‘The Biggest Game Changer in 100 Years’: Chinese Money Gushes into Sri Lanka

eol independent newsBeijing is spreading its influence across the region with huge investments – much to the worry of India and the west

Little disturbs the serenity of Guan Yin, the bodhisattva of compassion, as her statue sits in contemplation at the centre of Mattala Rajapaksa international airport.

The last flight from the airport departed at 7.50am. The next is scheduled for 7.50am tomorrow. In the meantime check-in counters are empty, car rental desks deserted, and the only sign of life a handful of staff laughing around an information desk who disperse when a visitor arrives.

Built to handle one million passengers each year, Mattala Rajapaksa saw just over 50,000 people in 2017. Since it opened four years ago the gleaming facility in Hambantota district, on Sri Lanka’s south coast, has become known as the emptiest international airport in the world.

Mattala Rajapaksa airport in southern Sri Lanka is often called the emptiest international airport in the world. Photograph: Michael Safi

It is a symbol of the promise and peril of a fierce contest under way in south Asia. While most international attention has been focused on the South China Sea, on its western border China has been aggressively expanding its presence in the Maldives, Nepal, Sri Lanka and Bangladesh – rattling the regional kingpin, India, and watched warily by the west.

“China’s penetration of south Asia is the biggest game changer in 100 years,” says Constantino Xavier, a fellow at the thinktank Carnegie India. “The Russians tried, the Americans tried. This is the first time since at least world war two you have a massive power contesting the Indian state.”

Chinese money has gushed into south Asia and especially Pakistan in the past decade, and billions more has been promised as part of the Belt and Road Initiative, Beijing’s ambitious bid to create a new Silk Road of trade routes around the world.

In the Maldives the Chinese government or state-owned enterprises have provided loans or investment for more than 20 projects, according to new analysis by thinktank Gateway House, with the largest three projects alone worth nearly 40% of the Maldivian GDP.

Nepal, which shares an open border with India, is hosting at least two dozen Chinese investments. Beijing’s interests in Bangladesh are estimated to be worth up to $35bn. But few regions in the neighbourhood have been transformed as dramatically as Hambantota, about five hours’ drive from the Sri Lankan capital, Colombo.

Surrounded by acres of paddy fields and banana trees, between fishing villages and food stalls, enormous pieces of modern infrastructure now line the Hambantota landscape. They are ghostly sites. More cows than cars ply a new expressway. A convention centre that hosted the Commonwealth heads of government meeting in 2013 now offers cheap rates to wedding parties. A newly built hospital has never admitted patients, instead providing accommodation to Chinese migrant workers.

They were built in the fury of development that followed the end of the Sri Lankan civil war, fuelled by $8bn borrowed from China by the previous president, Mahinda Rajapaksa, who dreamed of turning his ancestral home into a tourism and business powerhouse.

“There was this sense that China would write us blank cheques,” says one Sri Lankan government economist, not authorised to speak publicly.

Hambantota is dotted with paddy fields and banana trees. Photograph: Martin Godwin for the Guardian

The rates on Chinese loans were often no better than those on international capital markets, he says. The difference was China asked fewer questions. “There was no rigour applied to, how are you going to make this work, what’s the business model here?

“It took a while for folks to realise we might be in trouble.”

‘An acute crisis’

Not every Hambantota project is deserted. In 2010 Sri Lanka agreed to pay a Chinese state-owned corporation $1.5bn to build a new port. Last December, struggling to make repayments, the government agreed to lease the port – and 15,000 acres surrounding it – to the same Chinese company for 99 years.

The lease has alarmed Indian and western policymakers who worry China has won a strategic foothold in the Indian Ocean. It has also angered locals, who fear Sri Lanka is caught in a debt trap and will be forced to lease even more assets in the future.

On 9 December a Chinese flag was raised over Hambantota port in place of Sri Lanka’s. It lasted seven days. “I went to the port administration office and told them I was willing to be shot to take down this flag,” says Bergama Gnana Thilaka, the chief priest at a Buddhist temple near the site.

Thilaka has led hundreds of monks in resistance to the lease of the port, which he likens to a colonial invasion. “When Sri Lanka was colonised by the British there were Buddhist monks who played a pivotal role against them,” he says.

The presence of Chinese workers in Hambantota has particularly galled opponents, on a backdrop of raging Buddhist nationalist sentiment on the island. Thilaka complains he knows of at least five marriages already between Chinese workers and local women.

“If they start coming here and have that much of an imprint, we will have a similar problem to what we’ve had with the upcountry Tamils,” he says. “There is no way to send these people back.”

Bergama Gnana Thilaka, the chief priest at a Buddhist temple in Hambantota and an opponent of leasing the area’s port to Chinese state-owned enterprises. Photograph: Michael Safi

Watching on, analysts and western diplomats warn Chinese money is increasingly translating into political sway.

“What has changed is the sheer amount of [Chinese] influence, and how they’re using this economic leverage for political and strategic purposes,” says Tanvi Madan, the director of the India project at the Brookings Institution in Washington DC.

Mohamad Nasheed, the exiled former Maldives president, calls China’s involvement in his country an “acute crisis”, accusing it of propping up the current ruler, Abdulla Yameen, so it can keep acquiring territory in the archipelago. “They have weaponised foreign direct investment,” he says.

Sri Lanka has banned the Chinese navy from Hambantota port for now, but faces decades of debt repayments to Beijing. “Any country that extends economic assistance, whether it’s China, India or the US, has a strategic interest in doing so,” says Dushni Weerakoon, the executive director at the Institute of Policy Studies in Colombo.

Even in developed democracies such as Australia, governments are trying to adjust to more aggressive Chinese intervention, says Xavier, the Carnegie India fellow. “You can imagine what they can do with $24bn in Bangladesh in 10 years’ time.”

Inevitably a more intense rivalry also increases the potential for military confrontation. India and China have fought wars over disputed borders in the past, but in 2017 for the first time they squared off on the soil of a third country, when Bhutan called Indian troops in to stop Chinese road-building in a disputed area.

India is doubling down on courting its neighbours, Xavier says, but also China’s other rivals. Once described as “estranged democracies”, the US and India now boast closer ties than ever, and along with Japan and Australia have revived a high-level forum known as the “Quad”, aimed at ensuring the Indian and Pacific Ocean regions remain “free and open”.

Neither India nor China is likely to ever completely dominate the region, Madan says. Instead, she predicts the small states will keep their powerful patrons guessing. “They will play one country against the other and try to maximise the benefits,” she says. “This is only going to become more complex, not less.”



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