Wed, 05 Oct 2022

China Using Sri Lanka's Indebtedness to Show Military Muscle

Voice of America
03 Aug 2022, 16:05 GMT+10

NEW DELHI - China has dispatched a military ship to Sri Lanka's port city of Hambantota in the midst of the rapidly changing political situation in the island nation. The move has raised questions about whether China is trying to establish a strong military presence on Sri Lanka's Indian Ocean coast.

China's People's Liberation Army describes the vessel, Yuan Wang 5, as a survey ship, meant to conduct research in the Indian Ocean. But analysts are asking whether the ship, due to arrive in Hambantota on Aug. 11 and packed with sophisticated electronics for space and satellite tracking, is meant to serve a strategic purpose.

'China's goal is to put the Hambantota port to dual use, commercial and military. It is trying to build the capability to move and maneuver ships at the port with a military purpose,' Dayan Jayatilleka, a former Sri Lankan diplomat, told VOA.

China has some say about using the port because the Sri Lankan government handed it over to Chinese companies on a 99-year lease in 2017. Colombo was forced to give up control of the port after it failed to repay Chinese loans used to build it.

Sri Lanka's recently ousted president, Gotabaya Rajapaksa, is believed to have given his consent to berthing the vessel at the Sri Lankan port. The new government that replaced him after a massive protest movement is unlikely to revoke the decision and stop the vessel from using the port.

'Sri Lanka needs financial assistance, and it would not want to displease China by revoking the permission,' Jehan Perera, executive director of the National Peace Council of Sri Lanka, told VOA.

Hambantota, Sri Lanka Hambantota, Sri Lanka

'China's purpose is to make sure its military ships have easy access to the Sri Lankan port. As long as this goal is met, it has no need to actually build a military base,' said K.P. Fabian, a former deputy high commissioner of India to Sri Lanka.

Sri Lanka is seeking a bailout loan from the International Monetary Fund (IMF). IMF rules stipulate that a loan-seeking country should reschedule the payment timetable of past debt in order to qualify.

China has refused Sri Lanka's request to reschedule project loans amounting to nearly $10 billion that have fallen due. Without China's cooperation, Colombo would be unable to obtain IMF financing and sink deeper into a financial mire.

'[The] Sri Lankan government is hopeful Beijing will come around and accept the request. It also wants a currency swap arrangement to buy Chinese goods,' Perera said.

Sri Lanka is almost without foreign exchange reserves and facing higher world oil prices, which has resulted in a serious energy shortage. The country is also facing a food crisis with millions of people without jobs.

It is possible that China might try to use its influence as a lender to pressure Sri Lanka to allow the creation of Chinese military facilities, which could be used to target China's rival, India.

'For India, it is a matter that is causing serious concern. China has been trying to create military challenges for India, and this is one such effort,' said Fabian.

A move to establish a Chinese military presence in Sri Lanka will cause concern not only in India but also in other parts of the world because Indian Ocean sea routes connect Asia and Europe.

Debt trap

Sri Lanka's economic crisis was caused by heavy foreign borrowing, which has left it with a huge burden of debt. Sri Lanka's foreign debt as a percentage of its gross domestic product (GDP) jumped from 80% in 2015 to 101% in 2020, according to government estimates. The total foreign debt now stands at $51 billion.

China launched a series of infrastructure projects in Sri Lanka under its Belt and Road Initiative, including the port and an airport that were bankrolled by Chinese banks.

The island nation soon found itself unable to service the Chinese debt. Beijing used the opportunity to force Sri Lanka in 2017 to give the Hambantota port on a lease of 99 years to Chinese companies that built and financed it.

'The U.S. government is correct when it says that Chinese projects and loans are very non-transparent and overpriced,' Perera said. 'Chinese forays in Sri Lanka had a corrupting influence because they encouraged local politicians and officials to pilfer funds.'

Earlier, USAID Administrator Samantha Power said that China has financed infrastructure projects in Sri Lanka that often served little practical purpose.

'Indeed, over the past two decades, China became one of Sri Lanka's biggest creditors, offering often opaque loan deals at higher interest rates than other lenders, and financing a raft of headline-grabbing infrastructure projects with often questionable practical use for Sri Lankans,' Power said.

More Beijing News

Access More

Sign up for Beijing News

a daily newsletter full of things to discuss over drinks.and the great thing is that it's on the house!