Posted on November 26th, 2020


Economists agree that China has made a spectacular rise from a very poor nation in 1949 to very rich one in 2019. Chinese banks are among the largest cross border lenders in Asia, said Economist in 2019. Seven of the top 20 equity underwriters in Asia In 2018 were Chinese. Warren Buffet’s Berkshire Hathaway had invested USD 232 million in BYD, a Chinese energy products company, in 2008.  In 2019, China had the world’s largest high-speed rail network of 29,000 kilometers. This is about two thirds of the world’s total high-speed rail network.

China is now due to become the biggest economy in the world, ousting the US from that position, analysts said in 2019.     In 2020, China had become the world’s largest economy in terms of Purchasing Power Parity (PPP). China’s economy had reached a stunning 25.4 trillion USD in 2020, said analysts. By 2030 China will be the leading economy. By 2030 China will also have the largest navy and the most powerful aircraft carrier, they said.

China’s Belt and Road Initiative is a massive global network of ports, railways, roads and industrial parks spanning Asia, Africa, the Middle East and Europe, with trillions invested in new infrastructure.  China’s B&R is supported by a bank, unlike other similar ventures. Sri Lanka is a member.

More countries are joining it. Iraq announced in September 2019 that Iraq will join China’s “Belt and Road” project.  Iraq is grateful to China for its valuable support and is willing to work together in the ‘One Belt, One Road’ framework,” said the Prime Minister of Iraq during a state visit to China.  Beijing is Baghdad’s biggest trade partner, while Iraq is China’s second biggest oil supplier.

This November (2020) China and 14 other Asia-Pacific countries signed the world’s largest trade agreement, the Regional Comprehensive Economic Partnership. (RCEP). China has joined forces with more than a dozen countries across the Asia Pacific region to sign a huge free trade deal nearly a decade in the making, said analysts.

 The Regional Comprehensive Economic Partnership spans 15 countries and 2.2 billion people, or nearly 30% of the world’s population. Their combined GDP totals roughly $26 trillion and they account for nearly 28% of global trade based on 2019 data. The deal includes several of the region’s richest countries, China, Japan, South Korea. It also includes New Zealand, Australia, Indonesia, Thailand and Vietnam.

The trade agreement was first proposed in 2012 as a way to create one of the world’s largest free-trade zones. Tariffs and quotas would be eliminated on 65% of the goods that are traded in the region.  The economic benefits are modest and would take years to materialize but this was a coup for China, said Citi Research analysts.

The Communist Party intends to keep a firm grip on its capitalist economy.  Keeping big business in check is part of that plan, said analysts. There was a crackdown on global spending. Anbang Insurance was nationalised, putting the Waldorf under the ownership of China’s Ministry of Finance. Baoshang was taken over by the state. Acquisitions of European football clubs by Chinese groups came to an end. HNA, an airlines and logistics group that bought a large stake in Deutsche Bank and Hilton Worldwide, faced difficulties. . (Economist)

 China’s overextended financial conglomerates and China’s tech billionaires were brought to heel. Six of China’s 20 most valuable listed companies are tech firms with billions of users.  In addition, firms were asked to launch Party committees that will oversee corporate decisions. Also set up monitoring units that would allow the Party to audit company managers. (Economist)

The Republic of China celebrated its   70th anniversary with a very impressive, very long parade which included an ‘awesome display’ of military equipment. In the military parade in 1949, only 70 planes could be found so they had been ordered to fly past twice. In 2019 there were 160 aircraft and 580 pieces of military equipment on display. China has developed military abilities that can reach potential adversaries across the globe, said experts. 

The military parade was broadcast live, so everybody now knows that the China has invented powerful new weapons. China has no recent experience in sea or air battles, observed critics, but they are developing


missiles and asymmetric systems.

The military parade showed off China’s most advanced weapons, some being shown for the first time.  They included the following.  The J-20 supersonic stealth fighters,  the H-6N with an aerial refueling probe added,  that could be used to deter US aircraft carriers venturing into the South China Sea  and the DF-26 ballistic missile which, fired from land bases, is believed to have the accuracy to strike at US Navy’s aircraft carriers.

Also on display was the DR-8 or WZ-8 supersonic drone, a reconnaissance drone that that could potentially be deployed by aircraft, to infiltrate enemy airspace and gather intelligenceincluding determining the damage done by China’s missiles. It could be used to spot distant targets on very short notice and hit them with a conventional ballistic strike.

The Dong Feng  41, or DF-41, is an intercontinental ballistic missile with a range of 15,000 kilometers, allowing it to reach anywhere in the United States in about 30 minutes.  It is capable of hurling multiple nuclear warheads all over the United States, said experts.” It could be moved around by road and fired quickly.

 Its range of up to 15,000 kilometers would make it the world’s longest-range military missile. Some analysts say it can travel up to 25 times the speed of sound. It could carry as many as 10 independent warheads, which can hit 10 different targets over a wide area.”

One of the most closely-watched weapons was the Dongfeng-17, a new hypersonic ballistic nuclear missile believed capable of breaching all existing anti-missile shields deployed by the U.S. and its allies. Experts say it can breach any defence system.  The DF-17 missile is thought to be able to travel at more than five times the speed of sound. It’s designed to bypass enemy missile defense systems by traveling at speeds more than 3,400 miles per hour at low altitudes. 

DF-17 is a nuclear-capable glider that is designed to maneuver at high speed to evade anti-missile defenses. The glider is believed to be able to carry conventional and nuclear devices. The emergence of such a system would have a considerable impact, highlighting China’s progress in designing hypersonic non-strategic gliders, a segment in which Russians and Americans are lagging behind, said experts.”

China kept up its contact with Sri Lanka during the USA-controlled Yahapalana rule of 2015-2019. Tianjin Symphony orchestra played at Nelum Pokuna in 2017, to a full audience. Ceylon Chamber of Commerce and the Beijing Chamber of International Commerce signed an MOU to promote trade and commerce between the two countries in 2015.

 In 2014 Beijing Foreign Students University signed two memoranda with University of Colombo to set up a China Sri Lanka study Centre and a Confucius Institute. China said that there is a high demand for Sinhala degree courses at the Beijing Foreign Students University, due to the increase of Chinese investments and business groups. The university has facilities for PhD programs in Sinhala too. Chinese international broadcasting service had a Sinhala channel, they added.

China did not relax once Pohottu came to power. China remained watchful. Two criticisms of Port City were made. China replied. CHEC Port City Colombo (Pvt) Ltd wishes to draw your attention regarding, a misleading reference about Port City Colombo, in an article, titled ‘Did Expert Committee use similar standards in evaluating MCC and Port City loans’, by Harim Peiris, published on  09/07/2020, and subsequently another opinion article titled ‘Saving nation from Chinese loan strategies’ by G.A.D Sirimal, on  11/07/2020.

Both articles say “the issue that arises is whether the SLPP and its experts use the same criteria and standards when evaluating the MCC grant with Port City loans and project.”  Port City Colombo is not a Chinese loan. Port City Colombo is purely a commercial trade agreement and a 100% direct investment.

After the Eelam victory of 2009, Mahinda Rajapaksa wished to embark on a development progamme. The only country that came forward to invest in Sri Lankan infrastructure in a big way was China. Therefore, it wasn’t a foreign policy shift but an economic necessity, said Colombage. West had boycotted us on the grounds of human rights violations. So China filled the vacuum.

China became the biggest foreign investor in Sri Lanka, dwarfing foreign inflows from other countries by a significant margin. According to a March 2020 study by the London-based Chatham House think tank, Chinese infrastructure investment in Sri Lanka amounted to $12.1 billion between 2006 and July 2019.  Beijing is the largest foreign source of investment in Pakistan, Myanmar, Sri Lanka and Maldives, according to a 2018 study by Mumbai-based Gateway House think tank. Although the US is Sri Lanka’s biggest export market and a major development partner, it has been unable to match the Chinese economic might.

Since the election of Gotabaya Rajapaksa as the President last year, the government has once again deepened its relationship with China.  We have always had excellent relations with China, said President Gotabaya.  Sri Lanka relations with China is mainly economic, he observed.

China has offered to help mitigate the financial crisis faced by Sri Lanka. Pohottu asked for a $700 million loan. China gave US$500 million  on a 10-year concessionary loan. China also provided generous support towards controlling Covid-19.

Pohottu has bluntly pointed out to its pro-US, anti-China critics that it is China that has the most amount of cash now”. In different times in world history, different countries have had the most amount of cash. And now it happens to be China, Pohottu explained.  However, Sri Lanka is exploring different options to repay its debt, in addition to loans from China, currency swap facilities with India and China, and Samurai and Panda bonds, Pohottu added.

Despite the fact that Chinese loans to Sri Lanka remain below 10 percent of our overall debt burden, and those loans are concessionary loans with an interest rate around two percent, Pompeo and other US officials have tried to portray that China has Sri Lanka in a ‘debt trap”, complained Pohottu.

Pohottu dismissed the accusation that China is setting up “debt traps” in developing countries. China is Sri Lanka’s largest creditor but Sri Lanka is not caught in a China debt trap. 90 percent of Sri Lanka’s debt is in fact owed to western and multilateral financial institutions,   Pohottu said.

This statement has received support from abroad. Min Ye, Professor of International relations at Boston University has stated that studies conducted by scholars and researchers at US-based institutions have disproved the charge of a debt entrapment policy by China, whether it refers to Sri Lanka or Pakistan, or elsewhere.

China’s support was to enable Sri Lanka to pay off debt to other lenders. This could leave Sri Lanka completely in the hands of China, said . Mick Moore. At any moment, China could decide not to extend further loans to Sri Lanka.  On the other hand China could agree to give very large, low cost loans to enable the government to pay its debt to other lenders, he added.

Epithets like Trojan Horse” and Greeks bearing gifts” have been used to refer to offers of assistance by China to Sri Lanka.  Pohottu has ignored these warnings”. Analysts observe that Pohottu has pulled the plug on a light rail transit system that was to be financed and constructed by Japan. It is believed that the construction of the project will now be handed over to a Chinese company. (Continued)

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