Sri Lankan Cabinet has approved a 521 million US dollars highway project for the capital city that will be handed over to a Chinese company, a statement said here on Friday.

The Outer Circular Highway Project consisting of a loan of Rs. 66.7 billion (521 million US dollars) was awarded to a Chinese company named Metallurgical Corporation of China Ltd.

The Chinese company, which is listed on both the Shanghai and Hong Kong Stock Exchanges, is also engaged in copper mining in Afghanistan and nickel mining in Papua New Guinea.

The loan is provided by China's Exim bank under a turnkey policy.

The entire project is 29.22 km in length and is to be completed in three stages, according to a statement handed out at the Cabinet press briefing.

The Cabinet paper was submitted by President Rajapaksa and continues strong bilateral relations that have been forged between the two countries since Sri Lanka ended a three-decade war in 2009.

China is involved in several large scale projects in Sri Lanka including highways, airports, ports and a coal power plant.