In a significant development concerning Chinese investment in Sri Lanka, state-owned China Merchants Port Holdings has withdrawn from a $392 million joint venture for a logistics hub at the Colombo port.

In 2023, China Merchants Group announced its decision to invest in the proposed South Asia Commercial and Logistics Hub (SACLH) at the Colombo port, taking its cumulative investment in the island nation to $2 billion. According to the joint venture agreed upon then, China Merchants was to hold 70% stakes, while the Sri Lanka Ports Authority [SLPA] and a Sri Lankan private construction company were to hold 15% each.

“However, following an assessment of the prevailing external circumstances, commercial considerations and the interests of the respective shareholders, a decision was reached not to proceed with the proposed joint venture,” the SLPA said on Monday [October 19, 2026]. Further, the SLPA statement said it would pursue “an alternative development strategy” through the establishment of a “new logistics hub” under a Public–Private Partnership (PPP) model, through a competitive bidding process.

When China Merchants pledged the investment in 2023, it was touted as the “first major Foreign Direct Investment” to enter Sri Lanka after the country defaulted on its foreign debt the previous year amid a crushing economic crisis. The firm pulling out now is the second instance of a big investor exiting a project previously agreed upon in Sri Lanka. In February 2025, Adani Green withdrew from a controversial $ 442-million renewable energy project in northern Sri Lanka, after the ruling Anura Kumara Dissanayake government, which came to power in 2024, sought to renegotiate the power-purchasing tariff.

On its reasons for the recent decision, China Merchants said: “In view of changes in external circumstances, including adjustments to the SACLH Project’s implementation environment and timetable as well as the respective commercial considerations of the parties, the Company has reassessed the SACLH Project and concluded that terminating the project would be in the best interests of the parties,” in a filing to the Hong Kong stock exchange on Thursday [October 15, 2026].

Located along key shipping routes and a busy maritime hub, the Port of Colombo is widely seen as a strategic asset. China Merchants Port Holdings Company holds an 85% stake in the Colombo International Container Terminal (CICT) at the port, while Adani International Port Holdings holds majority stakes of 51% in the adjoining Colombo West International Terminal (CWIT). China Merchants is also involved in the management of the southern Hambantota Port.