Malaysia: Will China investments improve Malaysia’s economy? – 21 Jul 2017

  • China is investing heavily in Malaysia, and the government continues to woo Chinese firms. According to Citi Research these large investments have significant implications for the growth of the economy and the ringgit. There is a suggestion that the impact may not be as good as appears on paper.
  • The Edge quoted it as saying that the announced railway and port projects with Chinese interest could make up between 24% and 32% of Malaysia’s 2016 nominal GDP, spread out over the next 10 to 20 years.
  • Chinese FDI inflows remained on course to meet or exceed the 2016 figure of MYR18.7bn, The Edge quoted Citi Research as saying.
  • It said, however, that these large investments raised many questions. It said the mode of Chinese involvement was not completely clear. Chinese involvement, it said, could also come via construction contracts to Chinese state-owned enterprises.
  • Citi Research said there were also questions over the spill over to Malaysia’s GDP, “given concerns that the materials, companies and even labour involved in the projects will be Chinese”.
  • It noted that at USD12.6bn, construction contracts awarded to Chinese firms during the same period were almost twice as large as greenfield investments, and comparable in size with the total investments in the same period.

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