China's cheque-book diplomacy with South Asia's smaller countries has scored another victory over India to become the largest investor in Sri Lanka, with investments of over $6 billion in the island nation. Earlier, Nepal was also a beneficiary of China's cheque-book diplomacy, used by Beijing to dilute India's influence in the small Himalayan state. Trade between China and Sri Lanka crossed $4 billion in 2015, up from about $1.1 billion in 2006. The trade volume is expected to grow further with plans for a free trade agreement between the two countries.
The balance of trade has gradually tilted in favour of China as against a climb-down with respect to India. Sri Lanka's central bank announced in June 2011 that China's national currency, the Yuan (Renminbi), would be allowed in international transactions. On the other hand, the Indian Rupee still does not enjoy the same privilege, despite the fact that India was Sri Lanka's largest trading partner and one of its largest donors and investors till recently.
Sri Lanka ranks China superior, compared to India, in terms of timely completion of projects, cost effectiveness and quality of infrastructure. China, unlike India, places no conditions in terms of "structural adjustments, policy reforms, competitive bidding, transparency attached to their loans" or even human rights; except that Beijing brings its own workforce to execute projects. Otherwise, a significant difference is that Beijing charges far higher rates of interest, compared to India, on loans disbursed to other countries.
In July 2017, Sri Lanka signed an agreement with China to lease its southern deep-sea port of Hambantota, which is situated along the main shipping route that connects Malacca Straits to the Gulf of Aden. It is a classic case of how China has created dependency in the name of its Belt and Road Initiative (BRI). The first phase of the port was actually completed in 2010 at a cost of $360 million, which Colombo tries to project as "purely commercial". However, the port is strategically located as a transit halt which both Chinese mercantile marine traffic and the Chinese Peoples' Liberation Army Navy vessels could use in the future. As a strong foothold for the Chinese, Hambantota enables Beijing to dominate the Indian Ocean waters that extend from Australia in the east, Africa in the west and up to Antarctica in the south.
In the 21st century Maritime Silk Road, Sri Lanka is seen as "an important hub". China has time and again referred to the island state as the "splendid pearl of the Indian Ocean." Accordingly, China has been working on four broad areas of dependency: infrastructure, trade, defence and diplomatic support.
China's assistance in Sri Lanka's infrastructure development has attracted considerable attention from India and the West. Apart from Hambantota port, some important infrastructure projects that China has undertaken in Sri Lanka include the Katunayake-Colombo Expressway, the Norochcholai Coal Power Project, Maththala Airport, Colombo South Harbour Expansion Project, the 661-room Shangri La hotel and the Centre for Performing Arts in Colombo.
Sri Lanka remains grateful for China's liberal supply of arms and ammunition to Sri Lankan troops during 'Eelam War IV'. This earned China goodwill from Colombo and the Sinhalese people. Sri Lanka justified arms procurement from China on two counts: lack of an alternative source of supply and competitive prices. On the other hand, India was only able to provide "non-lethal weapons" due to domestic political implications, especially in Tamil Nadu. Though India remains a preferred destination for the training of Sri Lankan military officers, in the light of opposition from Tamil Nadu, the future of cooperation in this area remains uncertain. As a result, Colombo has been looking to Pakistan and China as alternatives for military training.
Sri Lanka also appreciates China's unstinted diplomatic support to Colombo against the call for international investigations on war crimes committed during 'Eelam War IV'. China has made it clear that it "resolutely opposes any move by any country to interfere in Sri Lanka's internal affairs under any excuse."
On the other hand, India's stand on the issue is seen as inconsistent. In May 2009, it joined China and Russia to defeat the UN resolution that was aimed at censuring Sri Lanka. However, in March 2012, not satisfied with Colombo's sincerity in carrying forward assurances on reconciliation with Tamil minorities, India voted in favour of the US-sponsored resolution. India maintained the same stand in 2013 as well. However, in 2014, India abstained from voting on a similar US-sponsored resolution.
Given these realities, Sri Lanka would obviously prefer China. Colombo considers Beijing a "time-tested friend". Such consideration is not just rhetoric. Lately, China has emerged as one of the major players in the island's economic development. Both countries upgraded their relations to 'strategic cooperative partnership' and a 'Plan of Action' was agreed upon during President Xi Jinping's visit to Sri Lanka in September 2014 to deepen the bilateral partnership. To that extent, China has successfully created dependency and convinced Sri Lanka that they together have a "shared destiny".
Colombo is now in a position to juggle India and China. India's interests and concerns are not on Sri Lanka's radars, although the island state tries its best to do a fine balancing act to keep the two Asian powers in good humour, while at the same time benefitting from both. Development projects are offered to both India and China from time to time. Beijing is preferred because it has "no strings attached", at least overtly, to any of the projects implemented or aided.
Sri Lanka is confident that China will never demand that Colombo should address the grievances of Sri Lankan minorities through a reasonable negotiated political settlement, nor place restrictions on the involvement of any other country in the island in any manner. India has to take these factors into consideration in its dealings with Sri Lanka on all four areas of China's interest, namely infrastructure, trade, defence and diplomatic support.
(The writer is Associate Professor, Department of International Studies and History, Christ University, Bengaluru)