The recent rise of China-Sri Lanka economic relations has been the subject of much discussion, debate, and analysis. Some of these discussions are also rich in misinterpretations, such as common misconceptions about Sri Lanka’s debt obligations to China and the link between that debt and the decision to lease Hambantota port to China for 99 years.
However, one significant part of Sri Lanka-China economic relations has not captured the spotlight: the fast-growing trade relations between two countries during the last decade or so. Similar to other countries’ trade relations with China, the expansion of trade with Sri Lanka was driven by a large influx of Chinese imports, resulting in an expanding trade deficit between the two countries.
In 2016, China became Sri Lanka’s largest source of imports, surpassing India. However, in subsequent years, the value of Indian imports has marginally exceeded Chinese imports. Although China was unable to remain Sri Lanka’s largest import partner, even its one-off claim to that title indicated the significant growth of Chinese imports and trade relations with Sri Lanka. On top of the noticeable rise of Chinese investments in Sri Lanka, this scenario clearly wouldn’t please India — particularly when China is able to export more to Sri Lanka than India does. Read More