Introduction
China’s Belt and Road Initiative (BRI) was launched in 2013, with an aim to enhance global connectivity through infrastructure development and investment. Under this project, China has worked with approximately 146 countries and spent One trillion US dollars. However, some countries are struggling to repay loans given by China to fund their infrastructure projects. One critical example is Sri Lanka. Sri Lanka has received more attention than other countries due to its geographical location. Its location can be a hub that provides facilities for the easy transformation of Chinese exports and imports (Kamburawala, 2022).
Chinese loans are often seen as having pushed Sri Lankans into a ‘debt trap’. Despite China’s pledges that BRI would boost Sri Lanka’s economic and social development, the nation suffered the worst economic crisis after its independence. In 2022, shortages of food, fuel, and medicine sparked huge protests across the country. While the government put the blame on the COVID-19 pandemic, experts argued that it was caused by the Rajapaksa administration’s economic policies, which caused the country to default on its foreign debt obligations (Wignaraja, 2020).
China – Sri Lanka Relations
Historically close, Sino-Sri Lankan ties became even closer under President Mahinda Rajapaksa after 2005. China protected Sri Lanka from international censure for suspected crimes and backed its military campaign against the Liberation Tigers of Tamil Eelam (LTTE). China gave large funds for infrastructure projects during Rajapaksa’s second term (2010-2015) despite reservations about the environmental effect and economic feasibility. Despite India’s protests, Chinese submarines docked in the capital, Colombo, further extending China’s strategic dominance. Expectations that Chinese influence would decline following Rajapaksa’s 2015 election loss were not fulfilled. Sri Lanka continued to rely on Chinese loans despite the new government’s attempts to renegotiate debt and balance relations with other international powers. As a result, China was able to strengthen its control over Sri Lanka’s critical assets by acquiring a 99-year lease on the Hambantota Port. According to critics, this transaction is an example of debt-trap diplomacy in which China makes loans to countries that are having trouble repaying them in order to gain strategic advantage (Ramachandran, 2022).
Labour & Environmental Concerns
The human rights implications of BRI projects in Sri Lanka are related to environmental effects, land acquisitions, and labour conditions. Chinese-funded infrastructure projects have been accused of employing poor labour practices, exploiting workers, and failing to provide locals with job opportunities. For example, many contracts require Chinese companies to manage construction using their own personnel, which reduces job benefits for Sri Lankan citizens. Chinese workers have also been accused of enjoying better pay and working conditions than their Sri Lankan counterparts in certain situations, creating social tensions and labour inequality.
Additionally, local people have been displaced as a result of land acquisition for BRI projects, often without proper compensation or consultation. Large-scale land reclamation was necessary for the Colombo Port City project, a flagship initiative, raising concerns about environmental degradation and the loss of traditional livelihoods for fishing communities. The impacted communities have demonstrated against the lack of transparency in compensation plans and forced evictions. Critics contend that the Sri Lankan government has neglected the rights of marginalised populations in an attempt to draw in Chinese investment, which has led to an increase in social instability.
Chinese investment projects have faced several environmental challenges in their design, implementation, and operation (Raisina Debates, 2021). Infrastructure developments have caused significant amounts of pollution and impacted Sri Lanka’s biodiversity and natural landscape. Some projects, like the Hambantota Port have encountered environmental issues during the construction phase or have been criticised for failing to consider all the environmental risks that come with infrastructure development. For instance, it has been reported that investigations into the port of Hambantota failed to find a rock on the ocean floor that would have prevented ships from entering the harbour. According to reports, the rock’s location and size resulted in significant delays and extra removal costs of $40 million (Kamburawala, 2022).
Sri Lanka’s Debt Crisis: The Role of China and the Bigger Picture
When analysing debt diplomacy, a strong argument has been endorsed. It is known that China successfully negotiated a 99-year lease to acquire the Hambantota Port after engaging in three phases of debt diplomacy with Sri Lanka. The three phases are: (1) the investment phase; (2) the construction and operating phase; and (3) the expropriation and debt collection phase. In the case of the Hambantota Port, China was able to entice Sri Lanka with loans that had high interest rates and terms that favoured China, such as contracting Chinese companies for port development projects (Kambarawala, 2022). Political interference, such as backing for the China-friendly Mahinda Rajapaksa government, serves to enhance China’s influence over developmental endeavours. Sri Lanka was compelled to accept a $1.12 billion debt-in-relief agreement in exchange for the 99-year lease of the Hambantota Port. That happened because of high-interest foreign debt bondage in major infrastructure projects that trapped the country in China’s debt diplomacy.
Due to the fact that ownership of significant state infrastructure is associated with private companies, there are concerns that Sri Lanka may lose some autonomy in how it maintains these assets. China’s acquisition of Sri Lanka’s problematic Hambantota Port sparked worries about the potential loss of sovereignty. Initiatives to build infrastructure are usually driven more by political considerations than by financial ones. Future project profits are unlikely to be enough to cover all of the obligations owed to Chinese creditors due to the lack of financial imperatives driving BRI initiatives.
However, the statistics on debt, which have been emphasised as the most pertinent argument, do not support the idea that Sri Lanka is burdened and overwhelmed by its debts to China. Chinese loans accounted for a little over nine percent of Sri Lanka’s total foreign debt in 2018, up from 0.5 percent in 2006. Furthermore, developing Asian countries like Sri Lanka stand to gain a great deal by taking part in the BRI initiative as part of a broader ‘Asian pivot’ plan to profit from expanding trade and financial flows (Kambarawala, 2022).
Debt trap is one of the most significant issues that has been discussed. The majority of analytical research, however, shows that the Sri Lankan debt issue goes beyond merely just one country. More importantly, just six percent of Sri Lanka’s Gross Domestic Product (GDP) is owed to global financial markets and multilateral lenders such as the World Bank. Additionally, 5.5 per cent of the country’s total debt is to China, whereas 94.5 percent debt is not to China. As a result, even though Sri Lanka’s debt to China is substantial, its debt problem considerably goes beyond that of any country.
Bibliography
Kamburawala, T. U., & Abeyrathne, D. h. (2022, November 2). Belt and Road Initiative (BRI) and Sri Lanka: A Review of Literature. KDU Journal of Multidisciplinary Studies. Retrieved March 21, 2025 from https://www.researchgate.net/publication/365805044_Belt_and_Road_Initiative_BRI_and_Sri_Lanka_A_Review_of_Literature.
Raisina Debates. (2021, December 28). Colombo Port City project: Controversial since its inception. Observer Research Foundation. Retrieved March 4, 2025 from https://www.orfonline.org/expert-speak/colombo-port-city-project.
Ramachandran, S. (2022, May 27). China and Sri Lanka’s Debt Crisis: Belt and Road Initiative Blowback. The Jamestown Foundation. Retrieved March 21, 2025 from https://jamestown.org/program/china-and-sri-lankas-debt-crisis-belt-and-road-initiative-blowback/.
Wignaraja, G., Panditaratne, D., Kannangara, P., & Hundlani, D. (2020). Chinese Investment and the BRI in Sri Lanka. Royal Institute of International Affairs.
