China waits and watches on Sri Lanka crisis

China has instead sought to blame the West for recent debt problems in a number of developing countries in Asia and Africa.

July 14, 2022 06:15 pm | Updated 06:45 pm IST - Beijing

Chinese Foreign Ministry spokesman Wang Wenbin. File

Chinese Foreign Ministry spokesman Wang Wenbin. File | Photo Credit: Reuters

China on Thursday declined to say whether it was considering financial assistance to Sri Lanka, continuing a studied silence over the unfolding crisis and what analysts called a “wait and watch” approach.

“As a friendly neighbour and cooperation partner, China sincerely hopes all sectors in Sri Lanka can bear in mind the fundamental interests of the country and people and overcome difficulties to restore stability, revitalise the economy and improve livelihoods, at an early date,” Chinse Foreign Ministry spokesperson Wang Wenbin said on Thursday.

In response to a question from The Hindu on whether China was considering responding to Sri Lankan requests for financial aid and if talks were ongoing, Mr. Wang declined to say if Beijing was preparing assistance. “China is ready to work with relevant countries and relevant institutions to help Sri Lanka achieve sustainable development and overcome the current difficulties,” he said.

While China cultivated close relations with the Rajapaksas, Beijing’s broad position, observers said, was that it would work with any regime in Colombo, as it did with the previous Sirisena government.

China is, however, facing more scrutiny over its investments and assistance, and has been pushing back against “debt trap” claims. State media reported this week that China’s debt accounted for only around 10%, as did Japan’s, and that most of the debt was owed to multilateral institutions.

China has instead sought to blame the West for recent debt problems in a number of developing countries in Asia and Africa. Mr. Wang on Thursday highlighted a new report by the group Debt Justice that showed that of the $696 billion external debt of 49 African governments, 35% was owed to non-Chinese private creditors while 12% was owed to China. “These facts show that the so-called China debt trap… [has been used] by Western lenders to blame China for the crisis in Africa but is a distraction,” he said.

The official China Daily in an editorial on Sri Lanka said “some Western politicians with ulterior motives have tried to blame China for Sri Lanka's dire situation.” “However, China ranks only third among Sri Lanka's creditors after Japan and the Asian Development Bank and accounts for only 10 percent of its debt.”

The newspaper did criticise the Gotabaya Rajapaksa government saying its “flawed policies” had “added to the woes”, highlighting the tax cuts and fertiliser bans. Beijing’s officials or media haven’t offered any support to the embattled Rajapaksas since the protests accelerated.

“China is willing to be quite detached and plays the wait and watch game”, noted Vinitha Revi, a scholar who tracks Sri Lanka’s relations with India and China. While both India and China were letting events in Sri Lanka play out, there were different motivations. “India has to be more sensitive given the history, proximality, close ties. China is more pragmatic. Once there is political stability, they are able to get in very quickly. It will be difficult for any government to say no to Chinese investment.”

However, Ms. Revi added, China has found itself facing “heightened scrutiny”. “Commentators are saying they are willing to invest in huge infrastructure projects but what about during this crisis?”

India has stepped in with over $3.5 billion, while China in May announced a $74 million grant. Beijing hasn’t yet responded to Sri Lankan requests for more assistance.

The crisis and Sri Lanka’s economic mismanagement, Chinese scholar Lin Minwang told the South China Morning Post, was a “reminder” for Chinese investors. “In the short run, there will be a big impact on China’s relations with Sri Lanka because the influence of the Rajapaksa family in Sri Lanka’s political circles will be undermined and a political comeback will be unlikely in the near future,” he said. “I won’t call it a lesson but it is a reminder that local governance competence should be taken into consideration when investing overseas.”

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