The Case of Hambantota Port: Did China Set up the Trap?
Robyn Montano
As the rise of China challenges the West’s hegemonic power, it stands in polar opposition of Western democratic values. Mainstream media appears to have capitalised on this, formulating oversimplified portrayals of antagonisation and skepticism surrounding its ascent. Debt Trap Diplomacy (DTD) is a narrative associated with China’s Belt and Road Initiative (BRI), which is an ambitious global infrastructure initiative that sought to strengthen connectivity between Asia, Europe, and Africa. This narrative suggests that China uses BRI to coax developing countries into issuing unaffordable infrastructure loans to gain geopolitical leverage. However, despite the prominence of this portrayal, its accuracy is often contested—is DTD truly in China’s arsenal to seize power?
China’s implementation of BRI in Sri Lanka is infamously cited as an example of DTD. The cautionary tale goes as follows: Sri Lanka was forced to give up Hambantota Port to relieve itself of unsustainable debt from China's loans—a debt-for-equity swap. Yet, according to Himmer and Rod’s 2023 research, the reality is far more complicated.
The formation of the Hambantota Port began under the regime of former prime minister and president, Mahinda Rajapaksa. Prior to construction, several feasibility studies were held in the early 2000s, yielding negative results—some stating that it was too expensive or that the location was unsuitable. With poor mismanagement and ambiguous plans, the port was likely an attempt for Rajapaksa to boost political influence.
Given the port’s low chance of success, Sri Lanka’s war-torn conditions, and the looming global financial crisis, the U.S., India, and the Asian Development Bank denied financing for the port. This pushed them to China, where China Harbor Group secured the project with a £245 million loan from China Eximbank at a high interest rate of 6.3 percent. Even as the port failed to generate a return on investment, Rajapaska continued to fund for its expansion in 2012, acquiring a second loan of £604 million from China Eximbank. By this time, BRI had not even been established.
Following the electoral victory of Maithripala Sirisena and the loss of Rajapaksa’s allegedly China-funded campaign, Sri Lanka became further buried in debt from spending on international sovereign bonds—with Japan, the Asian Development Bank, and the World Bank comprising a larger portion of the debt in comparison to China. As the port continued to suffer significant financial losses, the Sri Lankan government issued a 99-year lease to the Chinese Merchants Port, granting them 70% of the ownership in 2017. Contrary to the narrative that Sri Lanka gave up the port as collateral for defaulting on Chinese loans, the £907.2 million from the lease was used to instead increase foreign reserves.
From this, it is clear that the failure of Hambantota Port was not due to China’s malicious predatory implementation of DTD, but rather the result of multiple factors, including economic fragility and the selfish interests of politicians in the borrowing countries—who willingly pursued these projects. However, while this does not constitute DTD, this example still reflects the fundamental flaws of the BRI, which have resulted in its eventual decline. The execution of large-scale infrastructure projects driven by political motives instead of economic feasibility in nations with weak financial health is unsurprisingly unsustainable. It allows for unstrategic and short-term planning, where projects are built independently without consideration of how they could integrate with existing infrastructure. Kenya’s participation in the BRI follows a similar pattern of mismanagement, as the Standard Gauge Railway’s track prematurely ends in the middle of a field and costs were allegedly inflated to fund corruption.
With Western media ignoring the complexity of these failures, the West has framed them as evidence of DTD to forward propaganda against China, attempting to tighten its grip on global dominance. Ironically, this implies that the true beneficiary from DTD is none other than the West, using it as a narrative to maintain their power—not only by antagonising China, but also by diverting any criticism away from itself.