Sri Lanka’s recent high-level diplomatic engagements with India, France and Japan highlighted the island nation’s importance in the ongoing great power rivalry in the Indo-Pacific region. After obtaining an IMF bailout with the assistance of these nations and dealing with the fallout of the pro-China Rajapaksa family, is the new Sri Lankan administration adopting a more Western and India-oriented vision?
China finds itself in a similar predicament as Japan in the 1970s, when the latter was a major lender to the Latin American countries which eventually suffered a major debt crisis in the 1980s. Now a major lender to various developing countries, especially after Covid, China’s apparent approach of kicking the can down the road means that time bombs of massive defaults are waiting to go off.
The BRI’s implementation will be slowing down as a result of multiple factors ranging from the global Covid-19 pandemic, the shift in the global geostrategic environment and the Chinese economic slowdown. As it changes its model to suit change, it could focus more on sustainable financing for BRI countries and lower the long-term financial impacts of loans for infrastructure projects. It could also pursue “third-party market cooperation” as a flexible approach in its pursuit of cooperation with other countries under the BRI umbrella. This is the second in a five-part series of articles on the future of China.
China has been accused of debt trap diplomacy through its Belt and Road Initiative (BRI). Starting with the Hambantota Port in Sri Lanka, commentator William He examines the rhetoric surrounding the BRI, and controversies that have emerged from Asia to Africa. Is the BRI a channel for China to expend overproduction, infrastructure construction to boost connectivity, or a grand project to take over the world and counter the US?
ISAS academic Chulanee Attanayake explains the bind China is in with regards to the Sri Lanka economic and political crisis. On the one hand, China does not want to set a precedent for bailing out cash-strapped partners, but it also needs to maintain its carefully built image as an unwavering friend to small developing nations.