework and China through the BRI.

It seems that Sri Lanka has agreed to both jealous suitors, rendering its future balance of relations an extremely fraught tightrope walk.