December 24, 2018 By Grace Asirwatham
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China has a long history of relations with Sri Lanka that date back to the 4th century AD, when the Chinese monk Faxian visited Sri Lanka. In the 20th century, relations with China were renewed following Sri Lanka’s recognition of the People’s Republic of China in January 1950. Sri Lanka also supported China’s accession to the United Nations. Even before diplomatic relations were established between the two countries, Sri Lanka and China entered into the historic Rubber-Rice barter in 1952. It was significant because China entered into an agreement with a non-Communist country. It was also a critical trade agreement for both economies. At the time, Sri Lanka was affected by a worldwide rice shortage as well as a severe drop in rubber prices due to the introduction of synthetic rubber. At the same time, China had a surplus in rice while being unable to purchase natural rubber due to economic sanctions from other nations. Therefore, China very generously offered 40% higher than the market price for Sri Lankan rubber, and 1/3 of the market price for rice to Sri Lanka. The signing of this agreement led to capitalist countries revoking aid to Sri Lanka. Sri Lanka-China relations, nevertheless, forged ahead, built on the trust and friendship embodied in this Pact.
Diplomatic relations between Sri Lanka and China were established in 1957. The first agreement after establishing diplomatic relations was on Economic and Technical Cooperation, signed in 1962, following Prime Minister Sirimavo Bandaranaike’s visit to China. This helped Sri Lanka receive more assistance towards infrastructure projects, such as the Bandaranaike Memorial International Conference Hall (BMICH). In 1963, the two countries signed an agreement on commercial maritime relations. The China-Sri Lanka Joint Trade Committee was formed in 1982, while an Agreement on Economic and Trade Cooperation as signed in 1984. These two arrangements were merged in 1991 to form the Sri Lankan-Chinese Joint Commission. The Joint Commission had broader objectives, including the exchange of information and the extending of loan facilities for various development projects. In 1994, Sri Lanka-Chinese Business Cooperation Council was established with the objective of further improving trade and investment relations between the two countries. Regarding cooperation in international forums, Sri Lanka co-sponsored the draft resolution that facilitated China’s admission to the UN Security Council in 1971. Sri Lanka also supported China’s entry into the World Trade Organization (WTO) in 2001.
In the 21st century, Sri Lanka and China relations have seen robust growth. Sri Lanka and China upgraded bilateral relations to a strategic cooperative partnership during the former Sri Lanka President Mahinda Rajapaksa’s visit to China in 2013. There have also been several high-level visits by the heads of state of the two countries. Chinese President Xi Jinping visited Sri Lanka in 2014, while the current President of Sri Lanka, Maithripala Sirisena, visited China several times over the last three years. In addition, in 2017, Sri Lanka and China celebrated the 60th anniversary of the establishment of diplomatic relations.
China has now become a major trading partner of Sri Lanka’s. The total trade turnover between Sri Lanka and China was USD 4202 million in 2017; although the trade balance is not in our favour, the bilateral trade relationship is nevertheless beneficial to Sri Lanka. A further M0U on Trade and Economic Cooperation was signed in May 2013, where both countries agreed to establish a joint working group to study the feasibility of a China-Sri Lanka free trade agreement, and to discuss the expansion of Sri Lankan exports to China. The negotiations relating to the FTA are ongoing.
China has also been a major partner in Sri Lanka’s drive towards economic development. China has committed financial assistance by way of grants and loans for priority development projects in Sri Lanka. There are currently several projects that have been or are being built with Chinese assistance, of which the major ones are the Hambantota Port, the Mattala International Airport, the Colombo-Katunayake Expressway, the Narocholai Coal Power Plaint, the Moragahakanda Multipurpose Development Project (which deals with irrigation, drinking water, and electricity), the Matara-Kataragama Railway Line, and the Colombo International Financial City. China is also assisting in building a specialised hospital for kidney disease, as well as an outpatients’ building at the National Hospital in Colombo.
At least two of these projects—the Colombo International Financial City and the Hambantota Port—are flagship projects under China’s Belt and Road Initiative, which Sri Lanka has agreed to actively participate in. Sri Lanka believes that, in the long run, active participation in the BRI initiative will help it achieve its goal of becoming a trade and maritime hub in the Indian Ocean, by developing infrastructure to promote trade, investment and tourism. While there has been concern in certain quarters about the possible use of certain BRI projects in Sri Lanka— specifically the Hambantota Port— for Chinese military purposes, the government of Sri Lanka has emphasized that the port would be used by China only for commercial purposes.
Sri Lanka’s relationship with China have therefore evolved through Buddhism, trade and aid to more strategic ties based on infrastructure development and global connectivity. In addition, China had always supported Sri Lanka in global forums (especially during the civil war and immediate post-war period), based on a shared understanding of certain basic norms of international relations, such as non-interference in the internal affairs of states. As such, China has been and will be an in indispensable partner in Sri Lanka’s economic development, as well as a dependable friend to Sri Lanka on the global stage.
*Grace Asirwatham is the State Secretary of the Ministry of Foreign Affairs of Sri Lanka (MFA). She has held held several senior positions in the Ministry, the most recent being Additional Secretary for Economic Affairs and Trade, West (Political Affairs), and Middle East and Africa. These remarks were delivered at a joint event held by LKI and Chatham House, UK, on Chinese outbound investment and the Belt and Road Initiative (BRI). The opinions expressed in this article are the author’s own and not the institutional views of LKI, nor do they necessarily reflect the position of any other institution or individual with which the author is affiliated.