The 273-kilometre railway line, estimated to cost $2.2 billion, would link the capital Kampala and Uganda's border with Kenya, where it is planned to link up with Kenya's own standard gauge rail that runs to the Indian Ocean seaport of Mombasa.
Uganda is however frustrated with China's unwillingness to provide funding for the project and is now courting Turkey's Yapi Merkezi to take up the job, a senior official in the ministry of works and transport project told Reuters.
He spoke on condition of anonymity because he was not authorised to speak on the subject.
"One of the obligations under the contract with the Chinese was that they were supposed to help Uganda source financing which has really not come true," the official said.
He said Uganda had written to the Chinese firm in December cancelling the contract and that the Chinese had so far not indicated any objection to the decision. Officials of CHEC were not immediately reachable for comment.
The source at Uganda's transport ministry said they had turned their focus to Turkey's Yapi Merkezi.
"So now the discussions are with Yapi Merkezi which has shown interest ...there's no contract with them yet, but there's an MoU and things are moving fast."
Uganda was particularly impressed with the job Yapi Merkezi had done in neighbouring Tanzania, he said, adding a Ugandan team had recently travelled to Tanzania to see the work.
In Tanzania, Yapi Merkezi is helping to build a 1,219-kilometer standard gauge railway line that the country is developing as part of efforts to boost trade with Uganda and other neighbouring countries.
Yapi Merkezi did not immediately respond when contacted for comment.
In 2015, the east-African country signed an engineering, procurement and construction contract with CHEC to develop the Standard Gauge Railway (SGR) project, which will use the international standard rather than a narrower gauge sometimes used in the region.
Wang Wenbin, China's foreign ministry spokesperson, said China and Uganda had in the past jointly cooperated in railways, hydropower stations, highways, oil and gas development, and infrastructure construction.
"China and Uganda are comprehensive cooperative partners, and practical cooperation between the two countries is at the forefront of China-Africa cooperation," he told a news conference in Beijing.
