China Withdraws from $392 Million Sri Lanka Port Project Amid Economic Concerns

A Chinese state-owned company has decided not to move forward with a $392 million project to develop a logistics hub at Sri Lanka’s main seaport, according to the Sri Lanka Ports Authority (SLPA).

The SLPA announced the withdrawal on Monday, stating that China Merchants Port Holdings made the decision after evaluating various external factors and commercial interests. Despite this setback, the SLPA confirmed that the project will continue and they are looking for a new investor.

China Merchants was initially set to own 70% of the joint venture, while the SLPA and a local construction firm would each hold 15%. The SLPA is now actively seeking a replacement investor for the 150,000-square-metre logistics hub at Colombo Port, where China already has other investments.

In a statement to the stock exchange in Hong Kong, China Merchants indicated that ending the project was in the best interest of all parties involved. This joint venture was the first major foreign investment announced after Sri Lanka faced a severe economic crisis in April 2022.

China Merchants also operates a $500 million deep-water container terminal within Colombo Port and manages the Hambantota port complex on the southern coast of Sri Lanka. The Hambantota port has been criticized as a poor investment, as Sri Lanka struggled to repay loans taken from China for its construction.

Concerns have been raised by India and the United States about China’s growing influence in the Indian Ocean through its access to Sri Lankan ports. However, Sri Lanka has assured that its ports will not be used for military purposes.