China Merchants Holdings is teaming up with two Sri Lankan partners to build a $500 million container terminal in the Port of Colombo in Sri Lanka.
China Merchant Holdings International will own 55 percent of the three-way venture, with Sri Lanka's Aitken Spence holding 30 percent and state-run Sri Lanka Ports Authority controlling 15 percent, the Sri Lanka foreign ministry said in a statement.
"This is Sri Lanka’s single largest private-sector foreign investment project," the statement said.
The joint venture agreement was signed during Sri Lankan President Mahinda Rajapakse's four-day visit to China last week.
The project is planned for construction over five years. The first part of the Colombo terminal is expected to be ready in 2013.
Two other Chinese firms, China Harbour and Sino Hydro, are also building a $1.5-billion port in the Sri Lankan town of Hambantota, which is President Rajapakse's constituency.
Sri Lanka hopes to double the amount of foreign direct investment it attracts this year to $1 billion from $516 million in 2010. It aims to use the money mainly for infrastructure projects.
China, which clocked over $1 billion worth of trade with Sri Lanka in the first six months of this year, has committed large loans to build railways, roads, electricity and an airport in the island.
In 2010, China lent Sri Lanka $821 million, which accounted for 25 percent of the island's foreign loans. China lent $1.2 billion to Sri Lanka in the previous year.