COLOMBO, Sri Lanka—Sri Lanka’s heavily indebted government signed an agreement in principle on Thursday to sell an 80% stake in a deep-water port on the nation’s southern coast, close to one of the world’s busiest sea lanes, to a Chinese state-owned company, senior officials said.
Under the deal, a copy of which was reviewed by The Wall Street Journal, China Merchants Port Holdings Co. would pay about $1.1 billion for its share of the port and adjoining land in Hambantota district.
Sri Lanka’s ports authority would own 20%. Officials said they hoped to complete the arrangement by early January.
Washington could react warily, depending on the details. The port, in Hambantota, lies along an important trade route linking the Middle East and Asia. And China’s navy has been stepping up its operations in the Indian Ocean as it seeks to project power westward.
“We will watch carefully,” a senior U.S. official said. “These things do have long-term implications.”
Sri Lanka’s development minister, Malik Samarawickrama, dismissed strategic concerns, saying “there is no issue.” He said the deal was a commercial one that “would take a huge burden off the government.”
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