2022 Year in Review

China’s investment in Sri Lanka during the Rajyapaksha brothers’ rule was mainly for
strategic infrastructure projects to boost growth and bring in foreign investments as
sources of revenue. China invested $1.4 billion in the Colombo Port City project, $104
million in Lotus towers and $209 million in Mattala Airport. All these investments
were in large-scale infrastructure projects with increasing losses and limited
opportunities to generate profit. Some economists believe that this modus operandi
creates ‘debt-trap diplomacy’ where developing countries cannot repay their loans to
Chinese institutions that help China acquire equity in such countries. China’s One Belt
One Road (OBOR) initiative, now referred to as the Belt and Road Initiative (BRI),
launched in 2013 and has facilitated more infrastructural investment in developing
countries across Asia, Africa and the Pacific.
An example of ‘debt trap diplomacy’ is Hambantota port in Sri Lanka where China’s
Exim Bank offered $307 million to Colombo in 2007 for phase 1 and another $757
million in 2012 for phase 2 of the project. The port struggled to generate tax revenues
for years and was losing money. This resulted in Chinese state-owned corporations
China Harbour Engineering Company Ltd and China Merchants Group stepping in to
jointly operate the port for 99 years with the Sri Lankan Ports Authority. Some
economists contradict the view that China is creating debt traps. Instead, they claim
that it was Sri Lanka’s last resort to accept China’s investment after they were turned
down by Canada, the US and India. In 2015, Sri Lanka owed more to Japan, the World
Bank and the Asian Development Bank than to China. However, one cannot overlook
the millions of dollars invested by Chinese institutes when the Rajyapaksha brothers
were in power.
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