CHINA-FOREIGN POLICY: CHINESE FOREIGN MINISTER WANG YI VISITING ERITREA, KENYA, THE COMOROS, THE MALDIVES, AND SRI LANKA

Chinese Foreign Minister, Wang Yi is travelling through the Indian Ocean Region (IOR) from January 4 to 9. He will be visiting Eritrea, Kenya, the Comoros, the Maldives, and Sri Lanka, all face a financial crisis and have debt issues to be addressed. Eritrea joined China’s Belt and Road Initiative (BRI) in November 2020. The BRI in Eritrea gives China a foothold in the strategic Horn of Africa and the Red Sea. In Kenya, Wang Yi is likely to seek to ensure that huge Chinese loans do not become a prominent political issue ahead of the Kenyan general elections in August 2022. Nairobi could ask Wang Yi to restructure its debt, but Chinese lenders have been reluctant to offer debt relief. New deals were signed during a high-level bilateral forum on January 6, that was officiated by Foreign Affairs Cabinet Secretary, Raychelle Omamo, in the presence of China's Foreign affairs Minister, Wang Yi, among other officials. In the memorandum of understanding (MOU), a total of six deals were signed, among them trade and agriculture, which also accorded Kenya a green light to export avocados and fish to China. Other sectors that will benefit from the deal are agro-processing, textile, leather processing, footwear, furniture, construction among other sectors. The Ministry of ICT Innovation and Youth Affairs and the Ministry of Commerce of the People’s Republic of China also signed an MOU that recognizes digital economy as an important driver of global economic  growth and the potential for bilateral cooperation between Kenya and China. The agreement will allow both countries to explore areas for investment cooperation in the digital economy aligning with Kenya's vision 2030. In order to promote trade and reduce deficits, the two countries signed an agreement on the establishment of a working group tasked with addressing tariffs and non-tariffs barriers. From Kenya, Wang Yi goes to the Comoros, which is dependent on external aid and has been depending primarily on China since 2014. China has major infrastructure projects in the archipelago and China had forgiven Comorian debt in November 2018. For the Maldives high debt remains a problem and its public debt stood at US$ 5.6 billion at the end of March 2021. The Maldives’ debt to China is estimated to be 78% of its total external debt. Sri Lanka is seriously affected by debt and could ask Wang Yi for relief. China is the second-largest foreign lender to Sri Lanka, but it accounts for just over 10% of the overall debt. Most of the loans had been taken from the international market on commercial basis. As far as China is concerned, Sri Lanka had obtained a Foreign Currency Term Financing Facility (FTFF) of US$ 1 billion from the China Development Bank (CDB) in 2018, and another US$ 500 million in March 2020. In early April 2021, Sri Lanka signed an agreement with the CDB to obtain US$ 500 million as an FTFF. Sri Lanka could also draw on a Chinese currency denominated swap with the People’s Bank of China for US$ 1.5 billion, that could be used for paying for imports from China. Days before Wang Yi’s visit (January 8-9) the issue of organic fertilizer issue imports from China was resolved by negotiations. It is not clear if the Chinese Foreign Minister will extend further financial help or reschedule debt repayment to help Sri Lanka manage the severe dollar shortage. Wang Yi is expected to take steps to strengthen relations with Sri Lanka through new investments, especially in the Colombo Port City (CPC) built by a Chinese company





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