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China pauses billion dollar investment in Sri Lanka

16 Feb 2017 | By Supriya

China has formally announced a delay in proceeding with a proposed $1.1 billion investment in its Silk Road project in Sri Lanka.

Investment towards development of Hambantota port and industrial zone has been paused given political protests that have broken out.

A court case has also been filed against the port development deal which is now stuck until court hearing on March 3.

In context: China's 'Silk Road' project halted in Sri Lanka

IntroductionChina and Sri Lanka sign deal for industrial zone

China signed a deal with Sri Lanka in December 2016 to develop strategic Hambantota port and construct an industrial zone in the vicinity.

These plans are a crucial part of Beijing's 'Silk Road' project intended to open up new sea and land routes in Asia for Chinese goods and businesses.

So far, China has already invested $1.7 billion in developing the Hambantota port.

Key reasonsChina-Sri Lanka deal welcomed

The deal to develop port and construct industrial zone was initially welcomed by Sri Lankans.

The island nation is heavily indebted and the inclusion of Sri Lanka on China's Silk Road initiative was perceived as an "economic lifeline".

Currently, Sri Lanka's debt is $64 billion which is 76% of its GDP, one of the highest in emerging-economies.

It also owes $8 billion to China.

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Public sentiment changing

InsecurityPublic sentiment changing

Original deal by former President Rajapaksa provided that Hambantota port be operated jointly by Sri Lankan government and Chinese companies and 6,000 acres of industrial zone would also be under government control.

However, under revised terms, Chinese companies have been allocated 15,000 acres for industrial zone on a 99-year lease.

This has angered many whose land the government is trying to acquire to lease-out.

Former President's strong opposition

Former President Rajapaksa: "A 99-year lease impinges on Sri Lanka's sovereign rights, because a foreign company will enjoy the rights of the landlord over the free port and the main harbor. It's about getting best deal for Sri Lanka."

07 Jan 2017Violent protests against industrial zone

At the opening of the industrial zone, massive protests broke out.

Hundreds of protesting Sri Lankans clashed with police and refused to be moved out of their land saying they refused to be evicted by the government to make way for the industrial zone.

This was the first instance of simmering opposition towards China's industrial zone spilling over in form of violent protests.

16 Feb 2017China pauses billion dollar investment in Sri Lanka

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22 Mar 2017China to push for Silk Road implementation after UNSC resolution

Despite Indian concerns, China says it will push for implementation of its Silk Road initiative after a UN Security Council resolution on it was unanimously adopted.

Chinese state media meanwhile urged India to adopt a "more pragmatic" approach towards President Xi Jinping's pet project.

The initiative aims to connect China with ports across the world, as well as two corridors through Pakistan and Myanmar.

31 Mar 2017Chinese Media: India using Kashmir to oppose Silk Road Project

A report in China's Global Times has quoted Chinese officials saying India was using Kashmir as an excuse to oppose the Silk Road project.

Criticizing India for its "cliche mentality", the article says "India sees the Belt and Road initiative as a geopolitical competition," and was hence opposing it.

It said India would "surely see a different world" if it changes its "mentality."