Sri Lanka is set to sell an 80 percent stake of its Hambantota port in its south to a Chinese company, an attempt to cut its debt burden, Ravi Karunanayake, the country's finance minister, said.

 "The value will be more than $1 billion and the deal will be signed around the second week of November," Karunanayake said.

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"The money from the deal will be used to repay expensive foreign loans," Karunanayake said, adding that the government was also in final talks over a 6,100-hectare investment zone in the port, which would be signed "as soon as possible."

The estimated $1.5 billion project will also turn the port into a Chinese investment zone, The Diplomat noted.

The initiative follows after Prime Minister Ranil Wickremesinghe made an offer during a visit to China in April to swap equity in Sri Lankan infrastructure projects against some of the $8 billion debt it owes to China, the Fresh Plaza noted.

The Hambantota airport was established through Chinese financing in 2010 under the previous government leader Mahinda Rajapaksa. However, for the current government, the port was not financially viable.

For China, however, Sri Lanka, portrays an important role to its ambitious Maritime Silk Road. Given Sri Lanka's proximity and strategic location in the Indian market, Chinese investment in Sri Lanka has geopolitical importance, especially as Chinese naval assets were seen docking in Colombo, The Diplomat noted.

This reason alone makes some nations like India and the United States nervous, as Sri Lanka sits near shipping lanes through which a huge volume of the world's trade passes en route to China and Japan, according to the Fresh Plaza.

TagsSri Lanka, china, Hambantota Port, China and Sri Lanka, Chinese investment zone, Sri Lanka port