Navigating the Dragon’s Den: Sri Lanka’s strategic balancing act ahead of President AKD’s visit to China

by Professor Chanaka Jayawardhena

President Anura Kumara Dissanayake is scheduled to embark on a state visit to China early next year, following his recent diplomatic success in India. As Sri Lanka rebuilds from the ashes of an economic meltdown, this visit will serve as a pivotal moment, shaping not just bilateral relations but also the island’s broader economic and geopolitical trajectory. While the allure of Chinese investments may offer short-term relief, the stakes are high: the decisions made during this visit could either cement Sri Lanka’s recovery or deepen its vulnerabilities.

The Economic Promise: Opportunity at the Doorstep

China’s economic might is undeniable. As the world’s second-largest economy and a leading investor in developing nations, China has demonstrated a remarkable ability to deploy vast sums of capital into infrastructure projects and industrial ventures. For Sri Lanka, a nation grappling with limited fiscal space, Chinese investment could unlock opportunities in critical sectors such as energy, transport, and manufacturing.

The Hambantota Port stands as a testament to the scope of Chinese involvement in Sri Lanka. Despite initial controversies, the port has emerged as a strategic hub, offering potential for revenue generation and job creation. However, the same cannot be said for the Mattala Rajapaksa International Airport, often dubbed the “world’s emptiest airport.” While envisioned as a key logistical and passenger hub, the airport has yet to realise its potential, serving as a reminder that infrastructure investments must align with realistic demand projections and comprehensive planning. Addressing this gap should be a priority during discussions with Chinese counterparts, ensuring that such projects contribute meaningfully to Sri Lanka’s economic landscape.

Additionally, enhanced trade relations with China offer significant upside. As Sri Lanka seeks to diversify its export portfolio, targeting China’s vast consumer base could invigorate key industries such as apparel, seafood, and tea. Establishing favourable trade agreements during this visit could pave the way for sustainable economic growth, moving beyond aid and debt reliance.

The Geopolitical Tightrope

The geopolitical stakes for Sri Lanka are both immense and intricate, requiring delicate balancing between its key regional partner, India, and the opportunities presented by China. India remains Sri Lanka’s closest neighbour and has historically shared deep cultural, economic, and security ties with the island nation. India’s contributions during Sri Lanka’s economic crisis, including emergency financial aid, are a testament to its enduring commitment. However, India also views any expansion of Chinese influence in Sri Lanka with heightened concern, perceiving it as a potential security threat within its sphere of influence in the Indian Ocean region.

President Dissanayake must walk a fine line during his visit to China, ensuring that the agreements forged do not alienate India or exacerbate regional tensions. While pursuing Chinese investments, Sri Lanka must communicate its intentions transparently to India, emphasising that its engagement with China is rooted in economic pragmatism rather than any geopolitical alignment. Joint initiatives with India, such as collaborations in regional trade and maritime security, can serve as confidence-building measures to assuage Indian apprehensions.

China, on the other hand, presents unparalleled economic opportunities. Investments in infrastructure, manufacturing, and renewable energy could provide Sri Lanka with a much-needed economic boost. However, Sri Lanka’s leadership must remain vigilant to avoid the pitfalls of overdependence on China, as evidenced by the debt crises faced by other nations engaged in the Belt and Road Initiative. The priority must be projects that not only bolster the local economy but also preserve national sovereignty.

To emulate the success of nations like Vietnam, Sri Lanka can adopt a “bamboo foreign policy”—firmly rooted in its national interests yet flexible in adapting to the complexities of great power politics. Vietnam’s ability to maintain economic ties with China while cultivating strategic partnerships with the United States, Japan, and ASEAN countries offers a valuable model. Sri Lanka, too, must engage other global players, ensuring a diversified set of partnerships that prevent over-reliance on any single nation.

Moreover, Sri Lanka’s policymakers must focus on ensuring that the benefits of Chinese investments accrue to Sri Lanka itself, rather than serving external strategic interests. This includes rigorous scrutiny of project proposals, transparent procurement processes, and an unwavering commitment to prioritising projects that yield tangible economic returns for the Sri Lankan people.

The challenge lies in balancing these dynamics while maintaining Sri Lanka’s sovereignty. A comprehensive, long-term vision that places Sri Lanka’s national interests at the forefront is essential. Investments should align with the country’s development goals, fostering economic resilience and reducing external vulnerabilities. Ultimately, the success of this balancing act will determine whether Sri Lanka can emerge as a stable and independent player in the region or remain a pawn in the larger geopolitical chessboard.

Potential Pitfalls: Lessons from the Region

Sri Lanka’s impending engagement with China is fraught with risks, many of which have been experienced by other nations. Laos, for instance, has faced severe debt distress due to over-reliance on Chinese loans for infrastructure projects under the BRI. Similarly, Zambia’s excessive borrowing from China has resulted in contentious renegotiations and fears of asset seizures. These examples underscore the importance of scrutinising loan terms and prioritising projects that deliver tangible economic returns.

Another potential pitfall is the erosion of sovereignty. Nations that over depend on Chinese investments often find themselves compromising on key policy decisions, whether in trade, security, or governance. Sri Lanka’s leadership must ensure that economic agreements do not come at the expense of national autonomy.

Moreover, transparency is critical. Corruption in procurement processes and project implementation has plagued many BRI initiatives, undermining public trust and long-term viability. President Dissanayake’s government, which has earned public confidence for its anti-corruption stance, must maintain rigorous oversight over any agreements signed during this visit.

Charting a Vision for the Future

While the immediate focus of President Dissanayake’s visit will likely centre on securing economic investments, the government must adopt a comprehensive vision that extends beyond short-term gains. This vision should encompass three key pillars:

=Economic Sustainability:

Sri Lanka must prioritise investments that align with its long-term development goals. This includes focusing on renewable energy projects that reduce reliance on fossil fuels, thereby lowering energy costs and improving environmental outcomes. Digital infrastructure development, such as expanding broadband access, can drive innovation and attract high-value industries, while skill development initiatives can prepare Sri Lanka’s workforce for the demands of a modern economy. By diversifying its economic base, Sri Lanka can reduce its vulnerability to global economic shocks and ensure sustainable growth.

=Geopolitical Balance:

As Sri Lanka engages with China, it must simultaneously deepen partnerships with other nations, including India, our immediate neighbours in the SAARC region and the rest of both the western world along with the global south. Strengthening ties with India, its closest neighbour, ensures regional security and cooperation, while partnerships with any country with the means can provide access to alternative sources of investment and technology. A multilateral approach will mitigate the risks of over-dependence on any single nation and enhance Sri Lanka’s global standing. By actively participating in regional forums and initiatives, Sri Lanka can position itself as a bridge between competing powers, leveraging its strategic location to attract diverse opportunities.

=Social Cohesion:

The benefits of Chinese investments must be equitably distributed to avoid exacerbating social inequalities. Infrastructure projects should include components that directly impact local communities, such as job creation and skill development programmes.

Transparent planning and community engagement are essential to ensure that large-scale projects do not displace vulnerable populations or create environmental degradation. By fostering inclusivity and addressing the needs of all segments of society, the government can build public trust and strengthen social stability, which is vital for long-term development.

A Positive Path Forward

President Dissanayake’s forthcoming visit to China represents both a challenge and an opportunity. By adopting a cautious yet ambitious approach, Sri Lanka can harness the economic potential of Chinese investments while safeguarding its sovereignty and geopolitical balance. The lessons from countries like Vietnam, Laos, and Zambia serve as valuable guideposts, highlighting both the promise and perils of engagement with global powers.

Sri Lanka’s recovery journey is far from over, but the foundations for a brighter future are being laid. The government’s ability to navigate this complex landscape with transparency, vision, and pragmatism will determine whether the nation can emerge stronger, more resilient, and truly independent. As the president steps into the dragon’s den, the world will be watching—and so will the people of Sri Lanka.

(Views expressed in this article are personal.)

(The writer is Professor of (Chair) of Marketing, University of Surrey, UK. Linkedin: https://uk.linkedin.com/in/marketingchanaka, Email: Chanaka.j@gmail.com