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One stone, three birds

Frank Sieren, Beijing / jp
March 25, 2015

Despite trouble with its projects in Sri Lanka, China is unlikely to back off from foreign investments, according to DW columnist Frank Sieren.

Montage - Xi Jinping und Maithripala Sirisena
Image: Getty Images/Afp/Feng Li/Roberto Schmidt/DW-Montage

Sri Lanka's new President Maithripala Sirisena is visiting China, following an invitation by Xi Jinping, China's State and Government head (pictured above). Sirisena is first stopping over in Beijing on an official state visit and then heading to Hainan, the smallest and southernmost province in China. Here in the town of Bo‘ao, Asia's captains of industry are meeting for the annual Boao Forum for Asia (BFA) – Asia's answer to the World Economic Forum in Davos. It's no coincidence that Xi Jinping invited the freshly elected Sri Lanka president along this year. Such gestures of friendship are called for right now to smooth out the creases in the friendship between the two countries.

The most recent problem has been the bad atmosphere created by Sirisena. He's only been in office since the start of the year. But even during his election campaign, he won populist points agitating against Beijing. Foreign investors, he railed, were turning his country into a colony and its people into slaves. No sooner was he in power than he suspended construction on a Chinese project worth $1.5 billion in Colombo Port City. Officially, due to suspected corruption. The terms of a $5 billion credit from Beijing are now being reviewed.

So the government in Beijing is keen that talks beween Xi Jinping and Sirisena ensure these tensions don't worsen. The former is especially eager to make a success of the maritime leg of the New Silk Road, aimed at boosting the economy in the region. Colombo Port City on the Indian Ocean is seen as pivotal to the project.

Under Sirisena's predecessor Mahinda Rajapaksa, Sri Lanka was a reliable partner when it came to rebuilding his country with loans from China. But Sirisena is a confident leader and made his first foreign trip to Delhi in order to thaw Sri Lanka's icy relationship with India. It was a move that told Beijing it couldn't expect a free ride. India has long been perturbed by China's investment in the Colombo port and concerns in Delhi were exacerbated last year when Chinese submarines docked there. To the Indian leadership, this was further evidence of China's efforts to gain more control of sea routes around India.

Sri Lanka's 26-year-long civil war ended in 2009 and since then, Beijing has been ploughing billions into its infrastructure. Despite current tensions with Sri Lanka, Beijing's plan to position itself internationally with infrastructure projects and to simultaneously provide the necessary credit remains a business model that kills not just two but three birds with one stone.

Firstly, it helps widen China's geopolitical influence. Secondly, it means contracts for Chinese companies and therefore jobs. And thirdly, the US dollars earned from exports can be invested all over the world, thus spreading risk. This wide spread of investments over many continents also means one or other of them can go wrong – that here or there a government might create obstacles; that the economic situation of a partner might not develop in the manner one hoped, or that a project might have to be put on hold due to political turbulence.

These are all scenarios that have been factored in from the start. It doesn't look as though Beijing is going to put the brakes on its push for economic expansion – as will be spelled out at the Bo‘ao forum at the end of the week.

On the contrary, China is likely to shift up a gear and beef up its global investments even more. Beijing has ringfenced $1.25 trillion for the next 10 years alone. There'll be no shortage of takers for the capital on offer. In central and southeast Asia alone, $800 billion will be needed up to 2020 to finance the most urgent infrastructure measures.

But before long, new roads, airports and train tracks won't be financed by Chinese money just in Asia and Africa but perhaps also in Germany. China's second-largest insurance company Ping An Insurance and the investment group Fosun are already negotiating the purchase for $1.5 billion of parts of Potsdamer Platz in central Berlin.

DW columnist Frank Sieren has lived in Beijing for 20 years.

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