Will Chinese investors quit if Port City comes to a standstill?

The temporary suspension of the Port City project in Colombo has put lot of Chinese investors in uncertainty regarding the Sri Lankan investment policy.

The Sri Lankan media delegation currently visiting China was faced with a series of questions from Chinese investment giants  such as China Harbour Engineering Company (CHEC), which is constructing Sri Lanka’s port city project, and investment groups such as Shandong Hi-Speed Group, a Fortune 500 company that invests in a large number of infrastructure projects in China

This company is one of the leading infrastructure developers in the Shandong province of China which boasts China’s third largest GDP amounting to 968 billion US dollars. Furthermore Shandong province is among the large trade partners with Sri Lanka from China.

However, the foreign affairs office of the Shandong province has been deeply worried about future trade ties with Sri Lanka as they expresses fear that the island nation’s new government might reverse the investment policy of the country and thereby discouraging investor confidence.

The Deputy Director General of the Shandong provincial foreign affairs office Li Yongsen, speaking to Ada Derana, said that many investors in their province who are waiting to go visit Sri Lanka to invest have taken a step back with the latest developments in Sri Lanka especially after the government’s decision to temporarily suspend the Colombo Port City project, which is a US$1.4 billion direct foreign investment by the China Harbour Engineering Company.

Yongsen said that foreign investment policy should not be changed due to a change in government and that their concern is that the halting of projects would discourage confidence among potential investors from their province who were looking forward to investing in Sri Lanka.

He added that in 2014 Shandong province has approved investments amounting to US$ 9. 4 million to Sri Lanka but said that now it is up to the Lankan politicians if they are to attract Chinese investors from Shandong province.

For the last few days we have met with senior Chinese diplomatic officials in Beijing and almost all of them are very much concerned over the sudden change in treatment towards China.

However, despite their concerns over the developments in Sri Lanka, China has not completely withdrawn from its efforts in lobbying for the recommencement of the temporarily suspended project.

They still hope that the Lankan government will give the green light for the Colombo Port City project to recommence its work which had been temporarily suspended.

However, speaking to the various officials in the Chinese foreign office and the heads of leading investment companies it is evident that China might pull out from its existing investments projects in Sri Lanka and even discourage its investors from going to Sri Lanka.

One must not forget that China now tops the number of tourists arrivals to Sri Lanka which has gone up by 135 per cent in the last month compared to January this year and thereby keeping the confidence among the Chinese administrators would be of paramount importance if the tourist industry in the Indian Ocean Island is to prosper.  

This was one of the fundamental points that Chinese authorities were highlighting before the Sri Lankan delegation of journalists.

Shehan Baranage reporting from Beijing, China.