Will Sir Lanka Soon Be the First Colony of China in 2022?

Background on Sri Lanka

Sri Lanka is an island off of India and within close proximity to Thailand, Indonesia, Singapore, and The Philippines. Because of its location, Sri Lanka has experienced many periods of stability as well as instability. In 1815 it was ruled by British imperialism for about 50 years until Ceylon became independent on February 4th, 1948 when it entered into a commonwealth with Britain.

In 1972 it became a republic and changed its name from Ceylon to Sri Lanka (previously spelled Serendip). In 1987 a civil war broke out between Sinhalese people and Tamil people where over 100,000 died before an agreement was signed in May 2002. As of 2012, there are still issues of discrimination against Tamils. Although there have been major problems in Sri Lanka’s history, they continue to be one of Asia’s fastest-growing economies. There are also concerns that China will take control over Sri Lanka due to the large loans given to them by China.

Although these loans were supposed to help develop infrastructure projects such as roads and ports, they could possibly lead to Chinese dominance over strategic locations like Colombo Harbor and Hambantota Port which would give them more power in trade routes throughout Asia and Africa. This may be why there have been rumors circulating around that Chinese President Xi Jinping will visit Sri Lanka in March 2017 after his attendance at CHOGM Summit hosted by Australia later that month.

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What Leason we have to learn from China’s debt trap?

The never-ending rise of China’s debt pile has experts worried. By some estimates, it’ll be between 250% and 300% of GDP by 2022 — a point where [debt] becomes dangerous, as BlackRock chief Larry Fink put it. As such, there’s concern that Beijing will use its debt-trap diplomacy to place debt-laden emerging markets like Sri Lanka under its thumb.

But what’s going on in Sri Lanka, and is it really likely to fall prey to Chinese debt-trap diplomacy? Here are three things you need to know.

1) China’s investments in Sri Lanka have been all over the map. In 2017, Sri Lanka signed a deal with Sinohydro Group Co., a state-owned hydropower company based in Beijing, for an $8 billion dam project on one of its rivers. Later that year, it signed another $1 billion agreement with State Grid Corp., another state-owned Chinese firm that manages electricity distribution across much of Asia and Africa, for the construction of an undersea cable to transmit power from Indonesia to Sri Lanka. There was also another agreement for two new airports worth about $2 billion (funded mostly by private investors).

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2) These projects don’t seem like much relative to Sri Lanka’s debt pile—but they’re not trivial either. According to data compiled by Bloomberg, Sri Lanka had $5.3 billion in outstanding loans from China in end-2017. That’s equal to roughly 12% of total foreign currency reserves held by its central bank in end-2017.

3) It doesn’t help that Sri Lanka will have trouble paying back whatever it borrows from China now that global interest rates are rising. To service existing debt, Sri Lanka will pay out roughly 10% of government revenue in interest payments alone next year, according to Bloomberg Intelligence analyst Niraj Shah. That means any more borrowing could push up its overall interest burden significantly if interest rates keep rising.

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What is China’s next move on Sri Lanka?

China has sent a naval armada to protect its next investment opportunity. The island nation has been steadily falling into Chinese debt, prompting critics to claim that it will soon be the first colony of China. Read on to find out what you can do with your life if you don’t think your country is immune to Beijing’s grand schemes.

China’s Next Move: Sri Lanka is heading down a dangerous path by borrowing heavily from China, and many fear that it will become another one of Beijing’s debt-trap states. If you’re not familiar with how these work, read on to learn more about how they operate and how they may affect your country in the coming years.

You might also want to take note of some potential side effects so you know what to expect should you decide to move abroad or start a business there.

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