Xi’s Visit to Sri Lanka Heralds a Coming Free Trade Agreement

September 19, 2014 Posted by China Briefing Reading Time: 3 minutes

SHANGHAI – An MoU on the development of a free trade agreement (FTA) and 20 other bilateral deals were all in two-days’ work for Chinese President Xi Jinping this week during the Sri Lankan leg of his South Asian tour.

The FTA, projected to cover trade in goods and services, investment, and economic and technological cooperation, comes after a feasibility study was jointly completed by the two nations earlier this year, to positive results.

Meanwhile, the crown among the infrastructure deals was China’s commitment of US$1.4 billion for construction in the port city of Hambantota, home constituency of Sri Lanka’s Economic Minister, Basil Rajapaksa.

Ties have never been closer between Beijing and Colombo, which along with the Maldives has endorsed Xi’s maritime silk road initiative. Although Xi’s visit was the first by a Chinese president in nearly three decades, Sri Lankan President Mahinda Rajapaksa has made himself readily available, telling Xinhua: “Since I took office, I have toured China seven times, during which I have met President Xi Jinping on several occasions.”

A day prior to his arrival, Xi published an op-ed in the Sri Lankan Daily News, in which he effusively lauded China and Sri Lanka’s bilateral relationship. China, Xi highlighted, is now Sri Lanka’s second largest trading partner, with bilateral trade reaching US$3.62 billion in 2013 and growing at a rate of 14.3 percent annually.

China has also invested heavily in Sri Lankan development projects, including airports, seaports, road infrastructure and power generation, such that outstanding debt owed to China is nearly US$3.2 billion. Here, the elephant in the room is of a distinctly Indian variety. India has been closely watching China’s maneuvering in the region, especially in the lead up to Xi’s arrival on the sub-continent on Thursday.

For now, China’s intentions in Sri Lanka would appear to be similar to those behind its growing presence in Africa, Iraq and Mongolia. As described by Xi, “China will continue to do what it can to assist Sri Lanka in its economic and social development, which may facilitate the industrial development in Sri Lanka and help improve its people’s life.”

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