Over the past decade, China has expanded its global footprint by lending money to developing nations for large infrastructure projects. On the surface, this may appear helpful. But the case of Sri Lanka tells a very different story that reveals how this lending model can trap a country in debt and leave it more vulnerable than before.
Starting in 2010, Sri Lanka’s government accepted a large loan from China to build a new port in the southern city of Hambantota. The project was promoted as a game-changer for trade and investment. But soon after the port was completed, reality set in. The income from the port was far lower than expected. It could not even cover the interest payments on the loan.
Faced with this problem, the Sri Lankan government was offered another loan by China, but this time with higher interest. Caught in a financial corner and under pressure to stay afloat, the government accepted. According to reports, Chinese officials also threatened to expose corrupt agreements made during the first deal if Sri Lanka backed out. This pressure eventually led to Sri Lanka giving up control of the port and surrounding land for 99 years.
The financial and political cost of that decision still weighs heavily on the country today. The corrupt government that accepted the deal eventually fell and was replaced by an opposition that inherited the crisis. Meanwhile, the port operates under Chinese control, and Sri Lanka remains locked in debt.
This situation did not happen by accident. China was able to lend this money because of the wealth it has gained through trade with Western countries. The United States and others import more from China than they export, giving China a large surplus of cash. That money is then used to invest in places like Sri Lanka, not just for profit, but for power.
As Edouard Prisse explains in his book We Are Funding China’s Growth That Must Stop!, the roots of this strategy go back to 2001. That is when China joined the World Trade Organization, gaining greater access to global markets. The belief at the time was that this would help bring China into the global economic order and support positive reforms. But instead, it gave China a platform to pursue its own interests on a global scale, without the same checks and balances other nations must follow.
What happened in Sri Lanka is not an isolated case. Similar debt-related projects have taken place in Pakistan, Kenya, and other developing countries. Many of these deals include hidden terms, and some lack proper oversight. The result is the same: short-term funding in exchange for long-term control.
Sri Lanka has now turned to the West for help. In 2022, the International Monetary Fund approved a 2.9 billion dollar loan package to support economic recovery. But this is a response to damage already done. It is Western money trying to fix a crisis caused by earlier Chinese lending that was made possible by Western trade dollars in the first place.
This is the pattern Prisse warns about. Money spent on cheap goods does not just lower prices at home; it travels and lands in the hands of governments that use it for leverage. The impact can stretch across borders and decades.
If we continue to ignore the full picture, more countries may find themselves in similar traps. The answer is not to stop trade altogether. It is to manage it better. That means recognizing the risks of one-sided economic deals and making sure that lending is transparent and fair.
To understand the full scope of this issue and how it can be addressed, read We Are Funding China’s Growth That Must Stop!. The case of Sri Lanka is a warning we cannot afford to ignore, and only by reading this book can we prepare ourselves to turn the tables against China.
Here is a link to purchase: www.amazon.com/dp/1967963053.
