Chinese President Hu Jintao has different ways of observing the anniversary of diplomatic links with two rival states across the straits. 

Challenging the feel-good media hype in Malaysia over the 35th anniversary of diplomatic links, China chose to contrast President Hu’s Tuesday visit to Kuala Lumpur with a significant economic agenda. Whereas, in observing the 20th anniversary of official links with Singapore, Hu said China would loan a pair of pandas to the host of the APEC meeting this year.

While mainstream media had positioned Hu’s visit as a reenactment of the establishment of diplomatic ties in 1974 by the late prime minister Abdul Razak Hussein, father of Malaysia’s current premier, China wrapped huge packages of government-to-government (G2G) business deals within a whirlwind stop-over, making Malaysia ever more dependent on the Chinese yuan.

Hu left for the Asia Pacific Economic Cooperation (APEC) meeting in Singapore after a 20-hour stay in Malaysia.

By employing the same strategy it successfully tested in Africa, that is gaining access to resource supplies in host countries in return for yuan-denominated aid for infrastructure, China will now bankroll transport and utility infrastructure projects in return for Malaysian palm oil and timber.

According to the memorandums of understanding (MoUs) signed by the two countries in conjunction with Hu’s visit, China is to officially finance projects in the railway, bridge, water and energy sectors.The official speak for the deals is “strategic cooperations in all fields.”

As the icing on the cake, Malaysia gave a second banking licence to the Industrial and Commercial Bank of China (ICBC) to expand its network in Malaysia. Banking is a hugely regulated industry in Malaysia and there have been protracted restrictions on the issuance of such licences, especially to foreign banks. The other Chinese bank operating in Malaysia is the Bank of China (BoC).

Commenting on the signing of the MoUs, Godrej International Ltd director Dorab Mistry said China being the world’s largest edible oil importer would continue
to be a very good buyer of Malaysian palm oil.

With an economy growing at least 6 percent annually since 1997, per capita consumption in China is expected to grow between 3 and 4 percent, and that requires the country to secure a continuous supply of natural resources to sustain its economy, Mistry added.

Over the years, booming bilateral trade has made China the second-largest market for Malaysia’s exports valued at RM46.8 billion (US$13.8 billion). On the other hand, Malaysia has now become China’s largest trading partner among Asean countries at US$53 billion (RM179.67 billion) last year.

Deals signed

Of the deals signed Tuesday, China will be involved in two infrastructure projects in the state of Penang, a state Hu visited in 2002 when he was China’s deputy president.

The two projects are the second bridge linking Penang and the mainland, and the expansion of the Mengkuang Dam for water supply to Penang and areas nearby.

For the second bridge linking Penang and the mainland, the credit agreement was signed by the Export-Import Bank of China, a state export credit agency, and Jambatan Kedua Sdn Bhd, which is assigned for the building of the superstructure for the bridge. The deal was inked in the form of a Preferential Buyer’s Credit loan agreement.

China Harbour Engineering Co (CHEC) and UEM Builders Bhd are the main contractors for the Penang Second Bridge, which is now delayed. The Chinese government is providing a US$800 million loan for the project.

Besides, Global Rail Sdn Bhd, a Chinese company, has been awarded a contract to co-develop a RM28 billion (US$8.2 billion) double-track railway that will link Johor Bahru, Malaysia’s southern exit to Singapore, to Gemas in the centrally-located state of Negeri Sembilan.

In addition, Malaysia will engage Chinese companies, whose names were not announced, for the construction of a pulp and paper mill and aluminum smelter in the East-Malaysian state of Sarawak.

Another MoU signed was for China’s Beijing Enterprise Water Group Ltd. to partner Malaysian on improving the country’s sewerage services.

On the financial sector, Bank Negara Malaysia signed a MoU with the China Banking Regulatory Commission on banking supervision cooperation in the area of financial regulatory initiatives between the two nations. This is seen as setting the rules of engagement to facilitate more inflow of yuan aid into Malaysia.