China seeks to strengthen ties with Malaysia as work starts on key belt and road rail link

Senior official visits country ahead of ceremony to mark start of work on strategically vital piece of transport infrastructure

PUBLISHED : Tuesday, 08 August, 2017, 3:24pm
UPDATED : Tuesday, 08 August, 2017, 11:41pm

A Chinese state councillor has arrived in Malaysia to visit the site of a controversial railway project located in a strategic position for Southeast Asian trade routes.

Wang Yong, who is also head of the State-owned Assets Supervision and Administration Commission (Sasac), will attend the groundbreaking ceremony for the East Coast Rail Line project on Wednesday, according to a Malaysian foreign ministry statement.

During the three-day trip, he is also scheduled to pay a “courtesy call” to Malaysian Prime Minister Najib Razak and will visit another Chinese investment project, the Malaysia-China Kuantan Industrial Park.

“During the courtesy call, Wang is expected to discuss matters relating to ... bilateral cooperation as well as on the Chinese investments and projects in Malaysia,” the Malaysian ministry said on Tuesday.

Malaysia is one of the key posts for China’s ambitious belt and road trade and infrastructure plan.

The US$13 billion East Coast Rail Line project – connecting ports on the east and west coasts of the Malay peninsula – was controversially awarded to state-owned China Communications Construction Company (CCCC) without a tendering process.

The company will fully finance and build the 600km rail link, which is due to be completed by 2024. The Export-Import Bank of China will also provide soft loans.

In March, Najib said the railway would be a “game changer” that will add 1.5 per cent growth to the gross domestic product of three east coast states.

The project has also prompted speculation that it could ultimately alter current regional trade routes, which run through the Strait of Malacca and the South China Sea via the Port of Singapore.

“The rail line project is one of the most expensive investments that China has made in Malaysia,” Malaysian politics researcher Oh Ei Sun said. “Malaysia is very pragmatic in its relations with China. These investment projects are more significant for Malaysia than they are for China, given the economic growth they are projected to bring.”

China has run up against difficulties in its efforts to build high-speed railways overseas. A consortium of Indonesian and state-run Chinese firms building the country’s first high-speed railway linking Jakarta and Bandung is reportedly facing delays because land was not secured.

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Beijing is trying to boost ties with Southeast Asian nations despite ongoing tensions caused by a series of disputes with its neighbours over control of the South China Sea.

At an Association of Southeast Asian Nations forum in Manila this week, Vietnam pushed for a joint communique to express concern over “extended construction” in the disputed waters but failed to win support from other members.

Last month, Singapore’s Deputy Prime Minister Teo Chee Hean showed cautiousness on China’s belt and road plan, stressing the importance of “freedom of navigation” in Asian waterways like the Malacca and Singapore straits. That came after ties were strained when Singapore supported a decision in July last year by an international court in The Hague that invalidated China’s claim to sovereignty over most of the South China Sea.

“The completion of port and railway projects in Malaysia could slightly hinder trade volume in Singapore. But the belt and road plan will also increase general trade volume, so it’s difficult to say what the ultimate impact on Singapore will be,” said Xu Liping, a senior researcher on Southeast Asia at the Chinese Academy of Social Sciences.

“The edge that Singapore has – say its experience and financial system – is not replaceable by Malaysia’s new ports and railway.”

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Oh added that he believed the railway was being built so that China could export its railway technology as part of the push to expand its economic activities and influence overseas.

China has committed to import goods worth US$2 trillion from Malaysia over the next five years – a nearly eightfold jump from 2016 imports over that period.

It will also invest up to US$150 billion in the country and offer 10,000 places for training in China, Bloomberg reported.