Tuesday May 05, 2026
Tuesday May 05, 2026
Tuesday, 5 May 2026 00:00 - - {{hitsCtrl.values.hits}}
China overtook India to become Sri Lanka’s largest trading partner in 2025, driven by a sharp rise in imports, particularly vehicles, following the easing of restrictions, the Central Bank of Sri Lanka (CBSL) said.
In its Annual Economic Review 2025, the CBSL said total trade with China reached about $ 5.5 billion, narrowly surpassing India at $ 5.4 billion, reversing India’s lead held from 2021 to 2024. The US remained the third largest partner at $ 3.5 billion, with the three accounting for 41.1% of total merchandise trade.
The shift reflects a broader recovery in trade, with exports growing steadily while imports accelerated as economic conditions stabilised. Vehicle imports, including electric and hybrid models, were a key contributor to higher trade values. The movement in trade flows over the past five years has been largely shaped by import controls during the external crisis and their subsequent relaxation.
Trade with both China and India contracted in 2022 and 2023 as restrictions tightened, but the decline was sharper with China, reflecting its export mix to Sri Lanka, which is weighted towards machinery, construction materials, and other non-essential or investment-linked goods that were curtailed first.
By contrast, trade with India proved more resilient, underpinned by essential and short-cycle imports such as fuel, pharmaceuticals, and intermediate goods, which continued even during the period of tight restrictions.
The rebound from 2024 onwards has been import-led, with the faster recovery in trade with China reflecting the return of high-value imports, particularly vehicles. The resumption of electric and hybrid vehicle imports, where China is a key source, contributed to a sharper increase in total trade values relative to India.
“However, Sri Lanka recorded its highest trade deficit with China, which widened significantly to $ 4.9 billion in 2025 from $ 4.1 billion recorded in 2024. The expansion of the deficit with China was primarily driven by increased imports of electric and hybrid vehicles, as well as construction materials such as iron and steel, while exports remained relatively low,” the CBSL said.
“The trade deficit with India also widened in 2025, largely due to the increase in motor vehicle imports. Meanwhile, the US remained a vital trading partner, with total bilateral trade amounting to about $ 3.5 billion in 2025,” it added.
Sri Lanka continued to record a trade surplus of $ 2.5 billion with the US, largely supported by apparel exports.
