Sri Lanka Possible $100M Assistance from AIIB and Beijing Loyalist Lee Elected with 99% Vote in HK
May 5 - 11, 2022 | Issue 6 - PACOM
Francesca Cavazzuti, Ashani Wijesuriya, PACOM Team
Jennifer Loy, Chief of Staff
Sri Lanka and China
Date: May 8, 2022
Location: Sri Lanka
Parties involved: Sri Lankan President Gotabaya Rajapaksa; Sri Lankan government; Chinese government; Chinese companies; Asian Infrastructure Investment Bank (AIIB)
The event: The AIIB is considering granting $100 million in emergency assistance to Sri Lanka. The AIIB promotes infrastructure investment throughout Asia and receives the majority of its funding from China. China is Sri Lanka's largest bilateral lender, with over $6.5 billion mainly allocated to large infrastructure projects. Sri Lanka is currently in a deep economic crisis, with citizens protesting against the government and demanding Rajapaksa’s resignation. Clashes between protestors and government supporters have also increased.
Analysis & Implications:
Since there is almost no chance that Sri Lanka will be able to repay China’s loan, China will very likely ask the government for exclusive access to major infrastructure projects in the country, such as ports, airports, and electrical plants, to settle the debt. It is very likely that China will use technical equipment and machinery of Chinese production in the construction process, very likely increasing Chinese imports to Sri Lanka. Chinese companies will also very likely increase their presence in Sri Lanka by acquiring partial or total assets of national companies. This will almost certainly lead Sri Lanka to become almost entirely dependent on China to revive its economy.
Despite China’s offer of assistance, the Sri Lankan population will very unlikely halt their protests against the government until actual improvements in food and medicine imports and oil prices are seen. If the government uses the funds to revive the economy, the slow reprise of foreign trade will likely reduce people’s participation in protests, as many residents will very likely reopen their local businesses. This will likely limit the number of active protesters to only the most radical anti-government protesters and groups, likely increasing the risk of attacks on government buildings. The government will likely increase surveillance, intelligence, and security technologies to identify and monitor these groups’ activities.
Since Sri Lanka's economic crisis and social unrest will very likely threaten China’s future Belt and Road Initiative infrastructure projects, China will likely employ local and Chinese security personnel to ensure the security and safety of its working personnel and infrastructure. There is a roughly even chance that China will offer to assist in training Sri Lanka’s police and military forces to improve their capabilities in responding to domestic threats, like terrorist attacks and violent protests targeting public infrastructures like ports, highways, and airports. This will likely allow China to build military facilities, deploy its military and police forces, and increase its military cooperation with Sri Lanka through joint drills and official military visits.
Date: May 8, 2022
Location: Hong Kong, China
Parties involved: Hong Kong’s Chief Executive John Lee; Hong Kong’s former Chief Executive Carrie Lam; Chinese Communist Party (CCP)
The event: John Lee, a Beijing loyalist, was elected the new Chief Executive of Hong Kong. He remained the sole candidate in the election, winning over 99% of the votes. Unlike Hong Kong’s previous leadership, most of whom either had ties to the business community or experience in civil service, Lee retains a background in law enforcement. During his prior service as Secretary of Security, the police received heavy criticism for the brutal methods used to contain protests. In a recent popularity survey, Lee garnered only 34.8 points out of 100.
Analysis & Implications:
Lee’s appointment almost certainly signals growing ambitions within the CCP to dissolve Hong Kong’s semi-separation from mainland China. There is a roughly even chance China will try to incorporate Hong Kong into its economic sphere by imposing new fiscal barriers on foreign investors and creating more state-owned companies, likely allowing the Chinese government to exert more control over Hong Kong’s economic environment. If China imposes new taxes, some foreign companies will be unlikely to renew their business contracts with Hong Kong, likely deterring other prospective businesses from establishing an economic relationship with the city. As a result, other international financial centers, such as London, New York City, and Tokyo, will likely grow.
Hong Kong’s election very likely signifies its political system’s increasing deviation from democratic practices. With low popularity amongst the public, Lee’s appointment is unlikely to have resulted from a fair or honest election. During Lee’s term as Chief Executive, public trust in Hong Kong’s political institutions will likely decrease. With a halt in democratic principles, corrupt practices will likely become more frequent or even encouraged, further eroding confidence among Hong Kong residents in its political structure.
Under Lee’s leadership, the city will very likely focus on suppressing political dissidence. As a career police officer, he will very likely endorse law enforcement’s use of excessive force to handle anti-government protests. Transparency from the city’s police will very likely decline, with crime reporting statistics likely being manipulated to portray local law enforcement in a favorable view. Lee will likely lean on Beijing’s assistance to deter future activities of political dissent in Hong Kong.
________________________________________________________________________ The Counterterrorism Group (CTG)
 Sri Lanka in talks for $100 million emergency funding from Beijing-backed bank, Reuters, May 2022 https://www.reuters.com/world/asia-pacific/sri-lanka-talks-100-mln-emergency-funding-aiib-ministry-2022-05-08/
 Beijing loyalist John Lee elected as Hong Kong’s next leader, AP News, May 2022, https://apnews.com/article/voting-rights-elections-beijing-hong-kong-f136ce684eaafab980800337dd9ef4c2
 John Lee: Who is Hong Kong's new hardline pro-Beijing leader?, BBC News, May 2022, https://www.bbc.com/news/world-asia-china-61267490