By: Staff Writer
April 29, Colombo (LNW): In a crucial diplomatic maneuver, Sri Lanka is reportedly preparing to host Chinese Commerce Minister Wang Wentao in June 2025, amid intensifying global trade tensions triggered by new U.S. tariffs.
Although the visit has not been officially confirmed, mounting signs point to a deepening economic partnership between Colombo and Beijing, driven by urgent economic imperatives and shifting geopolitical dynamics.
The potential visit comes at a pivotal time. Following U.S. President Donald Trump’s latest reciprocal tariff policy, Sri Lankan exports now face a looming 44% tariff—though implementation has been delayed by three months—and an additional 10% universal baseline tariff.
With approximately $1 billion, or 8% of its exports at risk, Sri Lanka finds itself under tremendous pressure to diversify its trade partners rapidly.
Government insiders hint that trade and export expansion will dominate discussions during Wang’s expected visit, alongside the long-stalled Free Trade Agreement (FTA) between the two nations.
Talks on the FTA, initially launched in 2014, ground to a halt in 2018 over disagreements on key terms. Sri Lanka had pushed for immediate tariff eliminations on 500 items and periodic reviews every 10 years, while China insisted on a more gradual liberalization and a 20-year review timeline. Despite these roadblocks, both countries recommitted to fast-tracking the FTA during President Anura Kumara Dissanayake’s state visit to Beijing in January 2025.
Analysts believe a finalized FTA with China could inject much-needed momentum into Sri Lanka’s struggling economy. Enhanced access to the vast Chinese market, increased Chinese investments, and stronger links to the Belt and Road Initiative (BRI) could help Sri Lanka stabilize after its devastating 2022 economic collapse and sovereign debt default.
Already, China has pledged significant investments, including a landmark $3.7 billion oil refinery project—Sri Lanka’s largest-ever foreign direct investment—under the BRI framework. However, this deepening economic reliance on China reignites old fears.
Sri Lanka’s prior experiences, such as the controversial 99-year lease of the Hambantota Port to China due to debt distress, serve as cautionary tales about the risks of falling into a “debt trap.”
Neighboring India, which sees Sri Lanka as firmly within its strategic orbit, is watching these developments with concern. India extended over $4 billion in assistance to Sri Lanka during its 2022 crisis and continues to invest heavily in its energy and infrastructure sectors to counterbalance China’s influence.
Colombo has repeatedly assured New Delhi that its soil will not be used against Indian interests—a delicate diplomatic tightrope as Sri Lanka tries to reap benefits from both Asian giants.
Meanwhile, the United States has expressed broader concerns over China’s BRI, warning of potential sovereignty issues for participating countries.
While Washington has refrained from commenting directly on a potential China-Sri Lanka FTA, it has consistently advocated for transparency and sustainable investment standards across the Indo-Pacific region.
Caught in the middle of this escalating geopolitical “cold war,” Sri Lanka must tread carefully. Past caution has seen Colombo turn away from certain investment opportunities to avoid upsetting either China or India.
Yet today, with economic survival on the line, the island nation appears increasingly ready to embrace all viable avenues for foreign inflows, even if that risks strategic discomfort.
In January, Sri Lanka expressed gratitude to China for initiatives aimed at boosting Sri Lankan exports, signaling Colombo’s willingness to deepen trade ties amid a hostile global trading environment.
As the world’s major powers continue to jostle for influence, Sri Lanka’s balancing act between China, India, and the United States will be key to its economic recovery—and to maintaining its sovereignty in a turbulent new era.
