China’s foreign minister Wang Yi made a brief visit to Sri Lanka on 9 January, in the last leg of his trip to the Maldives and three other East African countries — Eritrea, Kenya, and Comoros. Obviously, the FM’s trip had not only a regional context but also an Indo-Pacific one. As members of the Belt and Road Initiative (BRI), these countries are groaning under debt servicing problems, particularly after the Covid-19 pandemic badly affected their economy.
This would explain the presence of Vice Minister of Commerce Qian Keming, Assistant FM Wu Jianghao and Vice Chairman of the China International Development Cooperation Agency (CIDCA) Zhang Maoyu in the FM’s team.
President Gotabaya Rajapaksa had a clear economic agenda when the Chinese FM met with him. He sought the FM’s assistance in attracting Chinese tourists to Sri Lanka under the bio-bubble concept. He also pointed out that it would be a great relief if attention could be paid to restructuring debt repayments as a solution to the economic crisis the country was facing. He also said that a concessional trade-credit scheme could be initiated for imports from China.
According to a Xinhua report when the FM met with PM Mahinda Rajapaksa, he emphasised that the friendly relationship between China and Sri Lanka benefits the development of both countries and serves the fundamental interest of both peoples.
In a veiled reference to India, Wang Yi said: “It does not target any third party and should not be interfered with by any third party. Their talks covered a wide agenda including progressing the Sri Lanka-China free trade agreement (FTA).”
China’s concerns on “third party” security aspects were echoed by the Chinese Ambassador to Sri Lanka Qi Zhenhong, while speaking to a group of journalists after the FM’s visit. He said, “Defence progression and exchanges is a very important part in bilateral relations… I think we (China and Sri Lanka) should and could do more in this field.” He believed that “cooperation in this field, we not only serve the common interests of China and Sri Lanka on sovereignty, security, and stability, but also you will have this region to keep stability and prosperity”.
According to Ambassador Qi, Sri Lanka will receive an 800 million yuan (about $125 million) grant from CIDCA as part of agreements signed following the visit by China’s FM. Under another grant agreement signed, CIDCA is to fund the construction of 2,000 housing units for low-income people in the Colombo district. China has also signed an agreement with the Ministry of Health to provide kidney disease screening units on ambulances. An agreement to refurbish the BMICH conference hall gifted by China has also been signed.
It is interesting to note that Wang’s visit comes after China-Sri Lanka relations took a nosedive after Colombo suspended its contract for import of organic fertiliser from Beijing when samples were found to be substandard quality. China arm-twisted state-owned Peoples Bank to cough up $6.3 million, payment withheld for rejected shipment of fertiliser. China was not amused when Sri Lanka sought India’s urgent assistance to meet its organic fertiliser shortage.
China was also vexed when Sri Lanka suspended the contract offered to a Chinese firm to install hybrid renewable energy systems in three islands in Palk Bay, barely 50 km from the Tamil Nadu coast, in deference to India’s security sensitivity. Sri Lanka’s positive action has probably imbued greater confidence in the Rajapaksa government.
India has been agile in dealing with Sri Lanka to further its relations, particularly in this period. It stepped in real-time to meet Sri Lanka’s organic fertiliser needs after its spat with China over its supply. India has also fast-tracked the follow-up action after FM Basil Rajapaksa flew to New Delhi last month to seek New Delhi’s help to tide over the foreign exchange crisis. India cleared $1.9 billion assistance including a $400 million swap arrangement, $500 million credit line for other purchases, a few days after FM Wang ended his visit to Colombo.
India’s quick response also recognised Sri Lanka’s action to close the Trincomalee Tank Farm (TTF) issue by signing an agreement on the joint development of the facility. However, much would depend upon how earnestly the TTF agreement is implemented by both sides, considering the political rumblings already heard in Sri Lanka in the wake of the agreement.
India will have to keep up the momentum in dealing with Sri Lanka as already there are signs of China cleaning up its act.
Ambassador Qi has already taken the first step to woo the Tamil minority with the first-ever trip to Jaffna and Mannar. National Alliance leader MA Sumanthiran, MP, has come out strongly against Chinese entry into the North, reflecting the general anti-Chinese sentiments of Tamils. They have not forgotten China’s help to Sri Lanka to crushing the Eelam struggle in 2009.
However, the lure of the Chinese lucre is likely to win over some friends in business circles, particularly in the fishing trade. Tamil fishermen have for long been up against poaching by Tamil Nadu trawlers illegally operating in Sri Lankan waters. So far, India and Sri Lanka have failed to amicably resolve this issue for political reasons. This could offer China pressure points to act against India.
Ambassador Qi has also made a strong pitch for resuming the negotiations for an FTA with Sri Lanka, which was stalled after six rounds of talks. “We are open to discuss any concerns and China will be flexible so we can ensure early harvest for Sri Lanka” he said. The FTA will also help Sri Lanka to become a sub-distribution hub for Chinese firms to set up manufacturing operations and serve global markets. He cited the example of Cambodia, a low-income country, which had greatly benefited from its FTA with China.
India will have to reckon with the issue when Sri Lanka signs the FTA with China. Its fallouts will have to be factored in India’s trade with Sri Lanka, as well as on its own FTA with the island nation.
China will soon be sending a shipment of rice to Sri Lanka as a donation on the occasion of the 70th anniversary of the Ceylon-China Rubber-Rice Pact in 1952. This will be welcomed by the people as rice prices are ruling high in import-dependent Sri Lanka. Sri Lanka’s relations with China are founded on the goodwill generated by the Pact, which should not be underestimated.
President Xi Jinping addressing the 13th BRICS summit last year made a pithy remark: “A man of wisdom adapts to change, a man of knowledge acts by circumstances.” This holds the key to China’s gamesmanship in India’s neighbourhood, particularly in Sri Lanka. The year 2022 is going to be crucial when hopefully the Covid pandemic tapers off and the global economy picks up. India will have to think two steps ahead to take on China’s “war by other means” on many fronts in Sri Lanka.