MALE, Sept 15 (Reuters), - The Maldives signed a deal with a Chinese firm to upgrade its international airport on Monday as Chinese President Xi Jinping toured the main island on his first trip to a region that India has long regarded as falling within its natural sphere of influence.
The contract to expand Male airport has been given to Beijing Urban Construction Group Company Limited after the Maldivian government cancelled a US$511 million (S$646 million) deal with India's GMR Infrastructure two years ago.
India has been concerned about growing Chinese involvement in the Indian Ocean as Beijing opens its purse strings and builds a network of ports dubbed the String of Pearls.
Xi was in Male as part of a South Asia tour that will also take him to Sri Lanka and India where he will hold the first summit meeting with India's prime minister Narendra Modi. Thousands of school children in green uniforms waved the flags of China and the Maldives as Xi's convoy drove through the capital of the idyllic chain of islands.
"China will encourage more Chinese enterprises to actively engage in the economic transformation of Maldives," Xi said in a statement.
He also enlisted Maldives' backing for his plan to build a "Maritime Silk Road" that is intended to revive a trade route running from China through southeast Asia and across tne Indian Ocean to Europe.
The Maldivian government, however, did not give the Chinese firm the right to run the airport. The islands' president Abdulla Yameen had said earlier foreign firms will not be given operational rights for security reasons.
"I wish to express my sincere appreciation to President Xi for expressing China's willingness to enhance the provision of development assistance to the Maldives, especially towards mega development projects," Yameen said after talks with the Chinese leader.
From economic parity in 1980, China's growth has outstripped India's fourfold and Beijing has sought to recycle some of its vast export surpluses into foreign investment in resources and infrastructure in South Asia to feed its industrial machine.
But Modi has sought to claw back ground by reaching out to neighbours since he took power in May. He invited the leaders of south Asia including the Maldives to his inauguration and since then has toured Bhutan and Nepal, promising to help build their infrastructure.