China is negotiating a military base in a strategic port of Djibouti, the president said, according to the AFP news agency.
The move raises the prospect of US and Chinese bases side-by-side in the tiny Horn of Africa nation.
"Discussions are ongoing," President Ismail Omar Guelleh said in an interview in Djibouti, saying Beijing's presence would be "welcome".
The AFP did not say when the interview was conducted.
Djibouti is already home to Camp Lemonnier, the US military headquarters on the continent, used for covert, anti-terror and other operations in Yemen, Somalia and elsewhere across Africa.
France and Japan also have bases in the port, a former French colony that guards the entrance to the Red Sea and the Suez Canal, and which has been used by European and other international navies as a base in the fight against piracy from neighbouring Somalia.
China is already financing several major infrastructure projects estimated to total more than $9bn, including improved ports, airports and railway lines to landlocked Ethiopia, for which Djibouti is a lifeline port.
"France's presence is old, and the Americans found that the position of Djibouti could help in the fight against terrorism in the region," Guelleh said.
"The Japanese want to protect themselves from piracy - and now the Chinese also want to protect their interests, and they are welcome," he said.
Djibouti oversees the narrow Bab al-Mandeb straits, the channel separating Africa from Arabia and one of the busiest shipping lanes in the world, leading into the Red Sea and northwards to the Mediterranean.
Djibouti and Beijing signed a military agreement allowing the Chinese navy to use Djibouti port in February 2014, a move that angered Washington.
China aims to install a permanent military base in Obock, Djibouti's northern port city.
In recent years, Guelleh has increasingly turned to China as a key economic partner. Last year he switched the port operating contract to a Chinese company, after the previous Dubai-based operator was accused of corruption.