Chinese loans are not responsible for structural problems within Malaysia’s economy

After suspending some China-backed projects, Malaysian Prime Minister Mahathir Mohamad is likely to visit China in August to discuss those projects and try to win deals that he said should be more favorable to his country, Bloomberg News has reported.

Chinese companies have great enthusiasm for economic cooperation with Malaysia, but this process should proceed on the basis of mutual respect, equality and mutual benefit.

Although the Malaysian economy continued its momentum by advancing 5.4 percent year-on-year in the first quarter, the country has also faced with economic problems such as the rising cost of living and youth underemployment.

China is willing to provide the necessary support to facilitate Malaysia’s efforts to fix its economy, but renegotiating contracts won’t solve the fundamental problems faced by the Southeast Asian country. The real question is whether Malaysia can solve structural issues within its economy such as low wages, the lack of affordable homes, a sluggish manufacturing sector, and overdependence on exports of agricultural products and natural resources.

There is an incorrect perception in some quarters that China-backed projects, instead of domestic structural issues, are the cause of the country’s unbalanced economy. Nationalism in the hearts of some Malaysian people can be easily aroused during hard times, but we should be vigilant against excessive nationalism, which would obscure the need to address structural problems within Malaysia’s economy.

Malaysia ran a trade surplus with China in the first half of this year, with exports to China reaching $30.2 billion, up 18.5 percent from the same period last year. Thus, there is no real basis for claiming China-Malaysia economic relations favor China.

If loans for some China-backed projects pose a hidden danger to the economy, it is essential for the Malaysian government to review such questionable debt. But we believe such loans represent only a small part of the bilateral economic cooperation. At the moment, China and Malaysia each look at bilateral economic cooperation from their own perspectives and experience. Hopefully, Mahathir’s visit will help both sides eliminate their differences and misunderstandings.

Mahathir steered Malaysia’s economic rise in the 1990s. Some pin high hopes on his new government to revamp the economy and resolve social injustices. It will be a test of Malaysia’s wisdom to see if it can capitalize on business opportunities arising from bilateral cooperation with China and make Chinese loans a positive factor for its economic restructuring.