Sri Lanka's government has signed a $500 million deal with China to build a new container terminal at the country's main port in the capital, Colombo.

Sri Lanka's Foreign Ministry says the deal is the country's largest private-sector foreign investment.

The port will be upgraded in two phases with the first part being completed by 2013.

The project is part of a joint venture between China Merchants Holding International, which holds 55 percent of the three-way deal, Sri Lanka's Aitken Spence, which has a 30 percent stake and the country's Port Authority, which holds 15 percent.