Economic relations


Since the establishment of diplomatic relations in January 1957, bilateral relations between China and Sri Lanka have gone through smooth and upward development.  The exchanges and co-operation in the political, economic and social fields have been frequent and fruitful.  China and Sri Lanka share common views and support each other on major international issues, with Sri Lanka adhering to the ‘One China’ policy, which recognizes Taiwan as part of China. All Past and Present presidents of Sri Lanka have visited China, and there are frequent visits of state leaders and high-ranking officials between the two nations.


The Most visible symbol of Chinese assistance remains the BMICH which is an enduring testimonial to Sri Lanka – China Friendship.  Prior to the Rajapaksa period China has also funded several Projects including the Supreme Court Complex, the Central Mailing Exchange, Ging Ganga Flood Protection Scheme and the Redevelopment of the Lady Ridgway Children’s Hospital.  In the aftermath of the Tsunami disaster China helped Sri Lanka to build three Fishery Harbours for affected people and extended 300 million USD worth of support.


The Rajapaksa Era has taken this silky relationship to an unparalleled height during the past 5 years as China emerged as the island’s biggest financial donor in 2009.


China became the biggest donor to Sri Lanka in 2009, with US $ 1. 2 billion (Dh 4.4bn) worth of assistance in the form of grants, loans and credit representing 54 per cent of the total $ 2.2bn committed by foreign countries and multilateral agencies.  The next highest contributors were the Asian Development Bank with $ 423m and the World Bank with $241m.


Mahinda Chinthana policy document embodies a more gradual approach to reform, combining the positive attributes of market economic policies, including encouragement of foreign direct investment (FDI) with support for domestic enterprises.  The core of the Mahinda Chinthana is to achieve high growth rates through investment in large scale infrastructure and the knowledge economy, and focus on rural development to help rural mass in particular.  The Mahinda Chinthana is completely home grown and has a high degree of country ownership. The significance of the policy is to make sure that economic benefits are distributed among the public equally. Sri Lanka achieved an impressive eight point two percent (8.2%) growth rate in 2011 following the defeat of terrorism in 2009 coupled with  massive reconstruction and rebuilding projects and by developing the country as a shipping, aviation, commercial services and knowledge hub.

As many Economists believe under this strategy the country’s economy is not being pushed from the back, but is being pulled from the front.  The strategy is able to be seen with the commencement of the infrastructure development of Sri Lanka in the fields of Ports, Roads Highways, Power, Public Utility Arts and Culture. It is in this context that the government embarked on a more rational and exciting journey aligned with China to create better infrastructure conveniences to the nation that would bring enormous Economic gains in its 10 year development Strategy.

The key factors that attract Foreign Direct Investments (FDIs) and progress to any country, is Peace, sound investment climate and most importantly political stability coupled with proper infrastructure such as aviation and shipping facilities, electricity, telecommunication, transportation etc.  With the end of the war, the country has embarked on an exceptional development in these sectors. 

Sri Lanka as a Transhipment Hub

The development of a Port in Southern Sri Lanka to reap the benefits of busy international shipping lanes closer to Sri Lanka had been in the air for over three decades.  President Rajapaksa, who already realized the importance of the project, presented this study and several other proposals on the construction of the Hambantota Port.

The proposal embodied the construction of a deep water harbour in Hambantota, demonstrating its potential of being developed as the deepest and largest harbour in the world, with a location just half an hour off the world s busiest sea-lane which is used by 100 - 200 ships a day.  President Rajapaksa’s Government came forward to give political muscle to a project that would not only modernize the Southern and the Uva Provinces but also lead the country as a whole towards a future of affluence and prosperity.  The construction of the Hambantota harbour - the dream of President Rajapaksa, will bring in its wake not only a revival of the past glory of Ruhuna but a economic, social, cultural and political resurgence of the country as a whole.

Bringing economic development to the neglected southern corner of the island was a cornerstone of President Rajapaksa’s election manifesto. A region ravenous of investment and infrastructure is, according to the government, going to be transformed into the economic and industrial heart of the country.  An international port, airport, highways, a Railway was visualized to the Southern Part of Sri Lanka to achieve this mission.

Chinese supports for the Development of Hambantota Project

Under the Ruhuna Re-awakening Program, Mahinda Chinthana promised construction of Hambantota Port and also to expedite work on the Southern Highway and convert Hambantota to a commercial Town.  As soon as President Rajapaksa, was elected he got the Hambantota project moving and most importantly through direct talks with the Chinese Leaders.  By visiting five times to the People’s Republic of China during the past five years, he persuaded and obtained the necessary funds from the Chinese government to kick start the project.

The total cost for the project is US $ 360 million for phase one, which has already been completed in 2010 with the arrival of the first vessel to the port.  Phase two and three of the port project will be constructed with another US $ 600 Million.

The project is financed through the EXIM Bank of China and the construction is being undertaken by the China Harbor Engineering Corporation (CHEC) and the Sino Hydro Corporation.  The China Harbour Co-operation is one of the world’s largest companies in this field and bears the national qualification under the Ministry of Construction of the People’s Republic of China (PRC) for Harbour, Road, Building, Environmental, EPC and other engineering projects.  The Sino Hydro Corporation is also the largest and most successful Chinese construction company in the field of hydraulic and hydropower engineering.

The People of Sri Lanka has now realized that the Hambantota project is a reality, a dream of more than three decade has become a certainty. When the Hambantota Port is completed ships could save nearly three days sailing time, fuel and enjoy numerous benefits by anchoring at Hambantota.  It is expected that at least 20 percent of the shipping traffic mainly the oil tankers would call over at the Hambantota Port, while many of the  4,500 oil tankers passing this sea route annually would  anchor in Hambantota for bunkering, ship repairing, and to purchase food, water and medical supplies and logistics.  The Hambantota Port Development Project will be constructed to handle 100000 DWT vessels. It will have an approach channel of 210 meters wide.

The Port of Hambantota is planned as a Service and Industrial Port and subsequently it could be developed as a transshipment port depending on increasing cargo volumes.

Energy Supply

The Norochcholai coal power plant

An objective of Mahinda Chinthana was to relive the country from the impact of increasing energy prices in the world market and raising the Energy Supply to the increasing demand of the Economy.

The coal power plant, constructed in Norochcholai, a coastal fishing village 120 km north from Colombo along the west coast, will have an ultimate capacity of 900 megawatts of electricity when it is completely developed. The first stage at a cost of US $ 455 million generates 300 Megawatts to the national grid while the second and third phase will generate 600 Megawatts.  The cost for the second and third phase is estimated at US $ 891 million.

The first phase of 300 MW of Norochcholai Coal Power Plant was ceremonially commissioned by PresidentMahinda Rajapaksa in 2011. Construction of Phase II and III of the Power Plant began in 2010 ahead of schedule.   Once completed, it is expected to deliver a steady and low cost energy output of 1658 Giga Watt hours annually to the consumers.

The construction of the Power Plant is carried out by the China National Machinery and Equipment Import and Export Corporation (CMEC).  The CMEC is a company listed among the largest 225 contractors in the world by a famous magazine in the United States, Engineering News-Record for several consecutive years.  The Chinese have agreed to carryout the project on a Design, Build and Transfer (DBT) basis. The main objective of the project is to cater to the increasing demand for electricity while supplying steady and low cost electricity to the national grid.  With the completion of the Norochcholai coal plant the Rs 11/- per unit of electricity will be reduced to Rs 5/- per unit.  The CMEC is using the best technology available in coal power generation in this technologically advanced Coal Power Plant.

Compared to hydro and thermal power generating sources, coal is the most economical and feasible power supply.  As hydro dependability is threatened by drought and silt and thermal is an expensive source, coal is cheaper and more widely available. 
The successful completion of the project will enhance the capacity of the national grid in Sri Lanka.

Development of Highways

Roads are a line of communication which will fortify communal harmony and will act as a channel to bring people of all communities as well as goods & services together.  With developed road networks, people of all ethnic groups will find it easy to move between the North and the South, the East and the West.  It will bridge the cultural gap that developed over the past few decades. 

The Present Government understood the importance of Roads for the superior development of the country.  To accomplish the need, China came to our assistance in an admirable way.

Colombo –Katunayake Expressway

The important roads in a country are the ones linking the international airport and the capital city.  Not only would this be the key link to the centre of business in the country, but also a major factor in the first impressions created among tourists.  Currently, the journey from the Bandaranaike International Airport to Colombo takes about an hour and a half with medium traffic.  Devoid of congestion, this could be a mere 15-minute drive. The new expressway could make this happen.  The proposed expressway will be 25 km long and 27.2 meters wide and will have 4 lanes, 2 on either side.

Developing Colombo-Katunayake Expressway had been in the pipeline for decades with the former Prime Minister Sirimavo Bandaranaike proposing one for the 1976 Non Aligned Summit.

With the initiative taken by President Mahinda Rajapaksa, the Colombo - Katunayake highway project will soon be a reality.

Southern Expressway  - Pinnaduwa to Matara.

The first part of Southern expressway (Kottawa to Pinnaduwa) was ceremonially opened by President Mahinda Rajapaksa on 27th of November 2011. The length of this section is 96km and newly constructed Galle Port access road of length 5km will connect this Expressway to the Galle city. The expected travel time from Kottawa to Pinnaduwa (Galle) when this expressway is used about one hour.

The second section (from Galle to Matara) of length 35km is under construction and scheduled to be completed by 2013. A long felt need is becoming a reality and once more the Chinese Government has come to the forefront to fund this section of the Southern Expressway with USD 162 million. The Southern Expressway which is largely funded by ADB and JICA consists of four sections - two funded by JICA, one by ADB, and the other by the China Exim Bank.  Bulk of the work is being carried out by the China Harbour Engineering Corporation  Ltd. (CHEC) has been awarded the first bid section of 34.5 km long, from the KOTTAWA in the Capital, Colombo, 20 km southward to connect A4, the termination is in DODAMGODA where the second bid section starts.

There are plans to extend the Southern Expressway up to Hambantota connecting Mattala International Airport which is being constructed.  The length of this section will be 75km and surveys are being done to acquire land for this section of the Expressway.

Apart from the above, a number of road network projects in the reconstruction process of the North and the East is in the pipeline to be funded by the Exim Bank of China, including the reconstruction of the A9 expressway to the value of USD 520 Million.

Performing Arts Theatre - a Symbol of Sino-Lanka friendship

The National Performing Arts Theatre, also known as the Nelum Pokuna (Lotus Pond),  the most recent gift from China to Sri Lanka, was ceremonially declared open by President Mahinda Rajapaksa on 15th December 2011.

The new building complex of 33,000 sq.ft built at a cost of US $ 23 million now offers a theatre complex for artistes, local and foreign equipped with modern facilities needed for the performance of music, dance and drama.  In addition the new theatre has become a centre of interest for the cultural tourists, and will support cultural tourism.  This is the realization of a long felt need in the field of performing arts in Sri Lanka.

The National Performing Arts Theatre will contribute to the development of performing Arts in Sri Lanka and to the promotion of the distinction of artistes.  It will  remain a fitting monument to the Sino-Sri Lanka friendship. 

Chinese Assistance to Sri Lanka s Second International Airport

The construction work of the runway at Mattala International Airport is nearing completion. The project is being implemented under the Mahinda Chinthana initiative of “Winning The Blue Sky", with the aim of making Sri Lanka a major aviation hub in South Asia.

The total cost of the airport project is in the region of over 300 Million U.S.Dollars. Construction of the sub runaways connecting to three and half kilo meter main runway has also been started. EXIM Bank of China is financing under a Concessional loan constructed by the CHEC. 

800 hectares will be developed under the first phase of the project. The new airport will have facilities to land 10 planes at a time, including the world’s largest aircraft Airbus A-380.

The Airport is scheduled to be opened by the end of 2012.

It is pretty noticeable during the past five years Sri Lanka - China Relations have reached a new height and China has figured prominently in providing funding for socio-economic development projects in particular.

As both Countries are willing to further increase friendly exchanges between the Governments, people of different walks of life, and expand bilateral exchanges and cooperation in politics, economy, trade, culture and tourism, the stage is set for both Countries to accumulate even more benefit from this new found dynamism. 





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