The civilians of Sri Lanka have suffered from soaring inflation and lengthy power cuts since 2019. Since then, the country has also been devastated by the tourism-related impacts of the COVID-19 pandemic, which led Sri Lanka to struggle to repay its external debt due to extravagant loans from China to fund ambitious infrastructure projects. Recently, the protesters demonstrated for their demands that their president had to step down. Yet what they got was ministerial resignation, restriction of social media and curfews. Sri Lanka’s problems are not all internal though, and external players also influence their political situation. Sri Lanka not only asked China to postpone the deadlines, but also reached out to the IMF and India. Now the crisis is still unsolved, but the impact has already became a battleground in which China and India compete for influence on political and security aspects. 

China is a revisionist country, which wants to spread its political influence around the world, including its neighbor region, South Asia. In recent years, China’s initiative, One Belt One Road (OBOR), has provided the funds for several infrastructure projects to help its southern neighbors, which are developing countries, to improve their internal situations. However, Western countries take this initiative as a threat challenging the “rule-based international order.” In South Asia, Sri Lanka is always the backyard of India. But since 2012, India-Sri Lanka ties turned frosty when India faulted Sri Lanka for human rights violations during its three-decade-long civil war, Sri Lanka moved to China’s orbit and used Chinese credit to buy the president’s domestic legitimacy and grip his power. China won one more ally in South Asia successfully, and threatened India more in geopolitics. 

Besides, China’s strategy also impacts India’s security, which is the core interest that all states pursue. India is seeking hegemony in this region, but it broke the relations between Sri Lanka and left its Achilles heel exposed to let China in. Sri Lanka has already lost the Hambantota Port for over 99 years to China because it could not repay the loans. India is concerned that China will handle this port as a possible strategic military base to deploy its Indian Ocean fleet. In South Asia, China has territorial disputes with India, which have resulted in the conflicts on their borders. Now, if China deploys its fleet in Sri Lanka, it will threaten India’s security and gain the advantage in the region.

This crisis for Sri Lanka is also an opportunity to reform its domestic politics if other stakeholders are willing to help. Sri Lanka’s economy has relied on tourism-related industries for many years. But the pandemic changed a lot of people’s ways of living. Sri Lanka can review and reform its domestic industries, and try to overcome this crisis through the right policies. Furthermore, Sri Lanka trapped itself with loans by following the wrong policies, which shows the danger in the initiative of OBOR. It can also negotiate with China with India’s aid, and make an independent diplomatic strategy between India and China to develop its country.

In conclusion, Sri Lanka’s domestic financial crisis affects the regional competition between China and India. China won a forced ally and political incentive in the region, and spread its influence in South Asia. For India, China’s action not only threatens its regional hegemony but also its security, because China may deploy its fleet in the Hambantota Port, which has been handed to China over 99 years. Sri Lanka’s predicament has exposed the trap in OBOR, and should make other countries more cautious before signing OBOR contracts.


Article by: Eddie C

Edited by: Ari B