Sri Lanka’s Galle Face Green, an iconic beach park in the capital of Colombo, has turned into a construction battleground as countries all over the world vie for influence over this gateway to the Indian Ocean. The Hong Kong–based Shangri-La and the Indian ITC hotel groups are poised to open their latest chains right next to each other. The American Hyatt and European Mövenpick are moving in just a mile down the road. The Chinese state–owned China Communications Construction Co. has financed a luxury playground at Colombo Port City that sports hotels, luxury apartments, a golf course, shopping malls, and a Formula One track. This project would have overshadowed all other developments in the park, but the city’s newly elected government suspended construction in order to review it for its economic viability, environmental risks, and potential infringement upon national sovereignty. Whether or not the project resumes, Western and Indian observers fear that China, with its billions of dollars invested in the Sri Lankan economy and infrastructure, may have already displaced competitors. Along with the intoxicating allure of Chinese money, the worry is that Sri Lanka—like the other developing nations of the Indian Ocean rim that form China’s “string of pearls”—will eventually yield to Beijing.
This argument, however, overestimates China’s leverage and disregards India’s influence over the region. Although China can coerce the countries of Southeast Asia to accept its demands by threatening to cut off trade, aid, investments, and other cash flows, those maneuvers will not work with Sri Lanka, because China’s economic investments there have been relatively shallow. India—owing to the depth of its economic, military, and social ties with Sri Lanka—still possesses greater influence over its island neighbor than China.
CHINA’S WHITE ELEPHANTS
When it comes to economic ties with Sri Lanka, China is more about quantity than quality. Beijing has dramatically increased financial assistance to Sri Lanka in recent years, but mostly in the