In this file photo taken on June 6, 2012, the Asian Sun car shipping carrier (right) and and carrier Frisia are pictured at the main berth of Sri Lanka's Chinese-built Hambantota Port. Sri Lanka will move its southern naval command to a port leased to a state-run Chinese firm but China will not use it for military purposes, the Sri Lankan Prime Minister's Office said on June 30, 2018. Photo: AFP / Ishara S Kodikara

Over the last few years, Sri Lanka has become a case study of how Chinese money and clout have the capability to buy favors and concessions. The government under Mahinda Rajapaksa gave China a free hand in how it chose to invest in Sri Lanka. Beijing put a lot of money into economically non-viable though strategically important projects, especially the Hambantota Port and Airport.

With time, the projects failed to achieve any benefit for the Sri Lankan economy. Rajapaksa lost the presidential elections in 2015 to Maithripala Sirisena. The issue of mounting Chinese debt played a major role in the latter’s victory. However, the Hambantota loan forced the Sri Lankan government to lease the port for 99 years to a Chinese shipping company with the hope of repaying the debt in due course.

Sirisena won the election on a strong anti-China campaign platform. However, after taking office he went on to pacify the Chinese and promise that their investments in Sri Lanka were safe and that the leadership change would not affect them.

Most of the projects have been revisited and restarted. One of the major projects in this category is the construction of the Colombo Port City. The time frame for completion of this project is around 2045 and it is to be built as a joint venture between Chinese and Sri Lankan companies on 249 hectares of reclaimed land.

This project has drawn a lot of protests and fear among the local population. The reclamation of land will change the whole landscape of the region, affecting the fishing community primarily. China also has a claim to a 99-year lease on all of the reclaimed land, thus giving it a major foothold in the Indian Ocean apart from the Hambantota Port.

China has also offered a “gift” valued at around $295 million to the current Sri Lankan government. The Sirisena government is “free” to use this money as it wishes, and thus it is no surprise that he announced the construction of a kidney hospital in his home constituency of Polonnaruwa, a Chinese-funded project. This “gift” appears to be a more of a favor or, as some say, even a “bribe.”

Sri Lanka has also agreed to be part of the Belt Road Initiative (BRI) project, under which China has promised an investment of $24 billion  even as Colombo has been unable to repay the existing $8 billion debt.

The Sri Lankan government acknowledged in 2016 it was not even aware of the amount of debt the country actually faced, giving rise to speculations that the level of Chinese investments in Sri Lanka was way more than what appeared on the surface. There were also reports suggesting that a large sum of this money actually went into the hands of private players.

In addition, the Chinese government has been pushing for the use of its BeiDou navigation system (an alternative to the Global Positioning System) by Sri Lankan vehicles under the BRI project. China also launched a communication satellite for Sri Lanka in 2012 and is in talks to launch another satellite some time this year.

However, the warming of relations between Sri Lanka and China under Sirisena underscores the fact that the money power of China is quite attractive for countries in need of investment and development. Beijing has always been keen to use this leverage to gain access to strategically important areas. The pattern has been quite apparent in the case of South Asia. Beijing has used its financial strength to gain access to the Hambantota and Colombo ports and almost owns the Colombo Port City.

China has followed a similar approach toward other countries in the South Asian region. It has leveraged its financial might to gain deeper access to Pakistan, Bangladesh, Maldives and Nepal. All these countries have welcomed the Chinese investments with the hope of developing their economies.

Even though China has always used its own people as workers for such projects and has generated very little local employment, the promise of infrastructure development has been the reason these countries have welcomed the Chinese investments. Reports suggest that in 2013 around 25,000 Chinese were involved in various projects in Sri Lanka.

However, there has been an increase in resentment among these countries.

Former Maldivian president Mohamed Nasheed has argued that Beijing is using its aid diplomacy to “buy Maldives.” This policy can also be termed as a new form of colonialism.

It appeared at first that under Sirisena Sri Lanka would adopt a more balanced approach, but the recent developments paint a very different picture. It is true that China was one of the few countries that were ready to invest in Sri Lanka after the civil war ended in 2008, but the unchecked access to Chinese investments has begun to create domestic issues.

The investments in Hambantota (home town of Rajapaksa) were done with the aim of winning over the local population, and the investments in Polonnaruwa (home constituency of Sirisena) appear to have had a similar motive. The question remains as to whether Sri Lankan leaders can use Chinese money to win domestic elections and influence.

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Gunjan Singh

Gunjan Singh is a research associate at the Institute of Chinese Studies (ICS), New Delhi.

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