Malaysia is the largest beneficiary of Chinese cash diplomacy
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Malaysia is the largest beneficiary of Chinese cash diplomacy

MONEY is the People’s Republic of China’s primary means of public diplomacy according to a new report funded by the US Department of State, which showed Malaysia had been the largest beneficiary of the economic giant’s financial diplomacy in its region over a period of 16 years.

The Ties That Bind report released this week by AidData in partnership with Asia Policy Society Institute and the Center for Strategic and International Studies (CSIS) tracked China’s public diplomacy efforts between 2000 and 2016.

During this period Beijing spent an estimated US$48 billion on financial diplomacy in what the authors refer to as the East Asia Pacific (EAP) region, spanning from Mongolia in the north to Micronesia in the southeast and home to 27 percent of the world’s population.

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Since the start of the 21st Century, wrote the report’s authors, “Chinese leaders have placed greater weight on public diplomacy as a means of reclaiming China’s rightful place in the world.”

With its “deep pockets”, China’s diplomatic efforts in recent decades have led by spending on financial diplomacy in the areas of infrastructure investments, humanitarian aid, budget support and debt relief.

Nevertheless, infrastructure investment accounted for around 95 percent of its financial diplomacy at US$45.8 billion, compared with just US$273 million for humanitarian aid.


The Vietnamese national flag flies on a diplomatic car outside the Great Hall of the People before talks between Vietnam’s President Tran Dai Quang and Chinese leaders in Beijing, China, May 12, 2017. Source: Reuters/Thomas Peter

Malaysia received $13.4 billion in “official finance with diplomatic intent” between 2000 and 2016 showed the report, followed by its Asean neighbours Cambodia (US$9.1 billion), Indonesia (US$9 billion), Laos (US$4.7 billion) and Vietnam ($3.7 billion).

“China’s financial diplomacy is accompanied by great fanfare,” wrote the report’s authors. “The Chinese government often bundles its agreements together and holds high profile signing ceremonies with the media in attendance.”

Such investment was expected to continue under the Belt and Road Initiative, it said.

Australia, meanwhile, saw the highest number of visits by Chinese officials 2000 to 2015 at 390, followed by New Zealand (310), Vietnam (286), Thailand (257), Japan (221) and Cambodia (216). Official visits to Malaysia were numbered at 145.


Source: AidData

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According to the report, “Beijing channels a higher volume of its public diplomacy activities towards EAP countries with a larger diaspora presence.” In Malaysia, ethnic Chinese account for 23.2 percent of the population, while there are more than one million ethnic Chinese Australians.

In addition to quantitative data, the report drew insights from interviews with almost 80 leaders in the public, private and civil society sectors as well as journalists, diplomats and academics in the Philippines, Fiji and Malaysia.

While historically Malaysia has been one of the friendliest countries in the region, wrote the authors, the election of Mahathir Mohamad last month may cause “an upset” for China’s diplomatic reception in the Southeast Asian nation.

Interviewees said that China enjoyed a positive public image in Malaysia even despite politicisation of its infrastructure investments in the lead up to the 2018 election.


A view of The Exchange 106 (formerly TRX Signature Tower) currently under construction in Kuala Lumpur, Malaysia May 31, 2018. Source: Reuters/John Geddie

Chinese ingenuity was showcased there by development it said, including the 106-floor Tun Razak Exchange building in Kuala Lumpur, a tower commissioned under the Najib administration which is set to be the tallest building in Southeast Asia.

Nevertheless, Mahathir’s campaign to “improve the regulation and transparency of Chinese investments resonated with the majority of Malaysians” and was key to his election, the report concluded.

The authors also noted the proliferation of Confucius Institutes – non-profit organisations aimed at promoting Chinese language and culture to host populations – across the East Asia Pacific at “breakneck speed”  to boost China’s regional soft power. Some 504 have been established since 2004, it said.

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South Korea was found to have the highest number of Confucius Institutes at 22, followed by 14 in Thailand, Australia and Japan, respectively. Indonesia is home to six, the Philippines four and Malaysia just two.

Sister cities were seen as another means of promoting soft power. Japan has 377 sister cities in China, followed by South Korea (180), Australia (103) and Malaysia (40). “China also curries favour with local media by buying majority ownership shares in domestic outlets through large Chinese corporations,” said the report.

Survey data from AsiaBarometer, a regional pollster, showed that “respondents living in democracies were wary of Beijing’s growing influence. They were more likely to say that China had the most influence in the region, but also that this was a net negative in their countries.”