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has hit many emerging market currencies including the Sri Lankan rupee – Cabraal is heading to China to attract more investment to the South Asian economy.
“The Chinese are the people who have the cash now, so building up relationships with them is very important,” Cabraal told beyondbrics as he prepared to fly to China after an ‘Invest in Sri Lanka’ forum in Hong Kong.
At the height of the European financial crisis, European officials tended to cry “China will save us” whenever serious danger was in sight and a senior Chinese official was in town. Cabraal says Sri Lanka, whose economy grew 7% in the second quarter, needs China, but for other reasons.
“The savings we have in Sri Lanka are not enough. We recognise that and we have to have foreign savings come in, in order to have the necessary level of investments to take Sri Lanka to the next level of development. To do so, we would definitely need to have other new partners coming in.”
Sri Lanka, which has only recently emerged from two decades of violence and civil war, has already benefited from Beijing’s largesse. Propelled by large loans from Chinese banks, Chinese construction companies have helped the nation of 20 m to build infrastructure, including a new airport and a port.
The growing Chinese investment has raised some concerns in Washington, where US officials worry about Beijing’s mounting influence in the region – a trend that has prompted a US naval “pivot” to Asia. But Sri Lanka sees the relationship from another angle.
“We don’t fear China at all… we have absolutely no suspicions,” says Cabraal.
He hopes Beijing will hear his message that Sri Lanka faces fewer risks from “tapering” than, for example, its northern neighbour India, whose currency has slid in recent months as problems ‘Made in Delhi’ have been exacerbated by the anticipated US withdrawal of huge amounts of liquidity from the global financial system.
Cabraal and his delegation hope to convince Chinese banks to invest more in Sri Lankan banks in addition to helping develop trade financing in the country.
“There is scope for greater engagement (with Chinese banks)… that is why the top bankers in Sri Lanka are joining me in Beijing,” says Cabraal.
If that does not work, there is always Japan. Cabraal says Japanese companies have shown more interest in Sri Lanka since Prime Minister Shinzo Abe took power last year.
