Malaysia has reportedly terminated the contract with China Communications Construction Company (CCCC) to build the East Coast Railway Link project.
The government plans to appoint a new contractor to build the $20bn project, reported The Straits Times citing unnamed sources.
The scale of the project will be reduced by almost half, as the government plans to build it at a cost of MYR40bn ($9.67bn).
The move comes within a month of a report indicating that works on the suspended East Coast Rail Link project may resume.
The 688km rail link project has have been stalled since July when Malaysian authorities instructed CCCC to suspend construction.
Construction was suspended due to an ongoing review of major national infrastructure projects that may increase government debt.
The Malaysian authorities started negotiations with the Chinese company to reduce the scale of the project, as well as to incorporate more domestic products and services in the construction process.
As the parties could not reach an agreement, negotiations were terminated.
CCCC was responsible for the engineering, procurement, construction and commissioning of the East Coast Railway Link project.
As part of China’s Belt and Road initiative, the rail link will connect the eastern coast of the Malaysia Peninsula with shipping routes in the west.
The project was supported by a loan from the Export and Import Bank of China to cover 85% of the costs.
The remaining amount would have been raised through bond issues.