Abstract
Over the last decade, China emerged as the primary source of foreign investment and loans for Sri Lanka, surpassing traditional sources, such as Japan and India. China also emerged as the largest overseas development assistance provider in Sri Lanka in the recent past. The bilateral relationship between these economies reached to a new high with Sri Lanka joining the mega Chinese initiative BRI wherein Sri Lanka availed huge volume of Chinese funds under BRI, charged at much higher interest rates than the multilateral agencies and the amount was more than the repayment capacity of the tiny island nation. The Chinese project and the loan extended for the infrastructure development were the target of intense debate and criticism all over the world after Sri Lanka had to transfer the ownership of the flagship BRI project Hambantota to China as it could not repay the loan. Perhaps all the criticism against BRI surfaced after this incidence took place in 2018. Accessing high volume of loans without assessing the repayment capacity and the commercial viability of the projects created a mounting pressure on Sri Lanka’s debt burden. With this background, this chapter explores the relationship between China and Sri Lanka from economic perspective and systematically investigates the role of Chinese loan in primarily contributing to the financial crisis in Sri Lanka.
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Notes
- 1.
For detailed information please see the website of Bandaranaike Memorial International Conference Hall. https://www.bmich.com/.
- 2.
For detail information please see WTO document G/TRIMS/N/1/LKA/1, 31 March 2000. Noted from WTO (2004).
- 3.
Detail data is available at: https://tcdata360.worldbank.org/.
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Choudhury, R.N. (2023). China’s Investment in Sri Lanka: Trap of Debt. In: Mapping Chinese Investment in South Asia. Palgrave Macmillan, Singapore. https://doi.org/10.1007/978-981-99-1385-5_8
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