China will provide a $100m loan to Sri Lanka to help improve the capacity of its railway network, Sri Lanka's foreign ministry has said.
Money will be provided by China's funding arm Exim Bank and will be used by Sri Lanka Railways.
The upgrade work will be carried out in the country's north, which has been hit by a 25-year civil war that ended in May 2009.
India has also agreed to a $67.4m loan to upgrade the southern railway line, according to Sri Lankan Minister of Finance Mahinda Rajapaksa.
China committed $1,200m to the country in 2009 for development works, with the Asian Development Bank supplying a further $424m.