Sri Lanka and China both anticipate that Chinese President Xi Jinping’s visit to the island tomorrow, a first by a Chinese head of state in 28 years, will expand cooperation and ties in trade and economy between the two countries.
According to the government of Sri Lanka, both countries in recent years have developed increasingly closer economic and trade relations and a proposed free trade agreement (FTA) between the two countries will boost Sri Lanka’s future development.
During President Rajapaksa’s state visit to China in May 2013 both leaders agreed to elevate the bilateral relations to a ‘Strategic Cooperation Partnership’, by substantially expanding the mandate for engagement.
A Memorandum of Understanding had been signed by the two countries and agreed to establish a Joint Working Group on Trade to study the feasibility of a China -Sri Lanka free trade agreement (FTA) and measures to enhance Sri Lankan exports to China.
A joint feasibility study on the proposed FTA completed in March 2014 concluded that the building of an FTA will bring benefits to both countries.
During Chinese President Xi Jinping’s visit to Colombo the two sides will launch negotiations on the FTA.
Although Sri Lanka’s exports to China have increased from US$ 28.39 million in 2005 to US$ 121.63 million in 2013, the exports have not increased up to its potential with the bilateral trade reaching US$ 3.62 billion in 2013.
Sri Lanka hopes the FTA will help the country to gain easier access to the Chinese market and gradually reduce its trade deficit towards the world’s second largest economy.
Some of Sri Lanka’s main export items to China include coir fiber, garments, tea, rubber and precious stones, among others.
China has become Sri Lanka’s second largest trade partner and the second largest sources of imports to the island with imports from China on a range of items have increased in recent years. Some of the main import items include cotton, textiles, iron and steel, vehicles and parts, and plastic products, among others.
In addition to the enhanced trade cooperation, China has become the largest investor in Sri Lanka.
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