China becomes Malaysia’s biggest foreign investor, thanks to 1MDB purchases

China is now Malaysia’s largest foreign investor, following its recent acquisition of 1MDB assets, extending Beijing’s reach into the Southeast Asian country’s economy.

The scale of China’s rise to become the top foreign investor is compelling - just a year ago, it was nowhere near the top of the table. While official figures for 2015 are not out yet, economists say China will certainly emerge in first place.

In 2014, foreign direct investment (FDI) to Malaysia mainly originated from Singapore, Japan, the Netherlands, the US and Norway, which amounted to RM257.7 billion (US$58 billion), or 55.1 per cent of total FDI.

However, some economists do not expect China’s top position to be sustained as Malaysia’s economic transition plan (ETP) to become a high-income nation by 2020 aims for high-value industries.

“I do not expect China’s pole position for FDI to be sustainable as Malaysia wants to move up the value chain into high technology . That will come from its traditional FDI sources of US, Japan, EU and Singapore,” says Yeah Kim Leng, Dean of the School of Business at the Malaysia University of Science and Technology.

China, however, has been Malaysia’s largest trading partner since 2009, and is both the largest market for Malaysian exports and the largest importer to Malaysia. Total trade between the two countries in 2014 reached RM207.85 billion.