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Trends in China - Sri Lanka ties

From a recent Reuters’ fact-box (see full text here), with added details from the BBC and others:

Trade

In the first half of 2011, trade between China and Sri Lanka was worth $1.28 billion - but Sri Lankan exports to China were worth just $68 million.

Lending

China was Sri Lanka's largest lender in 2009 and 2010, giving $1.2 billion and $821 million respectively.

China Development Bank Corporation has agreed to provide $1.5 billion within three years for construction of roads, bridges, power plants and water and irrigation schemes.

However, the projects China is financing are built by Chinese contractors and use large numbers of Chinese workers, the BBC reports.

China has lent $400 million for the first phase of the new Hambantota Port and China’s state-owned Exim Bank has lent $77 million for an oil bunkering facility there.

Both contracts were given to Chinese firms, (see here and here), without a tender (see here).

China has also lent $190 million for Sri Lanka's second international airport - also in Hambantota, President Mahinda Rajapaksa's home constituency.

Work has started on the airport - with the same Chinese state-owned company as contractor, the BBC reports.

China has lent another $810 million for the second phase of the Hambantota port – again with a Chinese firm as the contractor.

Sri Lanka has signed a $450 million deal with a Chinese conglomerate and a local one, to boost the Colombo port's cargo-handling capacity. The Chinese firm has a 70% stake, Reuters learnt.

Exim Bank has loaned Sri Lanka $455 million for the first phase of first coal-powered generation station - built by a Chinese firm, using 2,000 Chinese labourers (see here and here).

China has offered an $891 million loan for the second phase

China has also pledged $760 million for road construction across the country, including $302 million for projects in the north.

Exim lent $310 million for the Colombo-Katunayaka express road to be completed next year. It is being built by a Chinese firm.

Exim has lent $102.5 million for Sri Lanka to buy 13 new diesel railway engines – from Chinese manufacturers.

Loan conditions

Asantha Sirimanne of Lanka Business Online told the BBC in November:

“The [loan] rates offered by China are higher than those offered by the World Bank, and direct government loans from Japan. But it is definitely lower than commercial bank rates."

"Chinese loans by Exim bank are mainly offered to buy Chinese products and services." 

The contractors, the subcontractors and even labourers involved in these major projects are Chinese nationals, he adds.

"And all raw material is imported from China."

Investment

Proposed Chinese investment of $1 billion is for a 500-room hotel and a shopping mall, both in Colombo.

(The latter has run into an issue, with President Mahinda Rajapaksa questioning whether the land should be sold as first agreed by his brother, Economic Development Minister Basil Rajapaksa, or given on a long-term lease)

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