Monday, January 2, 2017

Malaysia's China Deals

China is already firmly encamped in the country.

The scale of China’s investments in Malaysia, especially in 2016, has been prominent. And massive. And impressive.
In Johor, China’s developers are betting on Johor Bahru and its vicinity.

Photographer: Ore Huiying/Bloomberg

In fact, China has overtaken Singapore’s position as the largest foreign investor in Iskandar Malaysia with investments amounting to RM18.23 billion, mainly on mega property development projects in the likes of Country Garden (Country Garden Danga Bay & Forest City), Guangzhou R&F Properties (Puteri Cove) and Greenland Group (Jade Palace & Tebrau Bay Waterfront City).

According to Bloomberg on November 22, 2016, some companies even took to flying in planeloads of potential buyers from China, prompting low-cost carrier AirAsia to start direct flights in May connecting JB with the southern Chinese city of Guangzhou.

On the first such flight, 150 of the 180 seats were taken by a subsidized tour group organized by Country Garden. Almost half of them ended up buying a residence, the developer boasted in an email.

Johor’s neighbor, Malacca is also opening its doors wide to the Chinese.


The Melaka Gateway is a massive endeavor – reportedly worth RM30 billion – undertaken by a JV between little-known Malaysia’s KAJ Development Sdn Bhd and China’s state-owned PowerChina International Group Ltd.

A real estate development project off Malacca’s coastline that involves three reclaimed islands slated for completion in 2025. Included in the plans is a deep sea port on the fourth island, i.e. Pulau Melaka, scheduled for completion six years earlier – and it fits into China's OBOR initiative.

[In case you didn’t know, OBOR or One Belt One Road is China’s most ambitious foreign policy and economic strategy.

More than 2,000 years ago, China’s imperial envoy Zhang Qian helped to establish the Silk Road, a network of trade routes that linked China to Central Asia and the Arab world. The name came from one of China’s most important exports – silk. And the road itself influenced the development of the entire region for hundreds of years.

In 2013, China’s president, Xi Jinping, proposed establishing a modern equivalent, creating a network of railways, roads, pipelines, and utility grids that would link China and Central Asia, West Asia, and parts of South Asia.

This OBOR initiative comprises two main components: the Silk Road Economic Belt and the 21st Century Maritime Silk Road. The SREB is envisioned as three routes connecting China to Europe (via Central Asia), the Persian Gulf, the Mediterranean (through West Asia), and the Indian Ocean (via South Asia). The 21st Century MSR is planned to create connections among regional waterways.

More than 60 countries, with a combined GDP of $21 trillion, have expressed interest in participating in the OBOR action plan.

OBOR is envisaged to be the world’s largest economic platform and know this! It is spearheaded by China].

Even in Negeri Sembilan, there is Chinese action.

China’s privately-owned Shangdong Hengyuan Petrochemical Company Limited have taken over control of Malaysia’s Shell Refining Company – a move applauded in the country because it supposedly saved 85% of the jobs at stake. The $66.3 million purchase was made through Shandong Hengyuan's Malaysian subsidiary, Malaysia Hengyuan International Limited. 

A Global Times report dated December 22, 2016 stated that MHIL had acquired a 51 percent stake in SRC – one of a few such acquisitions done by petroleum companies outside the three major state-owned China enterprises, including Sinopec and PetroChina.

The finalization of the deal means that a mandatory general offer has been triggered. The company have said they intend to buy the remaining 49 percent stake.

The acquisition of the said refinery in Port Dickson has made Shandong Hengyuan one of the few smaller refining companies in China to own an overseas refinery.

Over in the East coast, the China presence is no less significant.

The East Coast Rail Line is a RM55 billion project that China is set to build and finance. The ECRL will span four states in peninsular Malaysia – and it will eventually link Port Klang on the west and Kuantan port in Pahang in the east and connecting northwards with Terengganu and Kelantan.

Work begins next year and completion is expected by 2022. 

Kuantan Port is being expanded and upgraded – to the tune of RM4 billion – to accommodate bulk carriers and container vessels of up to 200,000 deadweight tonnage (DWT).

Yup, the Chinese are involved too. Kuantan Port is operated by the Kuantan Port Consortium, a JV between Malaysia’s IJM Corporation Berhad and China’s state-owned Guangxi Beibu International Port Group. GBIPG already operate four ports in China’s Guangxi Region, and the joint venture is expected to further boost bilateral trade between Malaysia and China.

Kuantan Port is expected to be the catalyst for development of the Malaysia-China Kuantan Industrial Park, the sister park of the China-Malaysia Qinzhou Industrial Park, whereby GBIPG is also a key investor in MCKIP. 

IJM Corp have a finger in the pie too – with a 40 percent stake in Kuantan Pahang Holdings Sdn Bhd which, in turn, own 51 percent of the 607ha MCKIP in Gebeng. Of course, GBIPG own the balance shareholding in MCKIP and the China company have committed to source more than RM78.5 billion worth of investments for this new growth area by 2020.

Given all of the above investments from China – and including the many other investments not highlighted here and to be sure, the many other investments to come – is it any wonder that PM Najib Razak’s critics are trumpeting that he is, indeed, selling the country?

It is a political hot potato but at the moment, everybody even the Malays – are keeping a respectful silence. They have no choice because the country desperately needs Chinese money.

And China has lots of money!

China is flying the flag in Malaysia. Welcome, brethren! 欢迎弟兄们!

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