COLOMBO (AFP) - China's President Xi Jinping held talks on Tuesday with his Sri Lankan counterpart, seeking to strengthen defence ties with the strategically located Indian Ocean nation that could provoke unease in neighbouring India.

China is increasingly asserting its influence in Sri Lanka, a midway point on one of the world's busiest international shipping lanes. It is already the largest investor, having financed the construction of a deep-sea port and an international airport.

During his visit, Mr Xi will kick off building work on a Beijing-funded US$1.4 billion (S$1.77 billion) port city and launch Sri Lanka's biggest electricity generator, a Chinese-funded 900MW coal-fired power plant.

On Tuesday, he met President Mahinda Rajapakse after a ceremonial welcome at the head of state's seafront office in Colombo.

Mr Xi will on Wednesday launch construction of the port city, which will include the country's first Formula One track.

In a letter published on the front page of Sri Lanka's state-run Daily News on Tuesday, Xi said he wants to "enhance exchanges and cooperation between us in maritime, business, infrastructure, defence, tourism and other areas".

The reference to defence came despite the repeated insistence of Sri Lankan officials that relations were based on commercial rather than security considerations, an apparent attempt to allay Indian fears.

Sri Lanka's Economic Development Minister Basil Rajapakse said ahead of the visit his country's close ties with China should not be a cause for concern in India.

"We are looking for trade, investment and tourism," minister Rajapakse told AFP.

"India is also looking to China so I do not see anything wrong in our having close ties with them."

Some officials in New Delhi have voiced fears in the past that China's growing engagement in the region is a deliberate strategy to encircle India.

A military aircraft maintenance facility which Sri Lanka sought to establish with Chinese help has been in limbo since India privately objected to its chosen venue, the eastern port district of Trincomalee.

Trincomalee is a natural deep-sea harbour which allied forces used as a staging post during World war II. It is still considered strategically important.

Mr Xi also said no country should be allowed to intervene in the affairs of the small island nation, which has historically come under India's influence.

"China... resolutely opposes any move by any country to interfere in Sri Lanka's internal affairs under any excuse," Mr Xi said Beijing has consistently supported Colombo in its efforts to resist a United Nations investigation into alleged war crimes against Tamil Tiger rebels, while India has pushed Sri Lanka to ensure accountability.

Mr Xi was greeted by President Rajapakse with a ceremony involving dozens of schoolchildren and elephants dressed in colourful and ornate clothing.

The two sides are expected to finalise more than 20 agreements on trade and aid.

Beijing has already financed the construction of Sri Lanka's second international airport and a deep sea port in the southern district of Hambantota, the president's home constituency.

The ambitious port city project being developed by the Sri Lanka Ports Authority with Chinese backing will include a luxury marina as well as the racetrack.

Authority chief Priyath Bandu Wickrama said the port would be "based on commercial interests".

"We will not allow our ports for any military purposes," he told AFP. "There is nothing for anyone to fear."

The Chinese President arrived from the neighbouring Maldives, where he secured support for his "21st century maritime silk road" - an initiative which seeks to secure trade routes, largely through economic diplomacy, and which already has Colombo's backing.

China also faces competition for influence in the region from Japan, which relies on the same maritime trade routes.

Japanese Prime Minister Shinzo Abe travelled to Sri Lanka earlier this month, securing an agreement that the two countries would forge stronger maritime links.

India's new Prime Minister Narendra Modi, meanwhile, has embarked on a regional charm offensive since taking office in May to restore relationships which critics say the previous government neglected.