China and Sri Lanka Forge Stronger Economic Ties

China and Sri Lanka have pledged to enhance investment and economic cooperation following a meeting between Chinese President Xi Jinping and Sri Lankan President Anura Kumara Dissanayake in Beijing. The two nations signed 15 cooperation documents, including agreements on economic and technological development, and initiatives to align China’s Belt and Road Initiative with Sri Lanka’s 2030 digital economy blueprint.

Specific details of the agreements were not disclosed during the signing ceremony. President Dissanayake’s visit to China, Sri Lanka’s largest bilateral lender, comes after a recent trip to regional rival India. Dissanayake, who secured a significant majority in the September elections, has committed to revising the terms of an International Monetary Fund (IMF) rescue package and addressing poverty and corruption through his leftist coalition’s policies.

Under the previous Rajapaksa administration, Sri Lanka deepened its ties with China, relying heavily on Chinese loans to develop infrastructure projects such as highways, a port, an airport, and a coal power plant as part of President Xi’s Belt and Road Initiative. In June, Colombo reached a preliminary $10 billion bilateral debt restructuring agreement with key lenders, including China, Japan, and India, followed by a $12.5 billion bondholder deal in December. However, Sri Lanka still requires direct agreements with the Export-Import Bank of China and the China Development Bank to finalize the deal and demonstrate progress to the IMF, ensuring further disbursements from a $2.9 billion bailout program.

During the meeting at the Great Hall of the People, President Xi expressed his willingness to collaborate with President Dissanayake to develop a new vision for bilateral relations and achieve greater milestones in China-Sri Lanka friendship and cooperation. President Dissanayake welcomed increased Chinese investment, acknowledging China’s support in significant infrastructure development through the Belt and Road Initiative and recognising China as a key development partner.

In December, during his visit to Delhi, President Dissanayake signed a range of energy and security cooperation agreements with India, signalling his administration’s intent to diversify partnerships and reduce reliance on Beijing.

Sri Lanka’s economy has shown signs of recovery, but the high cost of living remains a pressing issue for many citizens, particularly the impoverished. China, as the world’s second-largest economy, can further assist by increasing imports of Sri Lankan goods, such as tea, clothing, and chemicals, and by encouraging Chinese tourists to visit the island nation. President Xi emphasised the importance of strengthening people-to-people exchanges to enhance ties between the two countries.

This development underscores Sri Lanka’s strategic efforts to balance relationships with major regional powers, seeking economic support and investment to navigate its path toward sustainable recovery and growth.