Sino-Malaysia in­vest­ments perk up

Af­ter over­com­ing the ini­tial shock of see­ing a change of govern­ment, Chi­nese in­vestors are re­turn­ing to Malaysia.

The Star Malaysia - - Focus - By HO WAH FOON wah­foonho@thes­tar.com.my

KUALA LUMPUR was a hive of ac­tiv­i­ties last week when the two­day China Con­fer­ence or­gan­ised by Hong Kong’s South China Morn­ing Post at­tracted 1,000 Asian cor­po­rate lead­ers, pol­icy mak­ers, ex­perts and in­vestors.

It was in­deed timely for in­vestors to get an up­dated over­view on China, in view of the es­ca­lat­ing Sino-US trade war, fresh ten­sion in South China Sea, doubts on China’s Belt and Road Ini­tia­tive (BRI) and fu­ture of Sino-Malaysia eco­nomic re­la­tions.

For lo­cal par­tic­i­pants, the most eye-open­ing ses­sion on China had to be the talk given by prom­i­nent fund man­ager Datuk Seri Cheah Cheng Hye, who out­lined the po­ten­tial sec­tors and ar­eas for in­vest­ment in China.

While many speak­ers ex­uded op­ti­mism on Malaysia-China ties, the most con­vinc­ing state­ment emerged out­side the con­fer­ence.

In a state­ment sent di­rect to the me­dia last Thurs­day, China’s Pa­cific Con­struc­tion Group Ltd (CPCG) an­nounced a plan to in­vest RM10­bil over 10 years in Malaysia in in­fra­struc­ture de­vel­op­ment, hi-tech ma­chin­ery and ed­u­ca­tion.

This is by far the big­gest in­vest­ment plan by a for­eign com­pany af­ter the change of govern­ment in the May 9 gen­eral election.

This govern­ment change, plus the re­cent can­cel­la­tion of sev­eral China-fi­nanced projects by Prime Min­is­ter Tun Dr Ma­hathir Mo­hamad, had sent jit­ters to busi­ness com­mu­nity in the Mid­dle King­dom.

But Yan Jiehe, founder of CPCG – ranked 96th in 2018 For­tune Global 500 – chooses to view Malaysia as “busi­ness friendly and one of the most com­pet­i­tive coun­tries in the re­gion”.

“The coun­try’s fun­da­men­tals are strong. You have ex­cel­lent in­fra­struc­ture, a ro­bust eco-sys­tem and a big pool of trilin­gual tal­ents. Kuala Lumpur, is thus, a strate­gic launch pad for our ex­pan­sion into Asia Pa­cific,” he said.

The move by China’s big­gest pri­vately-owned con­struc­tion com­pany, with an­nual rev­enue of over RM300­bil, is seen as a much-needed vote of con­fi­dence for the new Malaysia.

Yan may also have a lead­er­ship in­flu­ence over po­ten­tial Chi­nese in­vestors, cur­rently look­ing to Malaysia and other South­east Asian na­tions to re­lo­cate their in­dus­tries in bid to mit­i­gate the ad­verse im­pact of the Sino-US trade war.

He has shown that he does not share the anx­i­ety of many Chi­nese to­wards the new govern­ment.

In­deed, this state­ment came af­ter Malaysia’s re­cent friendly ges­tures shown to­wards China.

Malaysia’s sov­er­eign wealth fund Khaz­anah Na­sional an­nounced at the China Con­fer­ence last Wed­nes­day that it was keen to in­vest in new tech­nolo­gies, e-com­merce, ar­ti­fi­cial in­tel­li­gence and new me­dia in China.

Its man­ag­ing di­rec­tor Datuk Shahril Ridza Ridzuan said: “We view our re­la­tion­ship with China as im­por­tant. Khaz­anah wants to forge a long term bond with China to cap­ture in­vest­ment op­por­tuni- ties in the hugely pop­u­lated coun­try.”

At the Tues­day din­ner func­tion of Fed­er­a­tion of Malaysian Man­u­fac­tur­ers (FMM), Dr Ma­hathir de­clared that his cur­rent Look East Pol­icy would mean learn­ing not just from Ja­pan, but also China and Korea.

Shar­ing his ad­mi­ra­tion for China’s achieve­ment in tech­nol­ogy, he re­peated his govern­ment’s stand that it wel­comed all for­eign di­rect in­vest­ments.

In fact, Chi­nese in­vestors at the con­fer­ence could get some con­so­la­tion af­ter lis­ten­ing to Univer­sity of Malaya pro­fes­sor Ed­mund Ter­ence Gomez and an of­fi­cial from Asian De­vel­op­ment Bank (ADB).

Gomez crit­i­cised the new govern­ment for ex­ces­sively high­light­ing con­tro­ver­sial in­fra­struc­ture projects of China.

Elab­o­rat­ing his point with charts and data, he said there were far more pro­duc­tive and dy­namic in­vest­ments from main­land China in var­i­ous sec­tors that has ben­e­fited Malaysia.

Apart from con­struc­tion and in­fra­struc­ture, Chi­nese in­vest­ments have gone into prop­erty de­vel­op­ment, bank­ing, in­dus­tries, fish­ing, agri­cul­ture, tourism, food and ser­vices.

Belt and Road projects

At the con­fer­ence, the ADB had played a vi­tal role to clear mis­con­cep­tion on projects linked to China’s Belt and Road Ini­tia­tive (BRI).

China’s am­bi­tious BRI, which spans more than 65 coun­tries, has given rise to crit­i­cism that it will drag fi­nan­cially weak de­vel­op­ing coun­tries into debts they can­not re­pay. Sri Lanka has of­ten been cited as an ex­am­ple.

ADB’s vice pres­i­dent Stephen Groff told a panel dis­cus­sion: “I don’t buy the no­tion of China prac­tis­ing debt diplo­macy. It is not a sus­tain­able model.

“More­over, I don’t think this is the ob­jec­tive of Chi­nese govern­ment in launch­ing the BRI. The fail­ure to re­pay loans is due to the lack of ca­pac­ity and trans­parency.”

If coun­tries within the re­gion re­ject China’s BRI projects, they may miss out op­por­tu­ni­ties to de­velop their economies.

The ADB es­ti­mates emerg­ing economies across Asia will need to in­vest as much as US$26 tril­lion (RM108.03 tril­lion) in build­ing trans­port and smart city net­works, erad­i­cat­ing poverty and tack­ling cli­mate change.

In this re­gard, China’s game-chang­ing BRI projects, which could amount to US$1 tril­lion (RM4.16 tril­lion), will have ma­jor im­pli­ca­tions for the re­gion.

With China now a ma­jor con­trib­u­tor to global growth, in­volve­ment in the BRI could help strengthen links within Asean, South Asia and with China, said Stan­dard Char­tered Global Re­search in a re­port is­sued last week.

Al­ready, China has be­come a key part­ner of Asean in trade, in­vest­ment and in­fra­struc­ture de­vel­op­ment. Asean has also gained from China’s strong eco­nomic and im­port growth over the past two decades.

Op­por­tu­ni­ties in China

Un­der the lead­er­ship of Pres­i­dent Xi Jin­ping, the cur­rent US-China trade war will not stop China’s con­tin­u­ous rise to be­come the sec­ond largest econ­omy in the world in 2030 when its GDP hits US$26 tril­lion, ac­cord­ing to HSBC’s fore­cast shown by Value Part­ners Group.

“China will be­come a high-in­come coun­try in 10 years. Its de­mand chain is very pow­er­ful. In five years, this coun­try can sus­tain its eco­nomic growth and there is no need to de­pend on

other coun­tries,” said Cheah, founder and chair­man of Value Part­ners.

In fact, the in­tense trade war di­rected at slow­ing the eco­nomic growth of China has in­stead strength­ened the re­solve of Bei­jing to be self-re­liant, ac­cord­ing to Cheah.

“In the worst case scene­rio, China does not need to ex­port,” Cheah said, adding China’s strong do­mes­tic mar­ket will see its pri­vate con­sump­tion ris­ing to US$9.7 tril­lion (RM40.3 tril­lion) in 2030 from US$4.2 tril­lion (RM17.45 tril­lion) in 2015 as he cited fore­cast from Econ­o­mist In­tel­li­gence Unit.

The Hong Kong-based Cheah, who of­ten trav­els across China, believes au­to­mo­bile, travel, house­hold ap­pli­ances, health­care, lux­ury goods and sports­wear of­fer in­vest­ment op­por­tu­ni­ties in China.

These sec­tors are key ben­e­fi­cia­ries from China’s con­sump­tion up­grade and grow­ing dis­pos­able in­come.

Em­pha­sis­ing on tourism, Cheah noted only 9% of the 1.4 bil­lion peo­ple in China pos­sess in­ter­na­tional pass­ports, yet out­bound China tourism ex­pen­di­ture topped the world at US$261bil (RM1.08 tril­lion) in 2016.

“Can we ac­com­mo­date Chi­nese tourist ar­rivals if more of them have pass­ports?”

Not­ing that China has a very vi­brant pri­vate sec­tor and the world’s largest In­ter­net pop­u­la­tion, he en­cour­ages Malaysian in­vestors to fo­cus on the Greater Bay Basin.

The Greater Bay Area refers to the Chi­nese govern­ment’s scheme to link the cities of Hong Kong, Ma­cau, Guangzhou, Shen­zhen, Zhuhai, Foshan, Zhong­shan, Dong­guan, Huizhou, Jiang­men and Zhao­qing into an in­te­grated eco­nomic and busi­ness hub.

Launched in March 2017, the Greater Bay Area project aims to trans­form the re­gion’s strong man­u­fac­tur­ing base into a sci­ence and tech­nol­ogy pow­er­house.

The com­bined GDP of the 11 cities stood at US$1.53 tril­lion (RM6.36 tril­lion) in 2017, about the same as South Korea or Rus­sia.

And eco­nomic growth at nine out of the 11 cities was over 7.0% in 2017, beat­ing the na­tional av­er­age of 6.9%.

“This is where Malaysia can see op­por­tu­ni­ties, bear­ing in mind Shen­zhen is the Sil­i­con Val­ley of China,” said Cheah.

— Bloomberg — AFP

Yan: His RM10­bil in­vest­ment plan in Malaysia is ‘a vote of con­fi­dence’ for new Malaysia. Cheah: Ad­vises Malaysian in­vestors head­ing to China to fo­cus on the Greater Bay Area. Bridg­ing in­vest­ments: The Hong Kong-Zhuhai-Ma­cau Bridge is one of the de­vel­op­ments un­der the Greater Bay Area, which is the Chi­nese govern­ment’s scheme to link the cities of Hong Kong, Ma­cau, Guangzhou, Shen­zhen, Zhuhai, Foshan, Zhong­shan, Dong­guan, Huizhou, Jiang­men and Zhao­qing into an in­te­grated eco­nomic and busi­ness hub.

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