A US$500 million Chinese-built port opens today in Sri Lanka, giving Beijing a vital foothold on the busiest international shipping lane as it seeks to secure maritime supply routes.
The massive terminal in Colombo is located midway on the lucrative east-west sea route and has facilities on a par with Singapore and Dubai.
The Colombo International Container Terminal, which is 85 per cent owned by the state-run China Merchant Holdings International, is designed to handle megaships - a first for Sri Lanka which is aiming to become the region's shipping hub.
The involvement of such a large Chinese company appears to conform to a pattern by Beijing after it sealed a deal in January to acquire the Pakistani port of Gwadar at a time when it is also building a US$14 million "dry port" in the Nepalese city of Larcha, near Tibet.
Chinese loans and expertise were also instrumental in the construction of a new U$450 million deep-sea port at the southern Sri Lankan city of Hambantota which opened in June 2012.
Independent shipping expert, Rohan Masakorala, says the new terminal made economic sense for China to tap in to the growing South Asian container cargo and gave Beijing a foothold along a strategic sea route.
"Terminal investments are a good business which can give a very good return," said Masakorala, a former secretary general of the Singapore-based Asian Shippers' Council. "Through this investment, China is also securing the safety and efficiency of their main supply chain."
Masakorala, who heads the Shippers' Academy Colombo, said about half of all world sea trade passed through the east-west shipping route and a presence at a midway point along that gives China a commanding position.
"For China to maintain economic growth at home, they also need to go out and secure their supply routes. In that sense, coming to Colombo is a strategic commercial investment."
The Chinese investment in Sri Lanka, which is under pressure from Western powers and India over its human rights record, has raised fears in New Delhi about Beijing's influence in the neighbourhood.
But Priyath Bandu Wickrama, chairman of the state-run Sri Lanka Ports Authority, insisted that India had nothing to fear from the new Colombo port and could in fact be a major beneficiary. "We will not allow any military base at our ports nor will we allow them to be used for any strategic military purpose by anyone," Wickrama said.
Wickrama said shippers in India could save up to four days by routing their cargo through Sri Lanka rather than using Singapore or Dubai.
"Earlier, Indians along the east coast had to send their cargo to Singapore if they wanted to catch a megaship going West. Now these megaships will be going through Colombo and picking up Indian cargo," he said. "That saves time and a lot of money."
The two major ports of south India, Cochin and Tuticorin, are too shallow for megavessels.
Saliya Senanayake, of the London-based Chartered Institute of Logistics and Transport, says that "India is about five to six years behind Sri Lanka when it comes to port infrastructure".
The Sri Lanka Ports Authority is pouring millions of dollars into infrastructure around the island and says it is on course to increase container handling capacity by 1.6 million containers to 6.4 million by April. It hopes to have a container capacity of 10 million by 2020, while revenue is forecast to triple to US$1 billion by 2020.
In April, Colombo's port is due to open another terminal just next to the Chinese-managed terminal. The addition will initially be able to handle about 800,000 containers a year.