Reuters A container ship is pictured docked at the Colombo South Harbor during its opening ceremony in Colombo August 5, 2013.

China's Investments in Sri Lanka

Why Beijing's Bonds Come at a Price

Last month, Sri Lanka officially lifted a hold on the Colombo Port City project, a $1.4 billion Chinese initiative to construct a “mini-city” atop reclaimed land at the country’s capital. The project is the largest in Sri Lanka’s history and falls under Beijing’s One Belt, One Road and New Silk Road initiatives, which are designed in part to expand and secure China’s trade routes throughout Asia.

The controversy over the port city offers a taste of the potential consequences the One Belt initiative could bring: it has plunged Sri Lanka into debt, rekindled the Chinese-Indian rivalry, and raised questions about Beijing’s use of economic statecraft to advance its strategic objectives.

A FRIEND IN NEED

China’s friendly relationship with Sri Lanka began in earnest after the election of Sri Lankan President Mahinda Rajapaksa in 2005. Colombo had spent over two decades fighting a costly war against the separatist Tamil Tigers, a conflict Rajapaksa was determined to end. With its own politically influential Tamil minority to contend with, India declined Rajapaksa’s appeals for large-scale military support, while the United States suspended military aid in 2007, citing government human rights violations in the country’s civil war.

Beijing, however, was happy to fill the void. The same year that Washington suspended arms sales, China provided Sri Lanka $37 million in ammunition and ordnance to aid Rajapaksa’s war against the Tamil Tigers. In 2008, it gave Sri Lanka six F-7 jet fighters, scores of antiaircraft guns, and a JY-11 radar system. China’s nonmilitary aid surged as well, jumping from only a few million dollars in 2005 to $1 billion in 2008.

With China’s backing, Rajapaksa launched a scorched-earth offensive in 2008 that crushed the Tamil Tigers, though not before claiming up to 20,000 civilian lives in the process. When the UN Security Council sought to investigate the humanitarian crisis prompted by Rajapaksa’s offensive, China helped put a stop to the inquiry.  

In return for Beijing’s generosity, Sri Lanka pledged respect for China’s “

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