Sri Lanka's new government on Thursday gave the green light for China's $1.4-billion port-related project in the capital despite warning while in opposition that it would scrap the controversial venture.

Government spokesman Rajitha Senaratne said the cabinet had approved the Colombo Port City project, under construction alongside an existing giant Chinese-built container terminal, in what is the island nation's largest single foreign investment.

Prime Minister Ranil Wickremesinghe vowed during last month's election to halt the project, branding it "haphazard" and damaging to the island's west coast where legions of tourist hotels are located.

"We have now found that the port city project had done an environment impact assessment and that says there is no harm (to the environment)," said Senaratne who is also the health minister.

The government's U-turn on the project came after Beijing sent a special envoy, Liu Jianchao, Thursday on a two-day visit for talks with Sri Lankan leaders.

The two sides will discuss Chinese-funded projects, official sources said.

They added that Foreign Minister Mangala Samaraweera would visit Beijing later this month and new President Maithripala Sirisena would make a state visit to China in March.

Launched under the last government during Chinese President Xi Jinping's visit to Sri Lanka in September, the project aims to give Beijing a firmer foothold in the Indian Ocean region.

It had also been a symbol of previous leader Mahinda Rajapakse's heavy reliance on Chinese funding for infrastructure work in the island nation.

Beijing has been accused of seeking to develop facilities around the Indian Ocean in a "string of pearls" strategy to counter the rise of its Asian rival India and secure its own economic interests.

Officials said Indian Prime Minister Narendra Modi will visit Sri Lanka before President Sirisena travels to China.

Sirisena is also due to travel to India from February 15 - 18 marking his first foreign visit since coming to power at the January 8 elections.

China's huge investments in Sri Lanka and other South Asian nations in India's neighbourhood have caused unease in New Delhi.

Indian diplomats have privately raised concerns about the port city venture, as it gives China ownership of one third of the total 233 hectares (583 acres) of reclaimed land.

Sri Lanka is a midway point on one of the world's busiest international shipping lanes that Beijing wants to secure as a maritime silk road for the 21st century.

Colombo hopes the city, which will have a Formula One track and a luxury marina, will attract another $5 billion in foreign investment for property development.