Sri Lanka approves setting up of Chinese tyre factory near major port

SRI LANKA announced on Tuesday (8) the first large-scale Chinese investment in manufacturing in the country, a $300-million (£225m) tyre factory near a strategic deep-sea port.

Western nations, as well as India, have long been concerned about Chinese influence in Sri Lanka through projects under its gargantuan Belt and Road infrastructure initiative.

The factory will be adjacent to the Hambantota port, which was leased to a Chinese company in 2017 after Sri Lanka failed to service the $1.4-billion debt from Beijing used to build it.

Sri Lanka’s cabinet approved the setting up of the tyre plant under legislation that allows generous tax concessions, media minister Keheliya Rambukwella told reporters in Colombo.

He said Shandong Haohua Tire Co Limited will export at least 80 per cent of production, with the option of selling the rest on the local market.

The announcement came just weeks after prime minister Mahinda Rajapaksa unveiled the country’s 2021 budget, banking on a huge Chinese real-estate development in Colombo to attract more investment and revive the island’s economy.

The Colombo Port City – a $1.4 billion land reclamation project which started in 2014 – has doubled the size of Sri Lanka’s current financial district.

When Rajapaksa was president between 2005-15, Colombo borrowed billions from China, accumulating a mountain of debt for a string of infrastructure projects – including an international airport dubbed “the world’s emptiest” by media for its lack of flights.

He and his brother Gotabaya Rajapaksa – the current president – have rejected accusations that many such projects are white elephants, and have denied falling victim to a Chinese debt trap.

With credit agencies cutting Sri Lanka’s debt ratings, the country is expecting more Chinese loans in the new year.