China, Sri Lanka to Launch FTA Talks

Maritime Activity Reports, Inc.

September 16, 2014

Chinese President Xi Jinping began a visit to Sri Lanka on Tuesday agreeing to open bilateral negotiations for a free trade pact as Beijing tightened its embrace of the island nation along a vital shipping route.

Sri Lanka, located just off the southern tip of India, has long had close ties with New Delhi, but China has stepped up its diplomacy in recent years, building ports and roads across the region in a strategy dubbed the String of Pearls.

China and Sri Lanka completed a feasibility study in March on a free trade agreement, which is expected to give a boost to the island's top exports of tea and garments.

Xi will also inaugurate a $1.5 billion project, the largest single direct foreign investment, to build a port city on reclaimed land in the Sri Lankan capital, Colombo.

China has already built a port in Hambantota on Sri Lanka's southern coast that is set to become the country's biggest once its second phase is completed.

Since the end of a nearly three-decade war in May 2009, Sri Lanka has been spending heavily on infrastructure, including ports to attract foreign investments to its $67 billion economy.

India has been slow to exploit the opportunities, offering China a foothold in the country of 21 million people. Since he took over in May, Indian Prime Minister Narendra Modi has reached out to neighbours in a bid to wrest back some influence.

Xi will fly to India later on Wednesday.

(By Shihar Aneez; Writing by Sanjeev Miglani; Editing by Tom Heneghan)

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