China on Wednesday praised India’s efforts to assist Sri Lanka in dealing with its worst financial crisis.
In a rare gesture, China on Wednesday commended India’s efforts to assist Sri Lanka to deal with its worst financial crisis but refuted the island nation’s President Gotabaya Rajapaksa’s remarks that Beijing has shifted its strategic focus from South Asia, including Pakistan, to South East Asia, saying the region still remained its priority.
Sri Lanka has been grappling with unprecedented economic turmoil since its independence from Britain in 1948. Sri Lanka’s economic crisis has created political unrest with protesters demanding President Rajapaksa’s resignation.
“We have taken note that the Indian government has also done a lot in this regard. We commend those efforts,” Chinese Foreign Ministry spokesman Zhao Lijian told a media briefing here while replying to questions about whether China, which has made big investments in Sri Lanka, is hesitating to help it when the island nation is facing the worst economic crisis.
“China is ready to work with India and the rest of the international community to help Sri Lanka and other developing countries experiencing difficulty to pull through the hardship as early as possible,” he said in an updated comment posted on the Foreign Ministry website.
India has rushed about USD 3 billion in assistance in the form of line credit and other modes to help Sri Lanka which has virtually declared insolvency and defaulted on all foreign loans including that of China totalling to USD 51 billion.
China has announced assistance of 500 million RMB (about USD 74 million) for the supply of essential goods but remained silent about President Rajapaksa’s request to defer the loan repayment, as well as its earlier announcement to consider a USD 2.5 billion loan facility for Colombo.
Beijing appeared to be peeved over the remarks by Rajapaksa that China appears to be shifting its strategic focus towards South-East Asia and Africa, noting that South Asian countries in financial trouble are not getting the same attention from Beijing as before.
In an interview to Bloomberg on Monday, Rajapaksa said that Lanka couldn’t tap a USD 1.5 billion (credit line from Beijing) and has yet to hear back on his request to President Xi Jinping for a USD one billion loan to buy essential goods.
Rajapaksa said China indicated that it would help Sri Lanka, while adding that “usually they don’t like” lending out more money to cover earlier debt payments.
“My analysis is that China has shifted their strategic focus into South-east Asia,” Rajapaksa said. “They see more strategic interest in the Philippines, Vietnam and Cambodia, that region, and Africa.”
“They have less interest in this region,” Rajapaksa said. “I don’t know whether I am right or wrong, even the focus on Pakistan has gone down. That shows that their interest here is not like earlier. Their interest has shifted to two other areas,” the Sri Lankan president said.
Sri Lanka and Pakistan are the biggest recipients of China’s biggest investments and loans in the region. While Colombo received about USD eight to 10 billion investments and loans from China, Beijing is currently committed to build USD 60 billion China Pakistan Economic Corridor (CPEC) over which India has protested as it is being laid through the Pakistan-occupied Kashmir (PoK).
Significantly, both countries are seeking IMF bailout packages to tide over the worst economic crisis.
China has already rolled over USD 4.5 billion debt of Pakistan in March and reportedly agreed not to withdraw USD 2.5 billion from Pakistan’s central bank, which Beijing deposited in 2019 to boost the depleted forex reserves of the all-weather ally to prevent it from going the Sri Lanka way.
Observers say Beijing is worried that with more countries in the region likely to face serious economic crises, demands for financial assistance may increase, putting pressure on the Chinese economy, which is in a slowdown mode with increasing pressure exerted by Covid lockdowns.
Reacting to Rajapaksa’s remarks, Zhao said, “as a traditional friendly neighbour, China pays close attention to and feels for the difficulties and challenges facing Sri Lanka. We have all along provided support to Sri Lanka’s socio-economic development as long as our ability permits”.
“As to China-Sri Lanka financial cooperation, shortly after the Sri Lankan government announced to suspend international debt payments, Chinese financial institutions reached out to the Sri Lankan side and expressed their readiness to find a proper way to handle the matured debts related to China and help Sri Lanka to overcome the current difficulties,” he said.
“South Asian countries, along with the other countries in our neighbouring areas, are China’s priority in its diplomacy. China attaches great importance to forging closer good neighbourly relations with its neighbours and has worked hard to this end,” he said, citing Beijing’s assistance in natural disasters, global financial crisis and Covid.
“China will work with relevant countries to respond to risks and challenges and pursue high-quality Belt and Road cooperation to jointly sustain the sound momentum of security, stability, cooperation and development in our region and bring great benefits for all peoples in this region,” he said.
On the economic crisis, he said, “we have noted and followed closely the financial, fiscal and international balance of payment difficulties facing the South Asian countries and other developing countries as you mentioned”.
“These difficulties partly stem from the challenges brought by the Covid-19 pandemic. They also have a lot to do with the Russia-Ukraine conflict and the unilateral sanctions slapped by the US and other Western countries on Russia in the wake of the conflict”, which had aggravated the food crisis and financial difficulties in developing countries and inflicted even more hardships on people, he said.