China Merchants quits Sri Lanka port hub venture

China Merchants Port Holdings has withdrawn from a planned $392 million logistics hub joint venture at Sri Lanka's main seaport, the Sri Lanka Ports Authority said Monday.

The authority said the Chinese state-owned company had decided not to proceed with the collaboration announced in 2023, but said the Colombo Port project would continue. It said it was seeking a new investor for the planned 150,000-square-metre hub.

China Merchants had been due to hold 70 percent of the venture. The Sri Lanka Ports Authority and a Sri Lankan private construction company were each due to hold 15 percent.

The port authority said the decision followed an assessment of external circumstances, commercial considerations and shareholder interests. China Merchants told the Hong Kong stock exchange on Friday that ending the project would be in the parties' best interests.

China Merchants already operates a $500 million deep-water container terminal at Colombo Port and manages the Hambantota deep-water port complex on Sri Lanka's southern coast. Sri Lanka handed Hambantota to China Merchants under a 99-year lease after being unable to repay a large Chinese loan taken in 2017.

India and the United States have expressed concern that China could gain a naval advantage in the Indian Ocean through access to Sri Lankan ports. Sri Lanka says its ports will not be used for military purposes.