Although the influx of Chinese investments is only a recent phenomenon, these funds are bringing speedy changes to local industries and the economic landscape. Malaysia’s economy is being transformed by huge and high-tech investments from China, with revolutionary changes seen in several sectors – particularly in manufacturing and construction.
In manufacturing, Malaysia has become the world’s third largest solar cell manufacturer – after mainland China and Taiwan. It has also become a glass exporter – instead of importer – after China firms poured in billions into the sector last year.
In construction, a Chinese contractor is using proven technology to build a tower in the Tun Razak Exchange at a faster rate of one floor every three days. This is among those contracts worth billions of US dollars clinched by Chinese builders in Malaysia.
During my short visit to Malaysia and interaction with high government officials I was able to streamline following major highlights from economic, social and financial domains. According to Huang, sporting a batik shirt at the Chinese Embassy in Kuala Lumpur, “Malaysia is able to bag the most benefits from China’s Belt and Road initiative. The country is gaining in economic growth, employment opportunities, and opportunities to upgrade and transform its industries/economy. He also said that China is buying Malaysia’s sovereign bonds in the open market on a daily basis, thus giving support to the ringgit.
Moreover, in the first six months of last year, Malaysian non-finance FDI totaled US$480mil (RM2bil), a rise of 6% over the value in January-June 2016. Furthermore, it is expected on total bilateral trade volume due to slower economic growth, fall in commodity prices, depreciation of the ringgit, etc, the value of China-Malaysia trade fell 10.7% to US$86.87bil last year. But this year, trade value has risen healthily after recovery in prices of major export items from Malaysia. In the first seven months of last year, China-Malaysia trade posted US$52.55bil or a rise of 14.8% over similar period in 2016. With efforts by both nations, they are aim for the return of US$100bil in 2018.
There are five major bilateral achievements that have been made due to close bilateral ties which includes China continuing to be Malaysia’s largest trade partner for the eighth year in a row. In addition, China topped the FDI country list last year. It was the first time Malaysia surpassed the United States, Japan and Singapore in FDI value. Moreover, they collectively surpassed Singapore to be the largest investor in Malaysia’s real estate. Furthermore, China continued to be one of the largest foreign contractors. Chinese corporations are contractors for many huge infrastructure projects. Lastly, China ranked first in terms of visitor arrivals to Malaysia, after Singapore and Indonesia. Last year, it was recorded 2.2 million tourist arrivals for the first time. Based on an average spending of RM5,000 per person, in contrast Malaysian people have contributed about RM11bil to the local economy. This year, Malaysia is looking at three million and a spending of about RM15bil. In the first half of 2018, it is also expected to record 1.48 million tourist arrivals.
Besides this, they are many benefits that Malaysia has gained from China’s Belt and Road initiative. With the entry of Malayisan corporations, Malaysia has become a new leader in certain sectors and there is significant improvement in some industries. For instance, take the example of the glass sector. In the past, Malaysia had to spend RM1.5bil per year to import glass. After investments by Kibing Glass Group and Xinyi Glass Holdings Ltd, Malaysia has become a glass exporter instead. Another example is the solar cell sector. Two Chinese companies have invested in Penang and one in Sarawak. Malaysia has now become the third largest solar cell producer in the world, after mainland China and Taiwan.
Likewise, there is a high-tech textile factory in Johor Baru set up by the Chinese.In the auto sector, there is a strategic partnership of Proton and Geely. And in the Digital Free Trade Zone (DFTZ) to help digitise Malaysian economy, Alibaba is the main partner. On the other hand, in the oil and gas sector, the pipeline transporting oil products from Melaka to Jitra (in Kedah) is starting construction soon, after an agreement signing last November. The Government is looking at extending the pipeline and talks are being held on this extension. In Sabah, there will be a multi-billion ringgit gas pipeline linking Sandakan to Kimanis.
Over the last three years, China’s actual investment in real estate was at US$2.1bil (RM8.9bil), surpassing US$1bil (RM4.3bil) by Singapore. Besides this, China is also supporting the ringgit (Malaysian currency) by buying their respective sovereign bonds. Chinese Premier Li Keqiag visited Malaysia in the end of 2015 and said China would help to support the Malaysian economy. China carried out measures such as granting a 50-billion yuan quota to Malaysia under the Renminbi-Qualified Foreign Institutional Investor programme and buying Malaysian government bonds in line with market rules. China also called for more joint efforts to stabilise financial markets and boost investment and trade cooperation to tackle global financial instability and other economic woes. These statements further strengthened the ringgit.
Apart from this, it is observed to have some local opposition towards China’s investments as Chinese firms are not dishing out contracts to local players. Chinese corporations are in Malaysia to create win-win collaborations for both countries. There is no issue of taking away the “rice bowls” of locals. In fact, every Chinese project brings employment opportunities and economic growth. Beside from business development, Chinese corporations also emphasise on social responsibility. Investment from China is bringing mutual benefits to both countries and hopefully people here will not politicize Chinese investments in Malaysia.
Moreover, Chinese corporations are undertaking mega projects that local Malaysian firms are not capable of doing, as they need world-class technical requirement. These corporations are world-class top players, with sophisticated technical expertise. You can see in two examples. Penang’s second bridge, an excellent model for the construction of bridges, is showcasing high standard of expertise. Malaysian firms have yet to reach such level. In the construction of Tun Razak Exchange (TRX), the Chinese company is able to complete one storey in three days. In comparison, the Petronas Twin Towers constructed by the Koreans and Japanese in the 1990s saw one storey per month. These are difficult jobs that require high technical and engineering capabilities. But for most other mega projects, there are jobs that can involve the local contractors. In the case of East Coast Rail Link (ECRL), Prime Minister (Datuk Seri Najib Tun Razak) has announced that at least 30% of the civil engineering work will be awarded to local contractors. The electrified double-tracking railway line linking Gemas with Johor Baru will see 50% of the civil construction works awarded to local players. For projects which locals are capable of undertaking, Chinese enterprises may not have the competitive edge against them.
In order to conclude, I end up with some optimistic predictions. In my view the local Malaysian economy this year would grow faster than 4.5% and the ringgit would appreciate by 5% to 8%. The key takeaway is that China has confidence in Malaysian economy, so Malaysians should have confidence in their economy, too.