China continues to carry large trade surplus with Lanka

China’s imports from Sri Lanka from January to March have dropped to US$ 93.74 million this year, and a substantial trade surplus remains in China’s favour for the three months.

China imported goods worth US$ 93.74 million (Rs 29.94 billion, down by 3.9%), while exporting shipments valued at US$ 759.80m (Rs 242.55 billion, down by 40.2%) to Colombo from January to March, China Customs data show.

For many decades, bilateral trade has been substantially in favour of China as a result of the low volume, narrow range, and low value products China buys from Sri Lanka, compared with large-scale exports to Colombo, ranging from motor vehicle parts and power tools to soaps, umbrellas, and walking sticks.

Sri Lanka’s exports to China are largely low-value products.

The trade imbalance — persisting even from the 1980s — shows no sign of narrowing.

Compared to this trading relationship, the United States remains Sri Lanka’s biggest bilateral trade partner, along with the European Union.

In 2022, China’s total exports to Sri Lanka added up to US$ 3.75bn (-28.3%, year-on- year). But what China bought from Sri Lanka was worth US$ 494.81m. In contrast, in just December, 2022 alone, Sri Lankan workers contributed US$ 476m to the economy.

The value of Chinese exports to Sri Lanka is nearly equal to the forex that Sri Lankan workers sent in 2022 -- US$ 3.78bn.

The 2022 bilateral trade with China should also be seen in the context of bans imposed under the Imports and Exports Control Act No 1 of 1969 and a shrinking merchandise trade deficit. The trade account gap in 2022 narrowed to US$ 5.18bn, from US$8.13bn in 2021

In 2020-2021, Sri Lanka’s share of China’s export market was a mere 2.19%, in contrast to 24.5% for the United States.

In 2008, Sri Lanka had a trade deficit of US$ 1.05bn with China and it rapidly ballooned to US$ 2.8bn in 2013, in six years. In that period, fabric was the biggest import from China apart from urea, canned fish, railway carriages, and even garlic. Among shipments from Sri Lanka were black tea (tariff of 7.5%), apparel (T-shirts, singles etc), tyres, gloves, and used or new rags (tariff of 14%). In 2012, the biggest export was coconut fibre for mattresses (US$ 11.9m).

China’s imports from Sri Lanka in January this year amounted to US$ 30.41m; February US$ 32.8m; and March US$ 30.52m. Exports to Sri Lanka in January were US$ 335.75m; US$ 146.19; and US$ 277.84m (-40.2%) in March.