By Amy Chew. Published in South China Morning Post on Tuesday, 12 January, 2016
China is now Malaysia’s largest foreign investor, following its recent acquisition of 1MDB assets, extending Beijing’s reach into the Southeast Asian country’s economy.
The scale of China’s rise to become the top foreign investor is compelling – just a year ago, it was nowhere near the top of the table. While official figures for 2015 are not out yet, economists say China will certainly emerge in first place.
In 2014, foreign direct investment (FDI) to Malaysia mainly originated from Singapore, Japan, the Netherlands, the US and Norway, which amounted to RM257.7 billion (US$58 billion), or 55.1 per cent of total FDI.
However, some economists do not expect China’s top position to be sustained as Malaysia’s economic transition plan (ETP) to become a high-income nation by 2020 aims for high-value industries.
“I do not expect China’s pole position for FDI to be sustainable as Malaysia wants to move up the value chain into high technology . That will come from its traditional FDI sources of US, Japan, EU and Singapore,” says Yeah Kim Leng, Dean of the School of Business at the Malaysia University of Science and Technology.
China, however, has been Malaysia’s largest trading partner since 2009, and is both the largest market for Malaysian exports and the largest importer to Malaysia. Total trade between the two countries in 2014 reached RM207.85 billion.
On November 23 last year, Chinese Premier Li Keqiang said China would buy more Malaysian government bonds and give the country a 50 billion yuan (US$7.6 billion) quota to invest in Chinese stocks and bonds.
China’s investments in Malaysia are well diversified. It is not only securing natural resources for its energy needs but building infrastructure and educational facilities.
Call it soft power.
China’s Xiamen University launched its first overseas campus in Malaysia, which can accommodate 10,000 students, in 2013. The first phase of the RM1.03 billion campus located in Sepang, Selangor state, was completed in October 2015.
The initial intake for undergraduates starts in February.
Other major Chinese investments include property and industrial developments.
Three Chinese companies are developing properties in Iskandar Malaysia, a special economic zone in the southern state of Johor which borders Singapore.
China’s Guangzhou R&F Properties Co Ltd is investing RM4.5 billion to build condominiums in Iskandar, while Country Garden Holdings Co Ltd is investing RM900 million in 45 condominium towers, offering a total of 9,500 units.
Greenland Holdings Group Ltd is investing RM2.4 billion in its Iskandar property development.
In Pahang state, Guangxi Beibu Gulf International Port Group is spending RM8 billion to expand and deepen the provincial capital’s Kuantan port on the eastern seaboard as well as build the Malaysia-China Kuantan industrial park.