China National Machinery Import and Export Corporation (CNMIEC) has secured a $600m contract for the second and third phases of the South Sri Lankan rail track extension from Beliatta to Kataragama.
Sri Lanka Transport minister Kumara Welgama said: "We have decided on the Chinese company as the Exim Bank has agreed to grant a loan for the project.
"Another reason to pick the Chinese company is that it was the same construction company that carried out the harbour and airport projects."
The $272m worth phase I of the project is already underway by CNMIEC and includes the extension of the railway line by 28km from Matara to Beliatte.
The Matara to Beliatte track will be in parallel to an expressway. However, the track was initially planned to be constructed along the coast.
This project is scheduled for completion in 2016.
Founded in 1949, CNMIEC imports and exports mechanical and electrical products around the world.