Sri Lanka's Tea, China's Cars: Industrial Upgrade Is Survival, Not Choice

I recently had the opportunity to visit a tea factory in Kandy, Sri Lanka—the country's second-largest city and the last capital of the Sinhalese kingdom, in the homeland of Ceylon tea. The factory, filled with the sweet and slightly bitter aroma of tea, was running machines so old it seemed miraculous they still moved, their heavy sounds echoing through the building. Some machines, I was told, were introduced during British colonial rule 70 to 80 years ago. While machinery gets upgraded when it becomes obsolete, operational systems like accounting remain unchanged from a century ago.

Leaving the factory with the sensation of having time-traveled to the Industrial Revolution, I happened upon a BYD dealership, the Chinese electric vehicle brand. Unlike nearby shops selling parts salvaged from disassembled used cars, BYD's large building displaying gleaming new vehicles evoked a futuristic feel. The Lotus Tower, a landmark in Sri Lanka's capital Colombo, and Port City—a $11 billion reclamation project under construction in the heart of downtown Colombo—are also Chinese-funded projects. One-third of the newly created Port City will be owned by China.

Sri Lanka frozen in industries from a century ago, and Chinese capital penetrating that Sri Lanka—these scenes illustrate the country's current economic situation. In 2022, Sri Lanka declared default after failing to repay massive foreign debt and is now under International Monetary Fund supervision. Fortunately, Sri Lanka is rapidly emerging from its foreign exchange crisis, but global capital, including Chinese funds, has already secured its grip deep within the country.

Sri Lanka's reality in 2026 serves as a reminder that industrial upgrading is not a choice but survival. Until just before the foreign exchange crisis, Sri Lanka was considered a country with solid economic fundamentals in South Asia, thanks to tea and spice trade and tourism. While the country remained content with its acceptable status quo, the world changed rapidly. Capital was the most sensitive in detecting that change. It fled Sri Lanka faster than anyone at the moment of crisis, then surged back to buy assets at rock-bottom prices once their values had plummeted. The speed and scale of global capital easily overwhelms any single nation's policy response capabilities. Unprepared countries have no choice but to lose their options and accept whatever terms are offered.