Sri Lanka-China Economic Relations in a Comparative Context

2ndSymposiumonMari0meSilkRoadandChina-SriLankaRela0ons

11th-13thofJuly2016,Shanghai-China

"Theopinionsexpressedinthispresenta0onaresolelythoseofthepresenteranddonotnecessarilyreflectthoseoftheLakshmanKadirgamarIns0tute.

Ravindra Deyshappriya Research Director

Lakshman Kadirgamar Institute Sri Lanka

[email protected]

7/11/16 LakshmanKadirgamarIns3tute,SriLanka 1


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.

Trade Relations


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.’


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


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


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)


-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


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


Investment Relations



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)


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.


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.


Foreign Financing Commitments from China ForeignFinancingCommitmentsfromMajorPartners(2006–2013,USDMn)

Chinesedevelopmentassistancesaremainlyforroadandpower&energysectors.

Chinahasbeenthekeyplayerofforeignfinancingcommitments.


Foreign Financing Disbursement from China ForeignFinancingDisbursementsfromMajorPartners(2006–2013,USDMn)

Bothdisbursementandcommitmentsincreaseda_er2009andfocusedonroad,transportaGonandpower&energy

Chinahasaccountedfor,byfar,thelargestdisbursement,followedbyJapan


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.

Tourism Relations



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.


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.


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?


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.


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’)


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



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

Sri Lanka-China Economic Relations in a Comparative Context

Economy & Finance

Transcript of Sri Lanka-China Economic Relations in a Comparative Context