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China’s loans to Lanka far below market rate – Chinese scholar

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The interest on 61.5% of China’s loans to Sri Lanka is far below the international market rate, according to Prof. Huang Yunsong, Associate Dean at the China Center for South Asian Studies in Sichuan University.

Huang told the Colombo Shangri-La Colloquium 2018 on Sunday, that as of December 2017, Sri Lanka owed China US$ 5.5 billion which was about 10.6% of the island nation’s total foreign debt of US$ 51.8 billion.

Of the US$ 5.5 billion, US$ 3.8 billion (61.5 % of the total loan) was provided at a rate far below the international market rate. Thus, the major part of China’s loan was taken at a concessionary rate,” Huang emphasized.

More importantly, US$ 1 billion had been taken at a concessionary rate of 2% which means that the interest on the major part of the loan was not excessive at all,” he added.

On the issues of Sri Lanka’s taking US$ 307 million at the London Interbank Offered Rate plus 0.75% pushing up the interest rate to 6.3%, Huang said that the commercial loan interest rate was based on a mutual agreement between Sri Lanka and China “as per established principles of the international market. Referring to the description of China’s taking over the Sri Lankan port at Hambantota as ‘neo-colonialism’, Huang said that if one were to Google ‘port 99 year lease’, the first result one would get is a 99-year lease on the Port of Darwin in Australia’s Northern Territory, a deal worth Australian Dollar 506 million with a Chinese company.

“Besides, port terminals in New York and Long Beach are managed by Chinese companies”. The China Merchant Holdings now holds a 70% stake in Hambantota port for 99 years, with the remaining shares in the hands of Sri Lanka. But the lease agreement provides for the purchase of shares held by China if Sri Lanka so decides at a future date, the Chinese scholar pointed out.

Huang described the charge that China is trying militarize Sri Lanka’s ports, as a ‘baseless speculation’.

He pointed out that between 2009 and May 2018, 422 warships had arrived in Lanka’s ports for operational, training and formal visits. These ships belonged to 27 navies in the world.

“Being a neighbour and having close ties with Sri Lanka, India tops the list with 83 visits . Japanese naval ships undertook 69 visits. China is at the distant third place with 33 visits followed by Bangladesh with 29 visits. Russia and Pakistan come next with 27 and 24 visits respectively. All these naval vessels have followed the same procedure of applying for logistic and operational requirements, which proves that China’s dual-use of ports for both military and economic purposes is baseless speculation,” the Chinese scholar said. He pointed out that according to the latest paper of a prominent US think tank, it is unlikely that the Kyaukpyu port in Myanmar and the Hambantota port in Sri Lanka will become dual use ports. This is due to political and legal restrictions in Myanmar and Indian pressure on Sri Lanka, the think tank had said. Furthermore, the agreement between China and Sri Lanka on Hambantota port contains a clause that “strictly prohibits,” the Chinese from using the port for military purposes.

It also states that the security of the port shall be with the Sri Lankan navy, Huang pointed out.

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