China is the largest global supplier to Sri Lanka. In 2016, 42 per cent of Lanka’s global imports was from China. From 2007 to 2016 Sri Lanka's total bilateral trade with China increased 363 per cent and from 2015 to 2016 there was a 11 per cent year on year increase.

The two countries are now discussing a free trade agreement, which would enable more mutually beneficial trade for both countries and offer potential to redress the trade deficit. Lanka's top exports to China last year were tea, coconut, footwear parts, apparel and rubber tires. Top imports from China last year were mobile phones, boats and vessels, handmade fabrics and petroleum. In general, exports to China have been on an upward trend, surging 568 per cent since 2007.

China signed a deal with Sri Lanka late last year to further develop the strategic port of Hambantota and build a huge industrial zone nearby, a key part of Beijing’s ambitions to create a modern-day Silk Road across Asia. Sri Lanka hopes to expand its export basket by producing medical equipment, using its comparative advantages in textile and rubber sectors. Its strategic location has been a crucial factor in its engagement with other countries.