Loan shark or loan savior? Chinese engagement with Sri Lanka

Intro for course paper

Chinese engagement with Sri Lanka will only be sustainable if it involves concessional loans and investments that focus on modernizing Sri Lanka’s key industries. Sri Lanka requires real economic gains that will assist the government in repaying Chinese and other foreign debtors in the future. Modernization efforts that push Sri Lanka to shift from being predominantly agricultural to more manufacturing-based and automated will enable the country to follow China’s growth path in the 1990s. An FDI project of this kind can be seen in the Rubber Master Plan that seeks to modernize the extensive rubber industry in Sri Lanka. Sri Lanka’s development could be another iteration of the Leading Dragons Phenomenon, currently visible in certain African countries and Southeast Asian countries. China’s higher wages are pushing it to transition from certain manufacturing industries, meaning Sri Lanka could potentially pick up the sectors that China is leaving behind—the garment industry, in particular. If Chinese engagement evaluates Sri Lanka’s industries, ability to repay, and its political environment, it will be able to fund projects that are both sustainable and profitable.

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