Friction on the Silk Road: Sri Lanka pushes back on China’s expansion

China’s recently announced ‘New Silk Road’ consists of two main routes, one overland and one sea-based.

China's Two Silk Roads: Land and Sea Routes

Source: HKTDC: Sri Lanka: A Key Node on the 21st Century Maritime Silk Road, 2015

For the latter, Sri Lanka will be a major link in a chain connecting Asia with both Africa and Europe, according to the Hong Kong Trade and Development Council.

Sri Lanka is already a major trans-shipment hub, with its main port, Colombo, being the busiest container port in South Asia, ahead of India’s Jawaharlal Nehru port in Mumbai.

Colombo: Annual Port Throughput (Million TEUs), 2003-2014

Source: HKTDC: Sri Lanka: A Key Node on the 21st Century Maritime Silk Road, 2015

For China, investment in Sri Lanka is a key part of its expansion strategy through which it can build robust and extensive trade infrastructure in the region and exercise control over key trade routes, particularly those that carry natural resources to the mainland.

To that end, China has invested huge sums in the country, including $1.4 billion in the Colombo Port City project. Via this project, China has secured strategic and commercial space in the trade hub, which it hopes to develop as trade flows are expected to grow in the future.

However, these strategic moves are seeing resistance. In April 2015, the newly-elected Sri Lankan government suspended China’s Colombo project, citing concerns about corruption during project negotiations.

For Sri Lanka, this is a difficult challenge because it requires investment to upgrade its trade infrastructure, but wants to protect itself from excessive influence from Beijing.

This pattern of resistance is becoming increasingly common throughout the world as China’s plans become clearer and its expansion more ambitious.

This presents a challenge for China’s leaders who are used to pushing through on grand domestic projects with little opposition.

Ultimately, this case shows that the force of Chinese capital must be coupled with both sensitive diplomacy and robust investment procedures as China becomes more prominent on the global stage.

On the diplomacy side, China’s hardline posturing around claims to territory in the South China Sea doesn’t raise too much in the way of hope. How this will play out in Sri Lanka remains to be seen but will be a testing ground for what the world might expect from China in the coming years.

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