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Malaysia an important part of China’s Asean expansion

Via The Star : PETALING JAYA: Malaysia remains a pivotal part of China’s economic expansion in Asean, despite the disparity in economic output between the two countries.

The year has just started but Chinese investors remain very much in the limelight, for better or worse, with Geely Automobile Holdings Ltd said to be leading the race to become Proton Holdings Bhd’s foreign strategic partner while a business weekly said Chinese investors were also interested in Scomi Engineering Bhd’s monorail operation.

Wong & Partners’ corporate, commercial and securities practice group head Brian Chia told StarBiz that Malaysia remains an important point of access for China in Asean.

“There are Chinese investments throughout the region but Malaysia’s balanced regional role has attracted the Chinese, making Malaysia quite central to Chinese involvement and narrative in the region,” he pointed out.

However, Chia cautioned that Chinese investments in Malaysia needed to be placed in context in regards to scale.

“What is significant is that Chinese investments came from a very low base five years ago to where it is today,” he said, adding that Chinese investments remain small compared to Japanese and European investments in Malaysia because the Japanese and Europeans helped modernise the Malaysian economy through industrialisation, making their investments in the country comparatively higher than China’s over the years.

According to official data, for the latest full-year foreign direct investment (FDI) figures available, China accounted for nearly a quarter or US$2bil of FDI in Malaysia in 2015, out of a total US$8.7bil.

Compared to 2014, China was not in the top five, with FDI in that year originating from Singapore, the Netherlands, Hong Kong, Cayman Islands and Bermuda, which together poured in US$6.4bil, accounting for 63.4% of total FDI. China has been Malaysia’s largest trading partner since 2010 and Malaysia remains China’s most important Asean trading partner.

Both government officials and analysts expect Chinese investments to significantly increase over the coming years.

According to a 2015 report by the United States Chamber of Commerce, Chinese investments into Malaysia has outpaced Malaysian investments into China since 2009. It said by 2013, Chinese FDI into Malaysia reached US$616mil compared to Malaysian investments into China, which stood at US$280mil.

Chia said that government policies to boost economic output and push the economy to the next level has drawn foreign investor interest over recent years, including the Chinese.

He cited the news of the Saudi Arabian Oil Co’s decision to pull out of a partnership with Petroliam Nasional Bhd on the multibillion ringgit Refinery and Petrochemical Integrated Development (Rapid) project in Pengerang, Johor as opportunity to others like the Chinese.

“The various projects announced under the Economic Transformation Programme will continue to attract funding requirements and I’m not surprised that Chinese investors will be interested in such projects,” Chia said.

The total cost of the Pengerang Integrated Complex, of which the Rapid project forms a part, has been estimated to cost up to US$27bil.

Chia said the Chinese were interested in many areas of industry including logistics, oil and gas and, construction.

For example, China and Malaysia last October signed an agreement to build the RM55bil East Coast Railway Line while Chinese companies have an edge, according to many, in the bidding for portions of the high speed railway linking Malaysia and Singapore.

“Chinese investors are like any other investors, they see opportunities in South-East Asia where the population is young and upwardly mobile, their companies are expanding in search of technology, markets, raw material and profile,” he added.

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