World News | The pitfalls of Chinese investment in Sri Lanka

colombo [Sri Lanka], Feb. 28 (ANI): China’s attempt to expand its influence in Sri Lanka, a region traditionally considered India’s backyard, has muddied the waters. One clear sign of Chinese encroachment can be seen in the field of foreign investment, according to Combo Gazette.

China’s foreign loans, and even the overseas activities of private companies, are motivated by political considerations. Its foreign investment has become a tool to buy geopolitical influence, adversely affecting the fragile democratic institutions of the target countries and the local environment in which Chinese-funded projects are implemented.

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Sri Lanka’s financing and infrastructure needs are clear as developing economies become middle-income countries, cutting off concessional loans from multilateral institutions, the Colombo Bulletin reported.

The transformation of Sri Lanka’s external debt pattern has made China the largest bilateral creditor. Contrary to popular belief that its share is 10% to 15%, Chinese loans account for around 20% of Sri Lanka’s public external debt.

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According to the Colombo Bulletin, a briefing note by Sri Lankan economists highlighted that the real interest rate on Chinese loans is higher than the average lending rate from Japan or multilateral institutions between 2008 and 2021.

In addition, an initial group of Chinese-funded projects has been criticized for ignoring environmental concerns. In Sri Lanka’s southern provinces, farmland and jungle have had to give way to Chinese-funded highway and link road projects.

A section of the Colombo-Galle-Hambantota-Wellawaya road or the A2 highway runs through the elephant corridor, and the Wildlife Department estimates that the project area is home to 15-20% of the island nation’s elephant population.

The Southern Expressway has also drawn the ire of locals because the area is more prone to landslides and flooding. Likewise, the port area project has raised fears of coastal erosion and harm to fish stocks.

In addition, members of the opposition point to the potential danger of erosion

Sovereign autonomy due to excessive reliance on Chinese financing. However, the Chinese tried to place the blame on domestic politics, accusing the Sri Lankan government of being opportunistic, according to the Colombo Bulletin.

China’s public rhetoric about the crisis situation in Sri Lanka hardly gives the impression of a friendly rising power coming to the rescue of a troubled partner. Moreover, it refused even to help Sri Lanka during the recent economic crisis.

For example, in terms of ongoing debt restructuring negotiations, analysts believe that China’s concessions to crisis-ridden Sri Lanka will certainly not be as generous as India’s offer under the Paris Club’s proposal.

China’s self-serving domestic rhetoric in times of crisis and its unsatisfactory debt restructuring both point to China’s inability to be a responsible actor. According to the Colombo Bulletin, the lessons for developing countries to learn from the risks of Chinese investment should be obvious. (Arnie)

(This is an unedited and auto-generated story from a Syndicated News feed, the content body may not have been modified or edited by LatestLY staff)