China pulls out of key investment in Sri Lanka port logistics venture - When China Merchants pledged investment in 2023, it was touted as first major Foreign Direct Investment to enter Sri Lanka after country defaulted on its foreign debt; this is also second instance of big investor exiting project.
In significant development concerning Chinese investment in Sri Lanka, state-owned China Merchants Port Holdings has withdrawn from $392 million joint venture for logistics hub at Colombo port.
In 2023, China Merchants Group announced decision to invest in proposed South Asia Commercial and Logistics Hub at Colombo port, taking cumulative investment in island nation to $2 billion. According to joint venture agreed then, China Merchants was to hold 70% stakes, while Sri Lanka Ports Authority and Sri Lankan private construction company were to hold 15% each.
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However, following assessment of prevailing external circumstances, commercial considerations and interests of respective shareholders, decision reached not to proceed with proposed joint venture, SLPA said Monday. Further, SLPA statement said it would pursue alternative development strategy through establishment of new logistics hub under Public-Private Partnership model, through competitive bidding process.
When China Merchants pledged investment in 2023, it was touted as first major Foreign Direct Investment to enter Sri Lanka after country defaulted on its foreign debt amid crushing economic crisis. The firm pulling out now is second instance of big investor exiting project previously agreed upon in Sri Lanka. In February 2025, Adani Green withdrew from controversial $442-million renewable energy project in northern Sri Lanka, after ruling government sought to renegotiate power-purchasing tariff.
On reasons for recent decision, China Merchants said in view of changes in external circumstances, Company has reassessed SACLH Project and concluded that terminating project would be in best interests of parties.
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Analytically, two exits signal Sri Lanka's post-default investment climate remains fragile. China, which owns 85% of Colombo International Container Terminal and Hambantota Port on 99-year lease, pulling out of logistics hub suggests Beijing reassessing risk after IMF programme demands transparent PPP, not negotiated deals. For India, which is building West Container Terminal at Colombo with Adani, exit creates opportunity but also warning - even China finds Sri Lankan regulatory risk high. For Sri Lanka, need to move to competitive bidding is IMF-driven reform, but losing $392 million FDI when forex reserves just recovered to $6 billion hurts.
Tags: #SriLanka #ChinaMerchants #ColomboPort #FDI #SACLH #AdaniGreen #SLPA #Chinalnvestment #IMF