sri lanka-china economic relations in a comparative context
TRANSCRIPT
2ndSymposiumonMari0meSilkRoadandChina-SriLankaRela0ons
11th-13thofJuly2016,Shanghai-China
"Theopinionsexpressedinthispresenta0onaresolelythoseofthepresenteranddonotnecessarilyreflectthoseoftheLakshmanKadirgamarIns0tute.
Ravindra Deyshappriya Research Director
Lakshman Kadirgamar Institute Sri Lanka
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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.
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.’
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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
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0
500
1000
1500
2000
2500
3000
2010 2011 2012 2013 2014
USD
(Million)
1US
2UK
3India
4Italy
5Germany
6Belgium
8Russia
9France
14China
Trade Flows of Sri Lanka with Major Trading Partners
IndiaistheleadingimportpartnerinSriLanka,followedbyChina
ImportsfromChinahasbeensteadilyincreasingoverGme
Imports
Exports
ExporGngtoChinahasbeenconsiderablylower,withsluggishgrowth
TheUSAisthemajorexporGngdesGnaGonofSriLanka,followedbytheUK
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500
1000
1500
2000
2500
3000
3500
4000
4500
5000
2010 2011 2012 2013 2014
USD
(Million)
1India
2China
3UAE
4Singapore
5Japan
6Malaysia
7Indonesia
8US
9Thailand
10Taiwan
USARank–1stShare–24.4%Value–2719.91USD(Mn)
ChinaRank–14stShare–1.5%Value–173.47USD(Mn)
ChinaRank–2ndShare–17.6%Value–3414.1USD(Mn)
IndiaRank–1stShare–20.5%Value–3977.1USD(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
SriLanka’sExportstoChina(1970s)
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-4000
-3000
-2000
-1000
0
1000
2000
3000
4000
2010 2011 2012 2013 2014
USD
(Million)
Import
Export
TradeBalance
Trade Balance Between Sri Lanka-China (2010 – 2014)
ShareofTradeDeficitofMajorImporGngPartners(2014)
SriLanka–ChinaTradeFlows&TradeBalance
FurtherdeepeningdramaGctradedeficit
SluggishexportandrockeGngimports
26.4%ofSriLanka’stradedeficitisaccountedforbyChina
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27.3
26.412.1
9.2
5.7
5.54.5
3.33.32.8
India
China
UAE
Singapore
Japan
Malaysia
Indonesia
Thailand
Taiwan
S.Korea
Trade Relations: Way Forward
Exp
ansi
on o
f
Exp
ort
Vol
ume
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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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)
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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.
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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.
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Foreign Financing Commitments from China ForeignFinancingCommitmentsfromMajorPartners(2006–2013,USDMn)
Chinesedevelopmentassistancesaremainlyforroadandpower&energysectors.
Chinahasbeenthekeyplayerofforeignfinancingcommitments.
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Foreign Financing Disbursement from China ForeignFinancingDisbursementsfromMajorPartners(2006–2013,USDMn)
Bothdisbursementandcommitmentsincreaseda_er2009andfocusedonroad,transportaGonandpower&energy
Chinahasaccountedfor,byfar,thelargestdisbursement,followedbyJapan
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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.
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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.
TourismarrivalsandtourismreceiptstoSriLankaarerelaGvelylowcomparedtootherregionalcounterparts.
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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.
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Trend of Tourist Arrivals from Top Five Countries (2010 - 2015)
0
50000
100000
150000
200000
250000
300000
350000
2010 2011 2012 2013 2014 2015
Tour
ist
Arr
ival
s
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)
DramaGcincreaseoftouristarrivalsfromChinaa_er2013
ChinesetouriststosurpassIndianarrivals?
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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.
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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.
High-Profile Meetings between Sri Lanka & China Date SriLankanMember ChineseMember
LocaGon
Aug2003 PM:R.Wickremasinghe President:HuJintao BeijingNov2004 President:C.B.Kumaratunge StateCouncilor:Chen ColomboDec2004 ForeignMin.L.Kadiragamar StateCouncilor:Chen BeijingApr2005 President:C.B.Kumaratunge Premier:Wen ColomboAug2005 President:C.B.Kumaratunge President:HuJintao BeijingMar2006 President:M.Rajapaksa StateCouncilor:Tang ColomboJuly2006 ForeignMin.M.Samaraweera Premier:Wen BeijingSep2006 FinanceMin.Jayasundera EximBank,Assis.Manager:Li ColomboMar2007 President:M.Rajapaksa President:HuJintao BeijingOct2007 FinanceMin.Jayasundera EximBankChairman:Li ColomboDec2007 ForeignMin.Bogollagama DeputyMayor:Tang ShanghaiApr2008 President:M.Rajapaksa President:HuJintao HainanAug2008 President:M.Rajapaksa President:HuJintao BeijingSep2008 President:M.Rajapaksa ForeignMin.Yang ColomboOct2008 PM:Wickramanayake YunnanGovernor:Qin KunmingJuly2009 ForeignMin.Bogollagama VicePremier:Li BeijingAug2009 ForeignMin.Bogollagama YunnanVice-Governor:Gao Colombo
Aug2009 TreasurySecretary:Abeysinghe EximBankVicePresident:Zhu BeijingSep2009 President:M.Rajapaksa TianjinCPCChief:Zhang ColomboOct2009 PM.Wickramanayake Premier:Wen ChengduDec2009 TreasurySecretary:Abeysinghe CommerceViceMin.Chen Beijing
June2010 President:M.Rajapaksa ChineseVice-Premier:ZhangDejiang
Colombo
Aug2010 PM:D.M.Jayaratne Governor:QinGuangrong Colombo7/11/16 LakshmanKadirgamarIns3tute,SriLanka 25
Date SriLankanMember ChineseMember LocaGonJune2011 President:M.Rajapakse President:HuJintao Russia
Aug2011 President:M.Rajapakse Premier:WenJiabao Zhongnanhai
Sep2012 President:M.Rajapakse WuBangguo Colombo
May2013 President:M.Rajapaksa President:XiJinping Beijing
Sep2013 President:M.Rajapaksa LiuYunshan Colombo
Jun2013 PM.D.M.Jayaratne VicePremier:MaKai Kunming
May2014 President:M.Rajapaksa President:XiJinping Shangai
Sep2014 President:M.Rajapaksa President:XiJinping Colombo
Nov2015 President:M.Rajapaksa President:XiJinping Hainan
Apr2016 PM.R.Wickremesinghe President:XiJinping Beijing
High-Profile Meetings between Sri Lanka & China (Cont’)
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Products SriLanka’sexporttotheworld2012(USD,000)
Annualgrowthinvalueoftotal
exportstoChina
(2008-2012)
TariffrateappliedtoSriLankainChina
Printedcircuits 26486 10% 0%
Partsofelectronicintegratedcircuitsandmicroassembles
4222 -8% 0%
Chemical/alliedindustrypreparaGons 1071 22% 0%
Manioc(Cassava),freshordried,whetherornotslicedorpelleted
1389 42% 8.3%
Bananaincludingplantains,freshordried 5692 32% 6.9%
Footwear,outersolesofrubber/plasGcuppersofleather
3628 18% 8.5%
Possible New Export Products
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ForeignCountriesRecepGonofChineseMainlandTourists
(Unitin10,000persons)(2007)Growth(%)
Japan 145.81 13.9
SouthKorea 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
NewZealand 6.83 16.6
SouthAfrica 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
TheRepublicofMaldives 0.95 47.3
SriLanka 0.69 -4.7
Cuba 0.39 18.6
Brunei 0.26 -7.1
CroaGa 0.10 24.2
TheRepublicofMalta 0.08 19.3
DesGnaGonsRecepGonofChineseMainlandTourists
(Unitin10,000persons)(2013)Growth(%)
HongKong 4030.33 15.3
Macau 2523.94 17.4
SouthKorea 425.34 42.0
Thailand 401.03 78.7
Taiwan 291.89 11.0
UnitedStates 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
UnitedKingdom 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
UnitedArabEmirates 26.33 11.6
Mongolia 23.64 -27.3
Reception of Chinese Mainland Tourists