According to foreign media reports, although India has exerted great pressure on Sri Lanka to prevent the Chinese Yuanwang 5 survey ship from mooring at the port of Hambantota, the Sri Lankan side finally approved the port call plan. The tripartite game around this issue has come to an end for the time being. However, after months of political and economic crisis and regime change, Sri Lanka still has many difficult problems that need outside help to solve, such as the thorny debt problem and promoting economic recovery. India may still make a big fuss and undermine Sino-Sri Lankan relations, but on the other hand, Sri Lanka's expectations of China and the effect of infrastructure construction also need to remain rational and uphold the spirit of independence. Focusing on related issues, Liu Zongyi, Secretary-General of the Center for China and South Asia Studies of the Shanghai Institute of International Studies, made the following interpretation:
Observer Network: Recently, Sri Lankan Ambassador to China Palita Kohona was interviewed by the media many times and talked about Sino-Sri Lankan relations, debt difficulties and so on. In an exclusive interview with Reuters, he said China is the key to Sri Lanka's economic recovery. On the one hand, he hopes that China can buy more Sri Lankan goods, continue to invest in port projects and provide economic assistance; On the other hand, he also expressed understanding that China is currently difficult to take immediate action to help Sri Lanka. How do you interpret this statement?
Liu Zongyi: First of all, in the face of Sri Lanka's current economic crisis, we in China can certainly help Sri Lanka within our capabilities, which is also what Chinese leaders have repeatedly said. But as scholars, I think we should also objectively analyze why Sri Lanka has come to this point, and then help it solve the problem in a targeted manner.
In terms of Sri Lanka's debt composition, sovereign debt from international capital markets reaches 47%, and Kohona admits that many of this are actually held by Wall Street. Therefore, in Sri Lanka's overall debt structure, the West is the mainstay, and China's debt accounts for only about 10%.
Moreover, the first of these loans in China is relatively favorable, the second is mainly used for its infrastructure construction, which belongs to productive financing, and many of the loans it borrows from Western and international financial institutions are used for consumption. So I think this question should be made clear, and we should define clearly where the main problems are and where the responsibilities lie. Some scholars and officials in the United States and the West have smeared and slandered China for creating a "debt trap" for Sri Lanka, which cannot deceive the international community or the ordinary people of Sri Lanka.
China can play a key role in Sri Lanka's economic recovery, but the relevant responsibilities must be made clear. We provide assistance to help the Sri Lankan government and people overcome difficulties, but on the issue of sri Lanka's economic crisis, we in China have no special moral responsibilities and obligations.
Composition of Sri Lanka's debt
Second, this year marks the 65th anniversary of the establishment of diplomatic relations between China and Sri Lanka, as well as the 70th anniversary of the signing of the Rice Glued Agreement. Our Chinese leaders have mentioned many times that China and Sri Lanka should carry forward the "spirit of the rice glued agreement" of "independence, self-improvement, solidarity and mutual assistance", which was indeed a win-win agreement for both sides at that time. Because China was at that time in the War to Resist US Aggression and Aid Korea, facing the strategic material blockade of the United States and the West, rubber was extremely scarce. Then Sri Lanka because of the U.S. embargo on rubber, price controls and the development of synthetic rubber, resulting in a sharp drop in the price of rubber in the international market, while its rice harvest failed and food shortages were extremely scarce. In this case, we signed the Rice Glue Agreement, which resolved the difficulties of both sides.
However, we must realize that the spirit of the "rice glue agreement" has two points, not only solidarity and mutual assistance, but also independence and self-reliance. After the economic crisis in Sri Lanka, China has provided a large amount of humanitarian assistance and also provided emergency assistance of 500 million yuan. This is actually implementing the spirit of solidarity and mutual assistance.
At the same time, we cannot ignore the point of "independent self-reliance". Independence means that both China and Sri Lanka must have a spirit of independence and autonomy in the process of developing bilateral relations, free from interference from other countries. But now we see that in the process of the development of Sino-Sri Lankan relations, the influence of the United States, the West and India may be too great. From the perspective of some in Sri Lanka, geopolitical rivalries between countries such as the United States, India, and Japan against China could be an opportunity.
There is also a self-improvement, what does self-improvement mean? I think that for Sri Lanka, to really find the root cause of this economic crisis in its own country, we should not only look at the international economic background, but also consider the problem of its own government's decision-making mistakes, and the more critical problem may be that the economic and social system it has pursued for so many years, especially the universal welfare system, may have problems.
A few days ago, when I saw Ambassador Kohona in an interview, he said a sentence, and I was very touched, he said that Sri Lanka and the IMF are negotiating an agreement, but because Sri Lanka is a welfare state for all, he hopes that the IMF will not touch these benefits that the Sri Lankan people now enjoy in the process of signing the agreement with the Sri Lankan side. No snowflake feels responsible during an avalanche, but no snowflake is innocent during an avalanche.
I think that in the face of such a serious national bankruptcy, every Sri Lankan should carry forward the spirit of hard work, and only when the Sri Lankan people have the determination to meet the current challenges with hard-working and common struggle can Sri Lanka have a more brilliant future. China can provide assistance within its capacity, but Sri Lankan politicians and people also need to think that China's money does not fall from the sky, but is earned by the hard work of the Chinese people.
In a society, the necessary welfare is needed, but excessive welfare will feed lazy people to a certain extent. Sri Lanka has long been in a state of fiscal deficit and trade deficit double deficit, and a large amount of fiscal expenditure is used for household consumption rather than investment and production, which is difficult for a country to develop. So Sri Lankan politicians should seriously reflect on whether major reforms should be made to their economic and social systems.
Sri Lankan Ambassador to China Palita Kohona was interviewed by reporters at the embassy in Beijing on the 25th.
Observer Network: In the interview, Kohona also refuted the "Belt and Road" debt trap frequently hyped by foreign media and emphasized the friendship between China and Sri Lanka. After experiencing this debt crisis, will Sri Lanka's attitude towards China and the "Belt and Road" issue change?
Liu Zongyi: Sri Lanka is generally neutral in handling international relations, but many of their politicians have a speculative mentality. Ambassador Kohona also mentioned that Sri Lanka's newly elected President Vikramasingha is planning a visit to China. He also revealed that the new government is not expected to undergo a fundamental change in its China policy. Therefore, the overall trend is relatively stable, of course, it cannot be ruled out that some politicians use great power competition to carry out strategic speculation.
Especially now that the stability of the new government is now, I think there may still be a problem. Moreover, Premadasa, the leader of the opposition Party to unite people's power, has not returned to Sri Lanka and remotely commanded abroad.
Observer Network: After the outbreak of the Sri Lanka debt crisis, there are also some views that China has invested in the construction of airports, ports and other facilities in the local area, and these infrastructures are actually projects with long construction cycles and large investments, considering the problem of risk aversion, whether the future construction of the "Belt and Road" can consider giving priority to those projects with less investment and faster returns. What do you think of these views? What enlightenment does the current situation in Sri Lanka provide for the "Chinese enterprises" that are going out? According to previous reports, China's debt holds about 10% of Sri Lanka's total external debt, and about $1 billion of the about $7 billion of Sri Lanka's external debt that needs to be repaid this year belongs to China. What might happen to the debt between China and Slovaks?
Liu Zongyi: Sri Lanka is a relatively key country in the "Belt and Road", and in terms of infrastructure, it does have great shortcomings. We in China have also been paying attention to and assessing its economic situation before. However, such a serious economic crisis is the result of a combination of factors, and finally a "perfect storm" is formed, which is still a relatively extreme case overall.
On December 14, 2021, at the port of Hambantota in southern Sri Lanka, then-Sri Lankan Prime Minister Mahinda Rajapaksa (front center) cut the ribbon for the annual throughput of the Port of Hampong Ro-Ro operation exceeded 500,000. (Xinhua Net)
Hambantota Port is a key cooperation project between China and Sri Lanka to jointly build the "Belt and Road", and it is also the object of foreign media to hype the topic of "China's debt trap".
So from my personal point of view, our infrastructure investment and long-term investment in the "Belt and Road" should still be done, and we should really do some small and beautiful projects. The key to these projects is to be able to have a more immediate effect on the local economic and social development, and then to win the support of the local people. Japan has done a relatively good job in this regard, they do some projects, it can be said that they go deep into the grassroots of society, and then they can do a project well for many years, and every link has the mark of Japan.
So we see a lot of Japanese aid in Southeast Asia, South Asia, Africa, although the money is not much, but the local people are grateful to Japan, and we should really learn from them in this regard.
As for debt repayment, the common way is to carry out debt restructuring, there are three basic ways: asset repayment, debt-to-equity swap, modification of debt conditions, such as reducing the principal, reducing interest rates, and eliminating unpaid interest payable.
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