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How China can warm India to its new-found financial clout

29 0 5
18.01.2019

When the then seemingly invincible Sri Lankan President Mahinda Rajapaksa suffered a shock election defeat in 2015, the ousting of the China-friendly leader was widely seen as the beginning of the end for Chinese influence in the nation.

Four years on, that assessment has proved to be premature. The government in Colombo under President Maithripala Sirisena, faced with both a financial crisis at home and few credible financing alternatives abroad, has found it has had little choice but to deepen the country’s economic reliance on China, as underlined by two recent events.

First, China’s once-controversial port project in Colombo – which made headlines during Sri Lanka’s elections in 2015 over environmental concerns as well as the opaque terms of the deal – took a major step towards fruition last week with the completion of 269 hectares of land reclamation. Two-thirds of this land will go to China on a 99-year lease, rather than in perpetuity as Rajapaksa had reportedly initially said, much to India’s concern.

Second, the Sri Lankan government revealed it was considering approaching the Bank of China for a US$300 million loan that could be further raised to US$1 billion. (Colombo is also negotiating a currency swap deal with India for up to US$1 billion.)

This follows a worsening financial crisis which many analysts see as a result of the excesses of the Rajapaksa years – marred as they were by widespread allegations of financial mismanagement and even corruption.

Sri Lanka faces repayments of US$5.9 billion this year, according to domestic media, with a little under half of that amount due in the first three months. From China alone,........

© South China Morning Post