The new railway will cut rail freight costs to $0.08 per metric ton according to president Uhuru Kenyatta, less than half the current rate of $0.20 per ton, according to Reuters.
"The costs of moving our people and our goods ... across our borders will fall sharply," Kenyatta said, after signing the deal, Reuters reported.
Chinese premier Li Keqiang met with East African leaders in the Kenyan capital of Nairobi, to sign the agreement as he continued his four-nation state visit of Africa. The ceremony followed Kenyatta's signing of the deal while on a visit to China last year.
The new railway line will connect the Kenyan port of Mombasa to Nairobi and onwards to Rwanda and South Sudan. The new standard gauge line will supplement the existing 19th century-built narrow gauge network, which only operates as far as Uganda. According to Reuters, the new line is part of efforts to cut the relatively high costs of trade transport across East Africa, which relies mainly on roads and the ageing narrow gauge railway system.
China Road and Bridge Corporation, a subsidiary of China Communications Construction Company, has been appointed to construct the initial Kenyan leg of the new line. The move attracted some criticism because the project was not put out to competitive tender, but Kenya has said that this was a condition of securing Chinese financing, according to Reuters. Officials have previously put the price for the railway from Mombasa to Kenya's western border with Uganda at $5 billion, including financing costs, Reuters said.
Days earlier president Li signed a $13 billion coastal railway project deal with Nigeria, which will connect 10 coastal states of the western African country, according to contractor China Civil Engineering Construction Corp, reports state-owned newspaper China Daily.
The 1,300km project will boost the export of Chinese construction equipment, locomotives, electromechanical products and steel by $3 billion, the newspaper said. Nigeria is also cooperating with China on a light-rail project.