Black South Asia: Sri Lanka and China ties post WWII

Wrote this as reply on a South Asian Blog re Sri Lankas China leanings questioned by Indian readers. Did not mention the obvious China has not trained and funded terrorists against Sri Lanka, unlike India.

Replying to Naveen and Sumits comments.

Sumit: i don’t understand the level of simping for China in SL
Naveen: SL have done the China leaning game for a couple decades. So what changed now?

The big geopolitical change is China has gone from being the US cheap labor manufacturing source to a big time competitor. Even the prime enemy as per Biden> So the US is trying to stop Chinas influence wherever. It was little too late when US (and India) realized China had cornered the very strategic Hambantota port.

We have been buddies with China for ages. Specially in 1970's during Srimavo Bandaranaike's time. That time too we had a foreign currency shortage It was a really bad time. I was about 12 and we had to stand in line for hours to get bread, rice/dhal/wheat flour on rations. Forced austerity, and we became self sufficient in about 5 years. However, people wanted the imported freebies and gave a 2/3rd majority to the West leaning JR Jayawardene in 1977. With that an open liberal economy. Also the 1977 and 1983 pogroms, the burning of the Jaffna Library..

China came to the rescue during those hard times with the rubber rice pact. Again bypassing dollar transaction. In comparison the US gave us moldy surplus wheat flour on credit. I and Sri Lankans had to eat that bread on ration. It was moldy and with maggots, gullo look up PL 480).

The first China Rice Rubber pact was in 1952 when the very West leaning Dudley Senanayake was the PM. SL (Ceylon then) had foreign exchange crisis in 1952 caused by a dramatic fall in her export prices brought about by the quick end of the Korean War boom. The end of the Korean War and the drastic reduction of commodity purchases by the West – in particular, of natural rubber by the United States.
China was unable to obtain rubber as a result of prohibition of rubber exports from Malaya following a UN resolution preventing the sale of rubber to China. The American Government invoked the Battle Act which prevented it from giving aid to countries selling strategic materials to Communist countries and cut off aid to Sri Lanka. In addition, US stopped selling sulphur needed by Sri Lanka’s rubber plantations. This was the price that had to be paid for trading with China.

R. G. Senanayake Minister of Commerce in 1952 said: "We noted on the Chinese side the absence of the spirit of bargaining and haggling on comparatively small points. On the other hand, they gave us the impression of being large minded and forthright in their dealings"

The trade was based on barter – exports and imports to balance every year; only the outstanding balance at the end-of-the-year was to be settled in foreign exchange.

Trade however was rarely balanced in the following years but the outstanding balance was generally carried forward to the next year without settlement in foreign exchange.

When Srimavo went to China in 1963 she was given a World Leaders welcome (see video link below). I wonder if the Chinese even then were thinking the long game.

Sumit: could raise the funds no strings attached via market borrowings at the same cost why would it need China and it’s restrictive loans?
extract its pound of flesh via geopolitical gains,
China has never pressurized SL about debt repayments.. Neither are the loans restrictive. It is IMF, ADB loans (9.5 million, 27%) that are extremely restrictive. In 2017 West leaning Ranil wanted loans/handouts to fund consumption/imports for local political gain. He wanted to be President. The West US did not oblige. So he went to China. The only thing China wanted was the Hambantota lease. That money (about a USD billion) was used in consumption, not to pay any Chinese Debt.

We cant raise at same cost from market borrowings because of Rating downgrades

Sumit: if I remember correctly, the Chinese debt closer to 20% because some got transferred to state owned
Chinese loans, bilateral, commercial whatever are around 10%. See the erd.gov.lk link above.

yeah propaganda. In one place I saw the statement "Chinese are 45% of Bilateral loans" True.

However, (again see link for data source)
Total borrowings............34.8 million
Market borrowings .......14.7 million i.e. 42%.
Bilateral borrowings..... 10.6 million i.e. 30%
China borrowings........... 4.77 billion (45% of Bilateral: i.e. (10.6 x 45% ):
.......................................13.5% of Total Borrowings (4.77/34.8)

Indian Bullet train. I.e India has a 50-year loan at just 0.1% interest from Japan with a 15 year grace period.
The carrot. Most of the money goes back to Japan to purchase locomotive. And then parts, maintenance etc over 50 years. Thats probably in the fine print. Nobody,I repeat Nobody gives handouts. there is always a catch or string

Sumit:SL approached China twice to restructure in 2015 and 2017
Never heard of that. Any link. Maybe, you are thinking of the Port lease. That was not to restructure debt, it was to raise money because the West was not obliging. Money was spent on consumption.

China Visit of Mrs. Sirimavo Bandaranaike (1963)