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FINANCIAL CHRONICLE™ » CORPORATE CHRONICLE™ » Sri Lankan Election Upset a Blow to China’s Indian Ocean Plans

Sri Lankan Election Upset a Blow to China’s Indian Ocean Plans

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Quibit


Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics

By Natalie Obiko Pearson
Life just got tougher for China’s diplomats in Sri Lanka.

Mahinda Rajapaksa, who tightened ties with China during his decade-long rule, conceded defeat today in Sri Lanka’s closely-fought presidential election. His successor Maithripala Sirisena used his campaign to criticize the island nation’s increasing economic dependence on China.

“In public, Beijing will likely express willingness to establish good relations with the new government,” said Zhang Guihong, a professor at the Institute of International Studies at the Shanghai-based Fudan University. “Privately, its diplomatic missions and officials in Colombo will get busy and start mingling with new people.”

The result, considered improbable just two months ago, risks disrupting President Xi Jinping’s moves to increase China’s presence in the Indian Ocean. China has invested heavily in Sri Lanka over the past decade and supported Rajapaksa in the face of U.S.-led inquiries into human rights abuses allegedly committed during the end of a 26-year civil war.

Sirisena, who deserted Rajapaksa in November to lead the opposition bloc, has promised to establish “equal relations” between China, India, Pakistan and Japan.

“China certainly will not have the uncritical support of the Sri Lankan government that it had under Rajapaksa,” said Jehan Perera, executive director of the National Peace Council of Sri Lanka, a group that promotes ethnic reconciliation.

Biggest Investor

Under Rajapaksa, China became the island’s top investor, biggest government lender and second-biggest trading partner. Xi visited Sri Lanka last year to promote his so-called Silk Road trade route rejuvenation project, which is backed by a $40 billion infrastructure fund and includes a maritime route encompassing the island.

Chinese government lending to Sri Lanka increased 50-fold over the past decade to $490 million in 2012, more than double the combined amount from the U.S. as well as allied governments and lending agencies. Growing economic ties have spurred military cooperation: China last year sent submarines twice to dock in the capital Colombo, triggering protests from India.

On the campaign trail, Sirisena lambasted projects built with credit from foreign countries, saying they were ensnaring Sri Lanka in a “debt trap.” He threatened to scrap a Chinese-backed $1.4 billion plan to build a city roughly the size of Monaco on reclaimed land off Colombo, which would be Sri Lanka’s largest foreign investment to date.

China Strength

Even so, it remains to be seen how strongly Sirisena will move against China, an economy more than 100 times bigger.

“Sirisena is promising to put the relationship on a more balanced footing,” said Paikiasothy Saravanamuttu, executive director of the Colombo-based Centre for Policy Alternatives. “But no one’s really going to kick them out.”

China, along with Russia, Venezuela and nine others, voted against a U.S.-sponsored United Nations Human Rights Council resolution in March to investigate allegations of war crimes in Sri Lanka. Rajapaksa crushed a Tamil minority uprising in 2008 to end a conflict that killed as many as 40,000 people.

The Sinhalese, Sri Lanka’s largest ethnic majority, oppose a U.S.-backed investigation into war crimes. China is also viewed as an important counterweight to India, which supported the ethnic minority Tamils during the conflict.

The result won’t have much impact on China’s ties with Sri Lanka, according to Shi Yinhong, director of the Center for American Studies at Renmin University in Beijing and an adviser to China’s State Council.

“China has quite a good basis for the relationship,” he said in an interview yesterday in Singapore. “ I don’t view that any single election will have much impact upon Sri Lanka’s relations with China.”

To contact the reporters on this story: Natalie Obiko Pearson in New Delhi at npearson7@bloomberg.net; Ting Shi in Hong Kong at tshi31@bloomberg.net

To contact the editors responsible for this story: Daniel Ten Kate at dtenkate@bloomberg.net Rosalind Mathieson

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