Ravindra Deyshappriya from the Lakshman Kadirgamar Institute in Sri Lanka presented on the trade, investment, and tourism relations between Sri Lanka and China. He outlined that trade relations date back to 1952 but Sri Lanka now has a large trade deficit with China. Chinese investment and financing have increased and are an important source but still lag behind investments in other Asian nations. Tourism from China has grown rapidly in recent years but the duration and spending of Chinese tourists is relatively low compared to European tourists. Strengthening economic ties through initiatives like the Maritime Silk Road could further boost Sri Lanka-China relations.

1. 2nd Symposium on Mari0me Silk Road and China-Sri Lanka Rela0ons
11th -13th of July 2016, Shanghai-China
"The opinions expressed in this presenta0on are solely those of the presenter and do not necessarily
reflect those of the Lakshman Kadirgamar Ins0tute.
Ravindra Deyshappriya
Research Director
Lakshman Kadirgamar Institute
Sri Lanka
ravindra@lki.lk
7/11/16 Lakshman Kadirgamar Ins3tute, Sri Lanka 1

2. 7/11/16 Lakshman Kadirgamar Ins3tute, Sri Lanka 2
Outline of the Presentation
Trade Relations Between Sri Lanka and
China
Investment Relations Between Sri Lanka
and China
Tourism Relations Between Sri Lanka and
China
Conclusion
Sri Lanka and China have experienced well-established and
friendly relations since ancient times. However, there is still a
possibility of expanding investment and tourism relations
further, while increasing the importance of China as an
exporting destination of Sri Lanka.

3. Trade
Relations
7/11/16 Lakshman Kadirgamar Ins3tute, Sri Lanka 3

4. Increasing Importance of the Indian Ocean and Strategic
Location of Sri Lanka
Sri Lanka’s strategic location in the Indian Ocean connects the
Asia Pacific with the Gulf and Africa Region, and is a significant
link between oil shipping lines and ‘String of Pearls.’
7/11/16 Lakshman Kadirgamar Ins3tute, Sri Lanka 4

5. 1952
• Sri Lanka-China bilateral trade agreement (Rubber-Rice Pact)
• SL imported 270,000 MT of rice and China exported 50,000 MT of rubber
1963
• China-Sri Lanka Maritime Agreement
• All commercial vessels engaged in cargo and passenger services between the two countries or a
third country were treated on the basis of most favored nations treatment.
1982
• Sri Lanka-China General Trade Pact
1984
• Agreement on Economic & Trade Cooperation
1992
• The first Amalgamated Sri Lanka China Joint Commission
• The second and the third were held in 1996 and 2000 respectively.
1994
• Establishment of Sri Lanka China Business Council
1997
• Sri Lanka signed a special agreement with China in 1997 in support of Chinese admission to Asia
Pacific Trade Agreement
2000
• Sri Lanka engaged in bilateral negotiations with China, extending glowing support in favor of the
Chinese bid to join the World Trade Organization.
Evolution of Trade Relation between Sri Lanka & China
7/11/16 Lakshman Kadirgamar Ins3tute, Sri Lanka 5

6. 0
500
1000
1500
2000
2500
3000
2010 2011 2012 2013 2014
USD (Million)
1 US
2 UK
3 India
4 Italy
5 Germany
6 Belgium
8 Russia
9 France
14 China
Trade Flows of Sri Lanka with Major Trading Partners
India is the leading import
partner in Sri Lanka, followed
by China
Imports from China has been
steadily increasing over Gme
Imports
Exports
ExporGng to China has been
considerably lower, with
sluggish growth
The USA is the major exporGng
desGnaGon of Sri Lanka,
followed by the UK
7/11/16 Lakshman Kadirgamar Ins3tute, Sri Lanka 6
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
2010 2011 2012 2013 2014
USD (Million)
1 India
2 China
3 UAE
4 Singapore
5 Japan
6 Malaysia
7 Indonesia
8 US
9 Thailand
10 Taiwan

7. USA
Rank – 1st
Share – 24.4%
Value – 2719.91 USD (Mn)
China
Rank – 14st
Share – 1.5%
Value – 173.47 USD (Mn)
China
Rank – 2nd
Share – 17.6%
Value – 3414.1 USD (Mn)
India
Rank – 1st
Share – 20.5%
Value – 3977.1 USD (Mn)
China’s Position at Export and Import Market of Sri Lanka
Export
Import
• China is the 2nd best import-trading partner of Sri
Lanka, whereas it ranked 14th in terms of export-
trading in 2014.
• This has resulted in Sri Lanka accounting for a
huge trade deficit annually.
• In the 1970s, China was one of the best export
destinations of Sri Lanka.
1975 1977
Rank Value (Rs, Mn) Rank Value (Rs, Mn)
China 1 460 3 433
USA 3 218 2 500
UK 2 311 1 527
Sri Lanka’s Exports to China
(1970s)
7/11/16 Lakshman Kadirgamar Ins3tute, Sri Lanka 7

8. -4000
-3000
-2000
-1000
0
1000
2000
3000
4000
2010 2011 2012 2013 2014
USD (Million)
Import
Export
Trade
Balance
Trade Balance Between Sri Lanka-China (2010 – 2014)
Share of Trade Deficit of Major
ImporGng Partners (2014)
Sri Lanka–China Trade Flows & Trade
Balance
Further deepening dramaGc
trade deficit
Sluggish export and rockeGng
imports
26.4% of Sri Lanka’s trade deficit is
accounted for by China
7/11/16 Lakshman Kadirgamar Ins3tute, Sri Lanka 8
27.3
26.4 12.1
9.2
5.7
5.5
4.5
3.3 3.3 2.8
India
China
UAE
Singapore
Japan
Malaysia
Indonesia
Thailand
Taiwan
S. Korea

9. Trade Relations: Way Forward
Expansionof
ExportVolume
Recognition of new export opportunities and
products
Formulation of strategies to penetrate the
requirements of Chinese cities, rather than the
country as a whole
Conducting awareness programs for Sri Lankan
exporters about the opportunities available in the
Chinese market
Utilizing the benefits of APTA
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10. Investment
Relations
7/11/16 Lakshman Kadirgamar Ins3tute, Sri Lanka 10

11. 7/11/16 Lakshman Kadirgamar Ins3tute, Sri Lanka 11
Investment Relations: Background
Sri Lanka prefers investments/loans from China over other Western entities.
Major players include Export-Import Bank of China, China Development
Bank Corporation, Chinese State-Owned Bank and Government of China
Chinese investments are free of preconditions.
Chinese investment can get ports and doesn’t get lectures on economic
reform and human rights. (Former US ambassador to Sri Lanka)
“China’s aid to Sri Lanka jumped from a few million dollars in 2005 to
almost $1 billion last year (2008), replacing Japan as the biggest foreign
donor”. (May 2009 Times of London)

12. 7/11/16 Lakshman Kadirgamar Ins3tute, Sri Lanka 12
FDI Inflows to Sri Lanka & China’s Contribution
FDI inflows from China and UK experienced an upsurge from 2012, while
the inflows from other countries reduced. 24.5% of total FDI inflows to Sri
Lanka is from China
Telecommunications, garments, power & energy, and electronic
manufacturing sectors have been most notable in attracting Chinese FDIs.

13. 7/11/16 Lakshman Kadirgamar Ins3tute, Sri Lanka 13
Sri Lanka Government Borrowings by Lenders
Sri Lanka’s borrowing from China is notably higher than from other
countries and multinational agencies.
Between 2010-2014, China accounted for the largest share in total
borrowings to Sri Lanka. Despite this, the amount lent to Sri Lanka
decreased in recent years.

14. 7/11/16 Lakshman Kadirgamar Ins3tute, Sri Lanka 14
Foreign Financing Commitments from China
Foreign Financing Commitments from
Major Partners (2006 – 2013, USD Mn)
Chinese development assistances
are mainly for road and power &
energy sectors.
China has been the key player of
foreign financing commitments.

15. 7/11/16 Lakshman Kadirgamar Ins3tute, Sri Lanka 15
Foreign Financing Disbursement from China
Foreign Financing Disbursements from
Major Partners (2006 – 2013, USD Mn)
Both disbursement and
commitments increased a_er 2009
and focused on road, transportaGon
and power & energy
China has accounted for, by far, the
largest disbursement, followed by
Japan

16. 7/11/16 Lakshman Kadirgamar Ins3tute, Sri Lanka 16
Investment Relations – Way Forward
Chinese FDI inflows to Sri Lanka are relatively low compared to other Asian
countries.
Country
FDI Inflows from China
(2013, USD Mn)
FDI as % of
GDP
Sri Lanka 240 0.36
Burma 3570 5.75
Cambodia 2849 18.68
Laos 2771 24.87
Vietnam 2167 1.26
Thailand 2472 0.64
Asian Infrastructure Investment Bank (AIIB) and future opportunities.

17. Tourism
Relations
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18. 7/11/16 Lakshman Kadirgamar Ins3tute, Sri Lanka 18
Sri Lanka as a Tourism Destination
Sri Lanka has been recognized as one of the best tourist destinations:
“Pearl of the Indian Ocean”.
Tourism is a driving force of economic growth, and is expected to attract 4
million tourists by 2020, with prospects of Sri Lanka becoming a major
tourism hub by 2025.
Tourism receipts are worth 2,431.1 USD Million (2014) and has created
direct and indirect employment opportunities-129,790 and 170,100
respectively.
Tourism arrivals and tourism
receipts to Sri Lanka are
relaGvely low compared to other
regional counterparts.

19. 7/11/16 Lakshman Kadirgamar Ins3tute, Sri Lanka 19
Share of Tourist Arrivals from Top Three Countries (1984 -
2015)
In 1980s and 1990s, tourist arrivals were dominated by German tourists,
followed by India and the UK.
India has accounted for the largest share of tourist arrivals during the last
decade, while the share from China increased sharply after 2013.

20. 7/11/16 Lakshman Kadirgamar Ins3tute, Sri Lanka 20
Trend of Tourist Arrivals from Top Five Countries (2010 -
2015)
0
50000
100000
150000
200000
250000
300000
350000
2010 2011 2012 2013 2014 2015
TouristArrivals
Tourist Arrivals from Top 5
Countries
India
China
UK
316,247
30%
214,783
161,845
115,868 86,125
68% 12% 13% 9%
Tourist Arrivals and Growth Rate of Tourist Arrivals of Top 5
Countries (2015)
DramaGc increase of tourist
arrivals from China a_er 2013
Chinese tourists to surpass
Indian arrivals?

21. 7/11/16 Lakshman Kadirgamar Ins3tute, Sri Lanka 21
Tourism Relations: Way Forward
Despite the rapid increase of Chinese tourists, Sri Lanka is not amongst
their top 25 destinations.
Establishing strong air transportation linkages between two countries.
The duration of stay for Chinese tourists (9.8 days) is relatively low
compared to most European countries and the US.
Attracting high-end tourists who are willing to spend 100USD-125USD per
day.
Developing an appropriate promotional campaign to attract more Chinese
tourists.

22. 7/11/16 Lakshman Kadirgamar Ins3tute, Sri Lanka 22
Conclusions of the Presentation
Cultural relations in the history of Sri Lanka and China have developed into
the current strong economic relations.
China ranks second best in tourist arrivals to Sri Lanka. However, the
duration of their stay and spending per day is relatively low. Sri Lanka is
not among the top 25 destinations for Chinese tourism.
Well-established trade relations starting from 1952, however trade balance
is unfavorable for Sri Lanka.
During the last decade, huge investment on infrastructure development and
a considerable amount of FDI inflows. However, Chinese investments in Sri
Lanka is still relatively low compared to Chinese investments in some other
Asian countries.
21st century Maritime Silk Road would be a possible way of further
strengthening Sri Lanka-China relations.

23. 7/11/16 Lakshman Kadirgamar Ins3tute, Sri Lanka 23

24. 7/11/16 Lakshman Kadirgamar Ins3tute, Sri Lanka 24

25. High-Profile Meetings between Sri Lanka & China
Date Sri Lankan Member Chinese Member
LocaGon
Aug 2003 PM: R. Wickremasinghe President: Hu Jintao Beijing
Nov 2004 President: C.B. Kumaratunge State Councilor: Chen Colombo
Dec 2004 Foreign Min. L. Kadiragamar State Councilor: Chen Beijing
Apr 2005 President: C.B. Kumaratunge Premier: Wen Colombo
Aug 2005 President: C.B. Kumaratunge President: Hu Jintao Beijing
Mar 2006 President: M. Rajapaksa State Councilor: Tang Colombo
July 2006 Foreign Min. M. Samaraweera Premier: Wen Beijing
Sep 2006 Finance Min. Jayasundera Exim Bank, Assis. Manager: Li Colombo
Mar 2007 President: M. Rajapaksa President: Hu Jintao Beijing
Oct 2007 Finance Min. Jayasundera Exim Bank Chairman: Li Colombo
Dec 2007 Foreign Min. Bogollagama Deputy Mayor: Tang Shanghai
Apr 2008 President: M. Rajapaksa President: Hu Jintao Hainan
Aug 2008 President: M. Rajapaksa President: Hu Jintao Beijing
Sep 2008 President: M. Rajapaksa Foreign Min. Yang Colombo
Oct 2008 PM: Wickramanayake Yunnan Governor: Qin Kunming
July 2009 Foreign Min. Bogollagama Vice Premier: Li Beijing
Aug 2009 Foreign Min. Bogollagama Yunnan Vice-Governor: Gao Colombo
Aug 2009 Treasury Secretary: Abeysinghe Exim Bank Vice President: Zhu Beijing
Sep 2009 President: M. Rajapaksa Tianjin CPC Chief: Zhang Colombo
Oct 2009 PM. Wickramanayake Premier: Wen Chengdu
Dec 2009 Treasury Secretary: Abeysinghe Commerce Vice Min. Chen Beijing
June 2010 President: M. Rajapaksa Chinese Vice-Premier: Zhang
Dejiang
Colombo
Aug 2010 PM: D.M. Jayaratne Governor : Qin Guangrong Colombo 7/11/16 Lakshman Kadirgamar Ins3tute, Sri Lanka 25

26. Date Sri Lankan Member Chinese Member LocaGon
June 2011 President: M. Rajapakse President: Hu Jintao Russia
Aug 2011 President: M. Rajapakse Premier: Wen Jiabao Zhongnanhai
Sep 2012 President: M. Rajapakse Wu Bangguo Colombo
May 2013 President: M. Rajapaksa President: Xi Jinping Beijing
Sep 2013 President: M. Rajapaksa Liu Yunshan Colombo
Jun 2013 PM. D.M. Jayaratne Vice Premier: Ma Kai Kunming
May 2014 President: M. Rajapaksa President: Xi Jinping Shangai
Sep 2014 President: M. Rajapaksa President: Xi Jinping Colombo
Nov 2015 President: M. Rajapaksa President: Xi Jinping Hainan
Apr 2016 PM. R. Wickremesinghe President: Xi Jinping Beijing
High-Profile Meetings between Sri Lanka & China (Cont’)
7/11/16 Lakshman Kadirgamar Ins3tute, Sri Lanka 26

27. Products Sri Lanka’s
export to the
world 2012
(USD, 000)
Annual growth
in value of total
exports to
China
(2008-2012)
Tariff rate
applied to Sri
Lanka in China
Printed circuits 26486 10% 0%
Parts of electronic integrated circuits and micro
assembles
4222 -8% 0%
Chemical/allied industry preparaGons 1071 22% 0%
Manioc (Cassava), fresh or dried, whether or not
sliced or pelleted
1389 42% 8.3%
Banana including plantains, fresh or dried 5692 32% 6.9%
Footwear, outer soles of rubber/plasGc uppers of
leather
3628 18% 8.5%
Possible New Export Products
7/11/16 Lakshman Kadirgamar Ins3tute, Sri Lanka 27

28. 7/11/16 Lakshman Kadirgamar Ins3tute, Sri Lanka 28
Foreign Countries
RecepGon of Chinese Mainland Tourists
(Unit in 10,000 persons) (2007)
Growth (%)
Japan 145.81 13.9
South Korea 131.25 19.5
Vietnam 92.03 81.7
Thailand 71.69 -6.5
Singapore 64.76 16.2
Malaysia 57.35 31.8
Australia 39.84 15.5
Germany 27.16 5.4
Myanmar 16.38 61.2
Philippines 16.00 15.7
Cambodia 14.05 70.7
India 6.98 48.2
New Zealand 6.83 16.6
South Africa 3.88 22.6
Egypt 3.30 52.0
Nepal 2.86 81.9
Pakistan 2.64 -10.7
Turkey 2.39 38.7
Hungary 1.60 -10.9
The Republic of Maldives 0.95 47.3
Sri Lanka 0.69 -4.7
Cuba 0.39 18.6
Brunei 0.26 -7.1
CroaGa 0.10 24.2
The Republic of Malta 0.08 19.3
DesGnaGons
RecepGon of Chinese Mainland Tourists
(Unit in 10,000 persons) (2013)
Growth (%)
Hong Kong 4030.33 15.3
Macau 2523.94 17.4
South Korea 425.34 42.0
Thailand 401.03 78.7
Taiwan 291.89 11.0
United States 196.69 14.2
Japan 183.46 -6.5
Vietnam 177.27 32.3
Cambodia 169.06 -8.4
Malaysia 135.16 -1.5
Singapore 132.28 13.4
Guinea-Bissau 114.39 216.0
Russia 91.53 5.3
Indonesia 87.92 23.2
Australia 82.27 12.8
Myanmar 56.13 2.8
Canada 49.77 19.1
United Kingdom 49.06 20.8
Italy 47.80 10.3
Philippines 44.65 64.0
France 42.21 14.2
Germany 41.51 10.2
Maldives 30.24 45.1
United Arab Emirates 26.33 11.6
Mongolia 23.64 -27.3
Reception of Chinese Mainland Tourists