China already has a presence in Hambantota and Colombo, a reality that has caused much consternation in Delhi, Sri Lanka's nearest and most powerful neighbour. If the Holcim deal goes through, China will obtain important footholds in both Galle and Trincomalee, an eventuality that cannot please India.
Holcim entered into an agreement with the Sri Lanka Cement Corporation in 1993 to lease 5141 acres of cement quarry land in Aruwakkalu, Puttalam for a period of 50 years. Holcim thereby made massive profits from the extraction of limestone alone with little returns for Sri Lanka, according to a recent communication sent to the Company by the Secretary, Ministry of Industry and Trade.
The sale itself ran into trouble due to allegations of Holcim not disclosing the true status of its agreement with the Cement Corporation and being silent on rental arrears payable to the same.
The bid by China Resources Cement Holdings Ltd., however is set to open a diplomatic can of worms in the subcontinent at a time when Sri Lanka desperately needs the support of both India and China in a context of uncertainty in the West after Brexit.
The bid itself is said to be very high, raising questions whether it has to do with strategic rather than commercial interest. China's takeovers with respect to ports, as evidenced by its operations in Australia, indicate that business takeovers are used to extract control necessary for China's long term maritime plans.
This move comes at a time when the Sri Lankan government is struggling to mend relations with India, relations that hit an unprecedented low during the previous regime, partly due to its close friendship with China.
A Chinese takeover, as such, would amount to a diplomatic snub that could have serious repercussions for Sri Lanka, analysts point out.