Malaysia invites more Chinese investment

Malaysia’s economy is increasingly tied to China. Source: Wikimedia

Kuala Lumpur is reportedly expecting to see rising Chinese investment as firms in the developing giant are looking overseas under the so-called “belt and road” initiative.

Chinese firms were not deterred by the domestic economic slowdown but were instead looking overseas, said the Oriental Daily, a Chinese-language newspaper in Malaysia.

“Furthermore, driven by the ‘belt and road’ initiative, Malaysia may expect a surge in investment and takeover by Chinese companies in coming years,” it reported.

The belt and road initiative refers to Chinese President Xi Jinping’s 2013 “Silk Road Economic Belt” announcement which aimed to boost cooperation along the historic Silk Road from China’s coast through Central Asia, West Asia and Europe. He also proposed a “maritime Silk Road” to link China with Asean.

The “belt and road” initiative has so far won support from 60 countries, Asean, the EU and the Arab League.

Trade between Malaysia and China has increased in recent years, with China becoming Malaysia’s largest trading partner since 2009 while Malaysia is China’s largest Asean trading partner. Bilateral trade exceeded US$97.3 billion last year.

And Kuala Lumpur is increasing efforts to attract more Chinese investment.

The numerous successful ethnic Chinese-Malaysians who form the bedrock of the federation’s economic success have been drawn to their ethnic homeland since Deng Xiaoping’s reforms were started in the late 1970s.

Robert Kuok, founder of luxury hotel chain Shangri-La, was a prominent example.

The Malaysian Investment Development Authority said Chinese investment in manufacturing reached US$4.4 billion since 2005.

Huawei, the IT giant, has set up its regional headquarters in Malaysia while realty firms such as Greenland and Country Garden have entered the federation.

Energy firm China General Nuclear Power Corporation agreed an equity purchase deal with Malaysian supplier Edra Global Energy in November.

Chinese companies are investigating the possibility of constructing a high-speed railway linking Kuala Lumpur and Singapore, in addition to similar projects in Java, Laos, Cambodia, Thailand and possibly Myanmar. India is said to be considering if Chinese high-speed rail technology could be applicable to the crowded subcontinent.

Investment slowed last year from the peak of 2013 and 2014, largely due to slower economic growth in both countries, but Kuala Lumpur is looking for figure to increase again.

Malaysia’s Deputy Minister for International Trade and Industry Lee Chee Leong said bilateral projects like ports in Kuantan and Malacca and a joint industrial park would send Chinese investment rising.

Meanwhile, the industrial-production index, which measures output from mines, factories and power plants, rose by 1 per cent in December from a year ago, according to a median forecast by a group of economists. It climbed 1.8 per cent year-over-year in November.

Malaysia’s exports grew by a slower-than-expected 1.4 per cent year-over-year in December, slower than the 4.8 per cent increase forecast. In November, exports rose 6.3 per cent year-over-year.

Moody’s Analytics said: “Export-facing producers are suffering from weak Chinese demand and its knock-on effect throughout the region. Domestic conditions also continue to be weak, with consumer and business confidence driven lower.”

Factory output growth in November slipped to 1.8 per cent year-on-year on falling global demand and declines in mining production.

Malaysia’s December exports rose 1.4 per cent from a year ago, well below observers’ expectations, as demand for its exports fell.