Malaysia’s new administration is cancelling Chinese state-backed projects, as it tries to wean itself off its neighbour’s friends-with-benefits investment policy.
The New York Times ran a fascinating piece yesterday exploring why Malaysia’s prime minister, the 93-year-old Mahathir Mohamad, is stopping two schemes worth a combined $15.4bn (£12.5bn).
The projects to be halted are a $2.5bn (£1.9bn) gas pipeline agreement and a $13.4bn (£10.4bn) deal for China Communications Construction Company to build Malaysia’s East Coast Rail Link.
It is reported that $2bn has already been paid out on the pipeline project, but construction has yet to begin.
Malaysia is in thrall to China for some $250bn, according to the NYT, and Mr Mohamad has vowed to put an end to exorbitant projects offering China a long-term stake in the country’s future.
Mr Mahathir was quoted as saying: “It’s all about borrowing too much money, which we cannot afford and cannot repay because we don’t need these projects in Malaysia.”
Malaysia’s investment in the UK is also under scrutiny, as has been reported.
Next month is the revised deadline for the £1.6bn takeover of Battersea Power Station by Malaysian investors Permodalan Nasional Berhad (PNB) and the Employees Provident Fund (EPF).
The deal has been delayed twice already, and the ruling party’s Anwar Ibrahim, tipped as a future PM, told The Guardian in June that his government would be investigating the transfer of Battersea to EPF and PNB, as it involved a state fund.
But could these shifting trading relationships combined with the upheaval of Brexit offer the UK government a chance to reinvigorate Chinese investment?
The signs are that Chinese investment into central London commercial property is already dipping compared with previous quarterly averages, despite successive Conservative leaders having gone cap in hand to Beijing.
Investment from Asia has been important in the private sector, though plenty of well-publicised schemes have fallen off the radar.
Perhaps it’s time for Theresa May to polish off that curtsey and invite China’s leadership over here for a chat: ‘Malaysia won’t take your money? Well, we can certainly put it to good use.’
It might even give a little wiggle room in the neverending bid to find a new, socially acceptable form of PPP. All the mood music suggests Treasury policy-makers including exchequer secretary Robert Jenrick and head of project finance Matthew Vickerstaff are keen to find a new private finance solution.
And with China now having at least a spare £12.5bn and withdrawing investment in the US at the same time, maybe the UK should once again look east, unfurl the red carpet and break out the fine china.