China Merchants Exits $392 Million Colombo Port Logistics Hub Venture

State-owned China Merchants Port Holdings has withdrawn from a $392 million joint venture to build a logistics hub at the Port of Colombo, in a setback for Chinese investment in Sri Lanka, according to a report by The Hindu.

The project, the South Asia Commercial and Logistics Hub (SACLH), was announced in 2023, when China Merchants Group said it would invest in the facility, bringing its cumulative investment in Sri Lanka to $2 billion. Under the agreed structure, China Merchants was to hold 70% of the venture, with the Sri Lanka Ports Authority (SLPA) and a Sri Lankan private construction company holding 15% each.

At the time, the pledge was described as the “first major Foreign Direct Investment” to enter Sri Lanka after the country defaulted on its foreign debt in 2022 amid a severe economic crisis, The Hindu reported.

In a filing to the Hong Kong stock exchange on Thursday, October 15, China Merchants said that changes in external circumstances, including adjustments to the project’s implementation environment and timetable, as well as the parties’ respective commercial considerations, led it to conclude that terminating the project was in the best interests of the parties.

The SLPA, in a statement on Monday, October 19, said a decision was reached not to proceed after assessing “prevailing external circumstances, commercial considerations and the interests of the respective shareholders.” It added that it would pursue an alternative development strategy, establishing a new logistics hub under a Public–Private Partnership (PPP) model through a competitive bidding process.

According to The Hindu, this is the second instance of a large investor leaving a previously agreed project in Sri Lanka. In February 2025, Adani Green withdrew from a controversial $442 million renewable energy project in the north of the country, after the government of President Anura Kumara Dissanayake, in power since 2024, sought to renegotiate the power purchase tariff.

The Port of Colombo, located along key shipping routes, is widely seen as a strategic asset. China Merchants Port Holdings holds an 85% stake in the Colombo International Container Terminal (CICT) and is also involved in managing the southern Hambantota Port. Adani International Port Holdings holds a 51% majority stake in the adjoining Colombo West International Terminal (CWIT).