China Merchants Port Holdings has withdrawn from its $392 million South Asia Commercial and Logistics Hub (SACLH) project at the Colombo Port, following growing geopolitical tensions over Chinese investments in Sri Lanka and concerns raised by the United States and India.
The Chinese company, which held a 70% stake in the project, announced its withdrawal on October 15, citing changes in external circumstances and commercial considerations. The Sri Lanka Ports Authority (SLPA) confirmed four days later that the project would not proceed.
Sri Lanka’s Transport Minister Bimal Rathnayake told Parliament that concerns over the allocation of 10 acres of port land and procedural irregularities contributed to the government’s opposition. Under the settlement, the SLPA will pay $21.9 million to the project company and seek a new investor through competitive bidding.
However, the withdrawal has raised questions about the growing geopolitical contest for influence over Sri Lanka’s strategic maritime infrastructure. Analysts have pointed to longstanding US and Indian concerns over China’s expanding presence at Colombo Port.
Unveiled in 2023, the project was structured as a 50-year build-operate-transfer (BOT) agreement and was expected to strengthen Colombo’s position as a regional logistics and transshipment hub. It also represented Sri Lanka’s first major foreign investment following its 2022 sovereign debt default.
The development faced setbacks after the International Monetary Fund’s 2023 bailout conditions led Sri Lanka to discontinue tax concessions under its Strategic Development Projects programme, affecting incentives originally envisaged for the project.
The withdrawal coincided with expanding US and Indian involvement at Colombo Port. India’s Adani Group holds a 51% stake in the West Container Terminal, while the US Embassy announced a $17 million grant on October 16 to support the digitisation of port operations, with American technology companies invited to participate.
The development also followed a visit to Sri Lanka by US Army Pacific Deputy Commanding General Lieutenant General JB Vowell from September 29 to October 1. Observers cited by Sri Lanka’s Daily Mirror identified geopolitical considerations, particularly concerns over Chinese involvement in Colombo’s logistics infrastructure, as a possible factor behind the withdrawal.
China Merchants has been a major investor in Sri Lanka’s maritime infrastructure, including the Colombo International Container Terminal and Hambantota Port. Its departure from the SACLH project marks a significant setback for China’s port-related investment ambitions in the country.
Located along a major east-west shipping corridor connecting Asia, the Middle East, Africa and Europe, Colombo Port is strategically important to global trade. India is also its largest transshipment market, making the port a key focus of regional competition for maritime and logistical influence.
The latest development highlights the increasingly complex geopolitical environment surrounding Sri Lanka’s ports, as China, India and the United States seek to strengthen their respective commercial and strategic positions in the Indian Ocean.