The long-delayed sale $1.1 billion sale of a 70 percent stake in Hambantota port, which straddles the world's busiest east-west shipping route, was confirmed by Sri Lanka's Ports Minister Mahinda Samarasinghe.
The government used tough laws against industrial action to stop workers going on strike this week to oppose the sale to China Merchants Port Holdings. India is nervous about China's infrastructure moves into its traditional sphere of influence.
"We have addressed geo-political concerns," the minister said at a signing ceremony in Colombo. "China has accepted that everything in this agreement will operate under Sri Lankan law."
Negotiations over the deal were held up for months amid opposition from trade unions and political parties.
The minister said this week that several countries had raised fears about the sale. India and the United States are known to be concerned that China getting a foothold at the deep-sea port could give it a military naval advantage in the Indian Ocean.
Samarasinghe said that Hambantota, 240 kilometres (150 miles) south of Colombo, will not be a military base for any country.
China Merchants operates Sri Lanka's only major deep-sea terminal in Colombo, which can accommodate the world's largest container carriers.
Executive vice president Hu Jianhua said the company wanted to make Hambantota the gateway to expanding economies in South Asia and Africa where it has similar port operations.
"Sri Lanka will be well positioned to play a strategic role in the one–belt-one-road initiative of the government of the People’s Republic of China," Hu said.
Sri Lanka has signed up to President Xi Jinping's signature foreign policy initiative, which aims to strengthen China's land and sea trade routes.
India has snubbed Xi's plan and skipped a May summit in Beijing that was attended by world leaders.
Samarasinghe said Hambantota will be purely a commercial port, but any routine port calls by foreign navies will be regulated by Sri Lanka as in the case with the Colombo port.
