The First Disastrous Effects of the BRI Appear – Sri Lanka Is Trapped by Chinese Investments.
Only China is a real winner with BRI projects.
Two weeks after being officially elected President of Sri Lanka, Ranil Wickremesinghe delivered a policy speech in Parliament on Tuesday 2 August 2022. The occasion for the leader to remind that his country, in default of payment since April 12, 2022, is going through a serious economic crisis.
But if he mentioned the resumption of negotiations with the International Monetary Fund for the creation of a rescue plan, Ranil Wickremesinghe never addressed the Chinese case.
China is a major player in Sri Lanka. Beijing owns more than 10% of Colombo's external debt (about $5 billion). The major donors, both public and private, have been unwilling to lend to Sri Lanka. Only the Chinese have been willing to lend.
Oversized projects
The problem is that the investments were for oversized projects, and if China was not vigilant, it is primarily the fault of the Sri Lankan government, which was demanding. Only a few thousand passengers pass through Mattala airport each year. Far from the ambitions displayed at the time of its inauguration, the complex is mainly used as an aircraft parking lot for some airlines and even as a storage facility for some local farmers.
A waste for this project, financed with 200 million dollars from China, which was supposed to make Sri Lanka a reference in international trade. And an illustration of the disproportionate Chinese investments, which arrived under the impetus of the former Sri Lankan president, Mahinda Rajapaksa.
As part of its pharaonic project of the Belt and Road Initiative (BRI), Beijing has undertaken to invest massively in Sri Lanka, particularly in the construction of infrastructure. Not all of them have been useless, such as the ports of Colombo and Hambantota. But the cost is still much higher than Sri Lanka can bear.
Unable to repay its Chinese creditors, the country was forced to hand over the Hambantota port to them for a 99-year lease. Today, there is an awareness of the trap of having too much debt and a high concentration of debt, especially to China. Sri Lanka is stuck, and this is something that many countries will experience in the coming years in the context of the BRI.
China's influence strategy shows its limits for BRI countries
China boasts of investing in more than 140 countries through its BRI. This is a way to ensure its economic growth by increasing its industrial production and developing new trade routes. But also to extend its influence on the globe.
For many specialists, China will not emerge unscathed from this Sri Lankan crisis. Many countries receiving Chinese funding are in financial trouble. The list of countries whose BRI projects are in trouble is not much shorter than the list of countries that have accepted projects under this initiative...
By acting everywhere as it did in Sri Lanka, China risks provoking widespread discontent and jeopardizing future investments. So lately, Beijing has been more willing to make concessions. The country has wiped out a debt of more than 4 billion dollars owed to it by Pakistan!
China could also come to the aid of Laos, which is experiencing a serious financial crisis. China, which holds half of its foreign debt, has multiplied the construction of infrastructure. In exchange for its help, it could take full control over them.
Final Thoughts
As you can see, China does nothing without anything, and in the end, all those countries that have already agreed to participate in the BRI risk being dispossessed of their national infrastructures if they cannot pay China. The most serious is even elsewhere because all these projects carried out within the framework of the BRI do not even bring employment for the locals, since China brings its own companies with Chinese labor and with its materials!
In the end, only China is a winner. We are far from what is sold by the CCP and Xi Jinping for years concerning the BRI. The harder it will be to wake up for those countries that risk ending up like Sri Lanka.
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