Mint Explainer: What China’s $4.5-bn investment in Sri Lanka means for India

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Sri Lanka has paved the way for a $4.5 billion investment by China in Hambantota. The town, which also houses a port that was leased to a Chinese state-owned shipping company in 2017, is at the heart of India’s concerns about growing Chinese influence in New Delhi’s strategic backyard. Mint take a look at the announcement and its implication.

Sri Lanka’s energy minister Kanchana Wijesekera broke the news on Monday that China’s Sinopec will be awarded a contract to establish a refinery at Hambantota Port. “Cabinet approval was granted today to award the contract to China Petroleum & Chemical Corporation (Sinopec) of China, to enter into an agreement to establish a new Petroleum Refinery & Associated Product Processing center in Hambantota," Wijesekera posted on X. This came after the country signed an agreement with Sinopec in May for the storage, distribution and sale of petroleum products.

This was particularly important for Sri Lanka, given the energy shortages that have rocked the country in recent years. At the heart of this new development is China’s growing influence in India’s strategic backyard. China has become a major investor, trading partner and political player in the island nation in recent decades.

Hambantota Port, which was financed with an estimated $1.3 billion of Chinese money, is seen as a key example of the lengths to which China will go to expand its influence. Experts have suggested that the economic logic for building the port has always been weak. Some reports suggest it was built to shore up China’s relationship with the Rajapaksa family, which has played a dominant role in the country’s politics.