economynext | 28 April 2025
Top Chinese Minister to visit Sri Lanka in June; FTA talks likely
Chinese Commerce Minister Wang Wentao is expected to visit Sri Lanka in June, an official said, amid the island nation is looking to expand its export market across the globe after U.S. President Donald Trump’s reciprocal tariff announcement.
The U.S. has imposed a 44 percent tariff by Trump’s latest policy, but the effective date has been postponed to three months. However, the island nation is facing a 10 percent universal baseline tariff.
“Topics are still under discussion and not have been finalized,” an official who is aware of the visit told EconomyNext.
Government sources, however, said the topic of trade and export expansion is likely among many others including the stalled Free Trade Agreement between the two countries.
Sri Lanka and China have agreed to work toward an early conclusion of a comprehensive free trade agreement (FTA), both countries said in a joint statement in January this year when President Anura Kumara Dissanayake visited Beijing.
After six rounds of negotiations, the FTA discussions between the both countries came to a temporary halt in 2018, following concerns over an upper hand by China. Sri Lanka disagreed on three clauses of the proposed FTA.
In January Sri Lanka expressed its appreciation to China for Beijing’s effort to promote imports from Sri Lanka through various means.
COLD WAR
Sri Lanka is caught in a geopolitical proxy cold war between China and India with the backing of the United States, analysts say.
That cold war has led Sri Lanka to be extremely cautious in dealing with both Asian powers and even to forego some investment opportunities.
However, the 2022 economic crisis and sovereign debt default have compelled the island nation to look into all available avenues to ensure more foreign inflows to move away from the crisis.
Analysts say Trump’s latest reciprocal tariff is likely to force Sri Lanka go towards China to expand its exports as the U.S. policy could hit $1 billion worth or around 8% of the island nation’s exports.
The proposed FTA went into trouble when Sri Lanka had disagreement over timing of zero tariffs from the Chinese side, percentage of tariff line, and review time period.
Sri Lanka wanted a list of about 500 tariff lines to go to zero from the first day the agreement comes into force, but there was no element of reciprocity from the Chinese side, FTA negotiators have told EconomyNext.
China during the negotiation wanted to liberalize 90 percent of the tariff lines and the value of the trade, though Sri Lanka’s position was to go for an 85 percent tariff line and not the value, the negotiators have said.
China also has opposed Sri Lanka’s proposal to have a review on the FTA in the 10th year against Beijing’s timeline of the 20th year.
After the disagreements, China has shown some flexibility on the three key concerns, sources have said.
