COLOMBO - Sri Lanka is investigating a Chinese firm on suspicion of offering a bribe to Mahinda Rajapaksa's failed presidential re-election campaign, a source close to the investigation said, weeks before he seeks to pull off a comeback in a general election. Ousted by erstwhile ally Maithripala Sirisena in January, Rajapaksa is now seeking to turn the tables at the Aug. 17 parliamentary polls but continues to be dogged by allegations of sleaze that led to his defeat after two terms as president. At the centre of an investigation by the police and central bank is China Harbour Engineering Company (CHEC), which under Rajapaksa landed a $1.4 billion deal to build a port city in Colombo that has been suspended by the current government. CHEC, a subsidiary of state-owned China Communications Construction Company (CCCC), denied as "baseless and false" any suggestion that it bribed Rajapaksa. "CHEC calls on all the relevant Sri Lankan officials and parties not to misunderstand their responsible and cooperative partner, and not to send a wrong signal to the investors from China and all other countries," it said in a state Rajapaksa was not immediately available for comment. CHINESE PROJECTS The state-run Daily News reported on Wednesday that police were investigating an allegation that CHEC paid 149 million rupees ($1.1 million) to Rajapaksa through various proxies. Police spokesman Ruwan Gunasekara confirmed to Reuters that the investigation was being conducted by the Criminal Investigation Department (CID) and the central bank's Finance Intelligence Unit (FIU). He declined to elaborate. A source, with knowledge of the FIU's investigations, said the investigation had "found a certain amount of money had gone out of the CHEC account". It was investigating whether this payment constituted a bribe. Shan Wijetunga, senior manager at Transparency International Sri Lanka said there are no laws barring companies or individuals funding political campaigns. However, if there are any vested interests it can be considered as bribe. Sirisena, after his election on Jan. 8, suspended most of the Chinese-backed infrastructure projects started under Rajapaksa, who denies allegations of corruption and overpricing in contract awards. The general election will see a battle between current Prime Minister Ranil Wickremesinghe and Rajapaksa, who helped crush a 26-year insurgency against Tamil Tiger rebels in 2009 and who retains a strong following among the electorate. Allies say if that if Rajapaksa, 69, returns to power, he would immediately resume the Chinese projects suspended by the Sirisena government.