China and Sri Lanka agree to put suspended $1.4b Colombo infrastructure plan back on track

China and Sri Lanka have ended a stalemate over a $1.4 billion port project in the island nation's capital of Colombo — the biggest Chinese investment project in the country.

The development sees Beijing recovering their ties amid Colombo's policy shift after a leadership reshuffle.

During meetings with Chinese leaders in Beijing on Thursday, Sri Lankan President Maithripala Sirisena promised to continue the infrastructure project, which was suspended by the country's new administration.

President Xi Jinping said China has always seen Sri Lanka as holding an "important diplomatic position in the region", while Premier Li Keqiang called for "consistency and stability of policies" in Sri Lanka.

Sirisena, who visited India soon after taking office in January, is making his first trip to China.

He said Sri Lanka appreciates China's continued support for the Colombo port project as well as other Chinese investment, adding that his government will take more effective measures to promote cooperation with China.

Problems surrounding construction of the port project are "temporary and do not lie with the Chinese side", he said.

China, which is sinking millions of dollars into Sri Lanka's infrastructure, is the island's biggest investor.

The new Sri Lankan government has ordered a review of the Colombo port project following allegations of wrongdoing that arose since Sirisena took office in January.

The suspension triggered concerns from China, which said the project was in line with local laws. Media reports said the commercial losses caused by the suspension could be as high as $380,000 a day.

During Thursday's talks, Xi pledged to expand bilateral trade and industrial cooperation with easier funding from the Beijing-led Silk Road Fund and the Asian Infrastructure Investment Bank.

The two financial institutions are committed to funding economic development in countries along the New Silk Road Economic Belt and the 21st Century Maritime Silk Road.

Xi also promised to speed up talks on a free trade agreement with Sri Lanka to lower tariffs, and to deepen economic exchanges, especially on health, agriculture, science and technology, tourism and talent training.

Liu Xiaoxue, a researcher of South Asian studies at the Chinese Academy of Social Sciences, said Sri Lanka is an important partner in building Beijing's initiative for the 21st Century Maritime Silk Road.

It is located at a key section on the route linking the resource-rich Gulf of Aden with China's booming coastal cities. Hower, Sri Lanka needs support to rebuild its infrastructure after its civil war, Liu said.

"The port project, like many other Chinese investments in the country, is a commercial deal, which means conflicts over the project should be solved through talks," she said.

Meanwhile, China and Indonesia issued a joint declaration on deepening ties and signed eight agreements in Beijing on Thursday.

They signed one memorandum of understanding on greater cooperation in infrastructure and industry, and another on building a high-speed railway linking the Indonesian capital of Jakarta and Bandung, about 180 km southeast of Jakarta. Others cover wide-ranging areas, including maritime searches, taxation, airspace and cooperation between Chinese and Indonesian enterprises.

Xi told his Indonesian counterpart Joko Widodo before they witnessed the signings that China is willing to use the Asian Infrastructure Investment Bank and Silk Road Fund to take part in Indonesia's development of ports, high-speed railways, airports, shipbuilding and special economic zones in coastal areas.

Widodo, making his first state visit to China since taking office in October, said Indonesia welcomes Chinese State-owned and private enterprises to its infrastructure sector and in constructing special economic zones.