After a public uproar over the Hambantota port this year, China gave Mr Sirisena a grant worth nearly US$300 million (S$414.85 million), which the President boasted was for "any project of my wish".Western governments have rallied around Mr Wickremesinghe in the crisis, and the loans and grants they have given this government in recent years may be at risk unless the Prime Minister is restored. Shortly after Mr Sirisena came to power, China's government built a hospital in his home district. But once they came to power, they realised that India and the US - which had also been critical of Mr Rajapaksa's rule - did not have China's deep pockets, and began to gravitate toward Beijing once again.Last year, the government handed over the Hambantota seaport to China in a 99-year lease after the government could not repay the money Mr Rajapaksa's government had borrowed to build the port.China has been nimble in its diplomacy, too. WHAT ARE THE INTERNATIONAL IMPLICATIONS?Sri Lanka is one of a chain of countries where the India-China rivalry is playing out, stretching from Bangladesh and Nepal to the Maldives, where a pro-China leader was voted out in a surprise election result last month that was welcomed by India, the United States and the European Union.The appointment of Mr Rajapaksa - whose administration was criticised by human rights groups for extrajudicial killings, enforced disappearances and jailing journalists - is good news for China, which enjoyed close ties with Sri Lanka during a 10-year rule that saw the island nation rack up large debts to fund infrastructure projects.During Mr Rajapaksa's rule, China found an opening to pull Sri Lanka more closely into its orbit through billions of dollars in loans, some for the ruling family's pet projects.The projects and the debt they accumulated became an election issue in 2015, with Mr Sirisena and Mr Wickremesinghe cooperating to run on an anti-China platform.
Mr Sirisena later denied that report. The claim came weeks after The Hindu, a major Indian daily, reported that Mr Sirisena had told allies that India's intelligence agency was also planning to assassinate him. His return to power has drawn concern in New Delhi that China would tighten its grip on the island that lies along busy shipping lanes.China has in recent years faced criticism that many of its investments in Sri Lanka, the Maldives and other countries run the risk of driving smaller nations into debt and potentially impinge on their sovereignty.In a national speech on Sunday evening, Mr Sirisena claimed that a Cabinet minister he did not identify had been hatching a plot to assassinate him.
"Foreign investors will hold back, but we can expect Chinese investments to come in and even boost the currency."The re-entry of Mr Rajapaksa, who had a "cosy relationship" with China, could lead Sri Lanka to pivot back to China, potentially re-opening the doors to Chinese funding, according to Nomura International (HK)."The immediate priority for Sri Lanka is to refinance the upcoming maturities, and Chinese backing should prove helpful," Mr Nicholas Yap, a desk analyst at the bank, wrote in a note. Stock bulls, including Mr Mark Mobius took a different view, namely that the upheaval may pave the way for a government focused on boosting economic growth.The upheaval comes as Sri Lanka faces significant bond maturities, including a US$1 billion bond due in January and a US$500 million debt due in April, according to data compiled by Bloomberg.The crisis is credit negative and uncertainty about the direction of Sri Lanka's future policy could dent investor confidence, Moody's said.Still, there may be a silver lining to the political problems, as there could be a more focused government programme with Mr Rajapaksa back in the driver's seat, Mr Mobius, co-founder of Mobius Capital Partners, said in a Bloomberg interview."We could see some positive sentiment from local investors who perceive that Sirisena and Rajapaksa could work better together to boost growth," says Mr Adrian Perera, chief operating officer at Equicapital Investments in Colombo.
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