Tag: China

Part 165- Sri Lanka Crisis

Rovija Khapre 0 Comment Economics, Politics and Geopolitics, Social Responsibilities , , ,
Part 165- Sri Lanka Crisis

Sri Lanka is currently going through the worst economic downturn faced since independence from Britain in 1948. Facing power outages, lack of food, bankruptcy, and overwhelmed by numerous loans, the island nation is struggling. However, it hasn’t always been this way. 

In the 19th and 20th centuries, Sri Lanka became a plantation economy famous for it’s cinnamon, rubber, and Ceylon tea, something that remains a trademark national export. The development of ports under British rule strengthened the island and made it a center of trade. It’s major economic sectors are tourism, tea export, clothing, rice production, other agricultural products, and overseas employment, especially in the Middle East. From 2005-2011, Sri Lanka’s per capita income doubled. 

However, in 2016, it’s debt started to accumulate as infrastructure started to develop. This led to a near state of bankruptcy. In the fourth quarter of 2016, there was an estimated debt of $64.9 billion. In 2018, China agreed to bail out the country with a loan of $1.25 billion to deal with foreign debt repayment spikes in 2019-2021. In September of 2021, Sri Lanka declared a major economical crisis. But how exactly did Sri Lanka fall into debt? How did such a thriving economy crash? There are three main factors that caused this. Infrastructure, COVID, and the previous ban of chemical fertilizers.

Toruism and overseas employment, both of which provided the country with an input of foreign currency, crashed due to the pandemic. People stopped traveling, during this period, and people were also losing jobs. Prior to the pandemic, the country had proudly achieved upper-middle-income status, yet today half a million people have sunk back into poverty.Apart from that, there was also a ban on fertilizers put in place, partly to save foreign exchange. However, this led to domestic rice production falling 20% in the first six months. As a result, they were forced to import $450 million worth of rice. The ban also devastates the nation’s tea crop, the primary export and source of foreign exchange. Although the policy has been suspended and the government is offering $200 million to farmers as direct compensation, it hardly makes up for the damage and suffering the ban produced. 

Today, they now heavily rely on imports from other countries. “Soaring inflation and a rapidly depreciating currency have forced Sri Lankans to cut down on food and fuel purchases as prices surge.” (foreign policy.com) This has led to power cuts lasting up to 13 hours a day. The Rajapaksa government also promised tax cuts, which were enacted before the pandemic. With less money from the taxes, the government was unable to make some of these necessary purchases. 

Sri Lanka has also fallen into debt due to loans from other countries. One of them is China. Sri Lanka, situated between the key shipping route between the Malacca Straits and the Suez Canal, which links Asia and Europe. However, the only major port in Sri Lanka is the Port of Colombo, and it is catered towards container handling and is unable to provide facilities for port related industries and services. Therefore, a new port near the city of Hambantota, which has a natural harbor and is close to international shipping routes, was proposed. With the help of the Chinese government and workers, this port was built.

This relates to China’s Belt and Road Initiative; a global infrastructure development strategy developed by the Chinese government to invest in nearly 70 countries and international organizations. It’s about improving the physical infrastructure through land corridors that roughly equate to the old Silk Road. This also includes a maritime Silk Road along ports. Hambantota was built with Chinese investment to become part of this. “But the billion dollar project using loans and contractors from China became mired in controversy, and struggled to prove viable, leaving Sri Lanka saddled with growing debts.” (bbc.com) In 2017, Sri Lanka agreed to give “state-owned China Merchants a controlling 70% stake in the export on a 99-year lease in return for further Chinese investment.” So basically, using a loan from China, Sri Lanka is paying Chinese workers to build this port, causing the money to go directly back to China itself. So they’ve pretty much fallen in what is called a ‘debt-trap.’ This has been seen in other parts of the world, where, “Chinese lending has also proved controversial, with contracts whose terms could give China leverage over important assets”, can be seen. Some examples include:

  • Pakistan
  • Ethiopia
  • Djibouti
  • Mongolia
  • Sri Lanka
Many more included. (These are countries listed part of the Belt and Road Initiative, and are in debt. Not all countries part of the Initiative essentially owe debt.) But what China does, is step in, offer some assistance through money/loans to solve a problem a country has. This is mainly related to large infrastructure projects like roads, railways, ports, and also the mining and energy industry. As of right now, there are more than 40 countries in this category whose debt exposure to Chinese leaders is more than 10% the size of their annual economic GDP. 
Apart from that, it’s interesting how this works. There’s not really any international law that says China cannot do something like this. There are laws for it being domestic, but not internationally. We have loan sharks domestically, and just foreign/international debt. 
Overall, I think that Sri Lanka made the mistake of doing something they couldn’t afford. At that time, during the agreement of building the port, Sri Lanka was already in debt. This was a huge risk they had to take. If it didn’t prove to be viable, as it didn’t, Sri Lanka ended up being in more debt. They shouldn’t have done something they weren’t sure about and weren’t stable to proceed with. Although China was helping them pay off some debt they had at that time, by doing so, they got themselves into a more deeper problem. Not only that, I think that the government was taking really hasty decisions just for the sake of getting money and trying to get out of the problem. This whole Hambantota port project was thought of for decades, but only now put in because China was offering to invest in it to pay off debts. I feel like they should have started this project much before instead of when they had a problem. I can’t really say much regarding the pandemic, as that was something no one could have expected. However, I think that at that time, when rice-production and other agricultural products were still going strong within exports, the government shouldn’t have done anything about it. Maybe waited until later to put in tax cuts and the chemical fertilizer ban. Wait until the country was able to pull itself out instead of doing it quickly. So pretty much, don’t do something you can’t afford to do. 






Part 112- China

Rovija Khapre 0 Comment Life during Pandemic, Politics and Geopolitics , , ,

So, this post is about China. China’s, One China Policy. Let’s get into it, no time for intros or any of that stuff.

Quick Background: China has two “labels”, one of which actually is China and the other which is just a name for Taiwan. The PRC-People’s Republic of China is China and the Republic of China is Taiwan. This actually is a basic explanation of why the One China Policy is there. What is the One China Policy? The One China Policy is basically, a policy that states that there is only one sovereign state under the name China. Like I said, this refers to Taiwan and China. So, Taiwan, or also known as ROC was a sovereign state based in mainland China but wanted to become democratic after China established Communism. 

Now, what the political problem, is that Taiwan declared the independence of China, but China claims Taiwan as it’s own or that it was once China. It is also an official PRC policy to force unification if peaceful unification doesn’t work. This means, that China was wanting Taiwan to become one with it again, or become part of China again, and Taiwan didn’t want to. The peaceful unification is most likely any way without violence. So, without that working, China decided to force unification, due to their policy. But why would they enforce such a policy in the first place? I know that there is a reason, and I’ll explain in a minute, but why? I mean, it is a good strategy to try peacefully at first, it always is, but still, if Taiwan wanted to be independent, why would you try to force them to re-join? I know that a lot of this same event happens all around the world, for example, India and Pakistan, but why would you try and force them to be one again? Taiwan wanted their own government of democracy, and to be their own independent country form China, and China wants them to become one again. Taiwan chose it’s independence and wanted to state its own government and “rule” or govern itself. Like, for example, Taiwan was sick and tired of being ruled by others, and they wanted to govern themselves and follow their own rules that they create.

Anyway, in mainland China, the CCP- Chinese Communist Party- declared the PRC, and create the reality of Two Chinas. After the creation of Two Chinas, the PRC began to fight a diplomatic war against the ROC or Taiwan over official recognition as the sole legitimate government of China. Like, there can only be one China government, I’m assuming they mean. Or, it could also mean, that the name China is under one sole government and because Taiwan-ROC- is under China, they are part of the same government. The second way sounds most likely to be correct. This may also be why Taiwan wants to change their passports. Oh, haven’t you heard? Taiwan has been wanting to change the names on their passports and it has been deemed official. (LINK) So, here’s what happened in case you didn’t hear. “On September 2, the government of Taiwan launched its new passport design with independent identity, deemed as official from January 2021.” Basically, Taiwan came up with a new design for their passports. the reason why was because, their original passports had” Republic of China” on them, and Taiwan wanted to get that changed, and so, they came up with a new design, that says Taiwan. See:

OCAC.R.O.C.(Taiwan) – News

This is the original or the first one on the left, and the new design one on the right. And, that’s reasonable. It’s reasonable and understandable about why Taiwan would want to change their passports. They aren’t a part of China anymore, but in fact, their own country and want to be recognized for that. They wanted to, ” …distinct Taiwan from China…” Continuing from Chinese unification, China never recognized the two Chinas. Again, I’m wondering if that refers to the part of, Taiwan is under the name of China and is therefore part of China. I mean, that is partially right. If it is named, it is under one name.  But think about it this way. ( BTW my example is not saying China and Taiwan are like fruit and pineapples and apples, it is only supposed to be an example, and hopefully, one that is clear and correct) Pineapple has an apple in its name. It is actually, not at all an apple. Just because it has the same word in its name, doesn’t mean that they are the same or one. They are two completely different things, but just have part of the same name. Anyway, China still claims Taiwan as its 23rd province. Plus, in 2005, they passed the Anti-Secession Law in order to, “…discourage independence of Taiwan independence sentiments, and in order to legitimize its use of force against Taiwan.” Wait, is that even possible? Is it possible for them to do that, to just say and state something that allows them to use force on another country and discourage them of their independence? Wait, what if the rules for such things are different. Like in the U.S., are there different rules or guidelines for passing laws or acts and such because it is a democratic country, as opposed to China who is a communist country? Would they have their own guidelines for doing something like that? Come to think of it, ARE THERE EVEN ANY GUIDELINES FOR PASSING ACTS OR LAWS?? Have 

I just been asking random questions over something that may or may not exist this whole 5 minutes?? I know that China claims Taiwan as part of them, but, isn’t it wrong to do that to another country. To pass an act that allows you to use force on another country isn’t that wrong. ( Thinking other than Taiwan and China) That country is its own independent country that is recognized as by the world, and you just want to pass something that, gives you permission to use force on them. That’s not right. That is very, truly, not in any way possible, right. It shouldn’t be right. It’s like saying, I’m allowed to do anything I want to you even though you are your own person, just because I want to. Why? But then, think of China’s perspective. We can’t always put them in the perspective of the bad side. They must have their own logical and fairly accurate reasons for doing so as well. When passing this law or act, or whatever it is called, China might have been thinking and believing that it is possible/allowed to happen because Taiwan is under the name of China- like mentioned in the other fairly-exhausting-minutes-of-writing paragraphs. They may see it as, if it is a part of us, it isn’t a big deal. This event is only happening within China, and not with any other country, so it is fine. 

Anyway, It has been, surprisingly, at least an hour of non-stop typing and researching, and it is getting late. I hope that this blog clearly discusses different facts and opinions on Taiwan and China, and is much, much better than the other posts before. See you soon.