Sri Lanka-China FTA: Real Progress or Another Round of Talk?

Arun UpadhayayJune 6, 2025

3 3 minutes read

What’s at Stake?
Opportunities for Exporters
Concerns Under the Surface
What Needs to Change?
Final Thought

Sri Lanka’s trade conversation with China is taking a familiar turn — but this time, there might be something more than just diplomatic handshakes. After years of stalled negotiations, both sides are now back at the table discussing a free trade agreement (FTA) that’s been hanging in limbo since 2014. Whether it becomes reality or remains another chapter in diplomatic engagement is still anyone’s guess.

Last week in Colombo, Chinese Commerce Minister Wang Wentao brought up the idea of wrapping the FTA talks into “one package,” stressing mutual benefit. This follows President Anura Kumara Dissanayake’s recent visit to Beijing, where deeper economic ties were discussed at length. China reiterated its support for Sri Lanka’s recovery and signaled continued investment under the Belt and Road Initiative.

What’s at Stake?

At present, the numbers are heavily tilted. China accounted for over $4.3 billion in Sri Lankan imports last year, while exports to China stood at just over $250 million. Tea remains the main export, with limited inroads made into other segments.

For Sri Lankan officials, the FTA offers a way to reduce this trade imbalance — or at least to stop it from widening. But experts are cautioning against overestimating short-term gains.

“There’s definitely potential in the long run, but expecting a trade boom right after signing the deal is unrealistic,” said W. A. Wijewardena, a former deputy governor of the Central Bank. “China’s market is massive, but without strategic planning, we’ll only end up importing more.”

Opportunities for Exporters

Even so, there’s room for hope. Sectors like high-end apparel, jewellery, and Ceylon black tea could gain some traction if promoted smartly to Chinese consumers. Sri Lanka could also look into expanding exports of processed foods, organic produce, and tourism-related services if the FTA includes relaxed rules on service trade.

“The Chinese middle class is large, and they’re looking for quality — not just quantity,” noted Bhagya Senaratne of the Bandaranaike Centre. “If we position ourselves well, we can cater to that demand.”

Concerns Under the Surface

But not everyone is on board. Economists point out the same sticking points that caused the original FTA negotiations to falter — especially around tariff liberalisation. China wants Sri Lanka to remove duties on nearly 90% of its imports. Local industries fear this could flood the market with cheaper Chinese goods, hurting domestic manufacturers and farmers.

“We can’t open the floodgates all at once,” said Umesh Moramudali, a lecturer at the University of Colombo. “What we need is a phased approach that fits our trade and industrial policies.”

Another concern is that Sri Lanka might be too late to attract large-scale Chinese manufacturing investments, which have already moved to Africa and Southeast Asia.

What Needs to Change?

For the FTA to work in Sri Lanka’s favour, the country needs to ramp up its export competitiveness — not just sign paperwork. Amali Wedagedara, a senior researcher at the Bandaranaike Centre, summed it up best: “We’re laying down legal frameworks, but what are we really exporting? That’s the core issue.”

Sri Lanka’s economic crisis in 2022 revealed deep-rooted structural problems — from reliance on imports to limited value-added exports. Without reforms and targeted industrial strategy, the FTA might end up benefiting China more than Sri Lanka.

Final Thought

So, will the FTA move forward? Probably. Will it change Sri Lanka’s trade fortunes overnight? Not likely. But if managed well — with policy clarity, export planning, and a healthy dose of realism — it could at least set the groundwork for future gains.

Start slow. Focus on a few winning sectors. And ensure the FTA aligns with national interests — not just foreign policy optics.

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Arun Upadhayay

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A former college-level cricketer and lifelong sports enthusiast, Arun Upadhayay brings the heart of an athlete to the sharp eye of a journalist. With firsthand experience in competitive sports and a deep understanding of team dynamics, Arun covers everything from grassroots tournaments to high-stakes international showdowns. His reporting blends field-level grit with analytical precision, making him a trusted voice for sports fans across New Jersey and beyond.