By using the 1MDB scandal for political gain, Malaysian Prime Minister Mahathir Mohamad risks throwing relations with China into lasting disarray.
By Robert Held
With the breakdown of Belt and Road negotiations, Chinese-Malaysian relations have slumped. The ongoing financial scandal surrounding former prime minister Najib Razak and businessman Jho Low is only adding fuel to the fire.
Malaysia, like a growing number of countries in the region, has become wary of Chinese investment and military encroachment by land and sea, and Low’s role as a deal broker between the two countries has been a major driver behind rising anti-Chinese sentiment. Accusations that China is now sheltering the fugitive businessman do not bode well for relations, which look unlikely to improve any time soon.
China is harbouring Jho Low
Low was charged in absentia last month amid embezzlement allegations connected to Malaysia’s now-defunct state fund 1Malaysia Development Berhad (1MDB). The fund’s debts and losses are said to total a whopping $10 billion.
The incumbent PM, Mahathir Mohamad, who defeated Najib in a shock election in May, was quick to politically capitalize on the scandal. He fingered Najib as “totally responsible” for the financial disaster.
Jho Low is a close associate of Najib and has been labelled by investigators in both Malaysia and the US as a key figure in the unfolding case. A warrant is now out for his arrest.
At the same time, allegations have surfaced that Low is hiding out in China – a claim echoed by senior Malaysian politicians, including Mahathir himself.
As he told Malaysian media, the government is currently employing “some ways or private efforts to get back Jho Low from China”, thereby implicitly accusing Beijing of harbouring a wanted criminal.
Low may be a political pawn for Beijing
As to why China would do this, Mahathir remained vague but suggested that Low may be a “bargaining chip”, perhaps for political or economic pressure.
Mahathir’s comments may, therefore, be interpreted as a means to undermine Low’s effectiveness as a pawn in China’s hands. But beyond that they no doubt represent a major setback for Malaysia-China relations amid a series of already frosty exchanges.
Mahathir is turning the tables on Beijing
In one of his first moves after regaining the premiership, Mahathir suspended $22 billion in Chinese-backed infrastructure projects. The projects were previously backed by Najib and brokered by Low, believed by many to be a central part of the delicate 1MDB web Low was allegedly building.
Rather than reaching out to Beijing, as his predecessor did, the premier has instead instilled a narrative of Chinese “colonization” and claimed that Kuala Lumpur is in Beijing’s pocket.
The PM has led a concerted pushback against projects agreed under Najib and covered in Low’s fingerprints. The criticism now has a legal profile, with an investigation into Chinese money at the heart of the 1MDB scandal specifically drawing Beijing’s anger.
Could the trial trigger a bilateral crisis?
Mahathir is unlikely to let go any time soon. The ongoing investigation of Chinese cash flowing into the state fund has been extraordinarily expedient. It amplifies anti-Chinese sentiment and thereby provides greater justification for the Najib trial, under the umbrella of national security.
As the investigation digs deeper, Beijing’s discontent is set to increase, to the point that the Low affair could develop into a veritable bilateral crisis – a risk that Mahathir is seemingly willing to take. In doing so, however, he is taking a major gamble that poses a risk to Malaysia’s security at large.
It could also escalate the South China Sea territorial dispute
Malaysia is locked in a territorial dispute with Beijing in the South China Sea (SCS), and China’s assertiveness in the Pacific has only grown in recent years. It is clear Beijing will not relent on its claims, and although Malaysia’s close ties to China have in the past ensured a gentle-handed approach to conflicting territorial claims in the region, Mahathir seems determined to take a firmer stance on the issue.
At present, Malaysia retains in control of a number of land features in the contested Spratly chain of islands, including the tourist hub of Swallow Reef. The area is also home to permanently stationed military personnel from the Royal Malaysian Navy (RMN).
China’s rising militarization of the SCS has prompted accusations from Mahathir. He suspects Beijing’s latest leadership is “inclined towards totalitarianism”. At the same time, he has stressed that cooperation and peace should rein in the SCS – a goal that requires China’s cooperation.
Is it worth it?
With relations souring, there is always the risk that Beijing could opt to step away from the negotiating table and demonstrate China’s rapidly rising might with a show of force instead. It is a grim reality that it has become a question of when, not if, China decides to assert itself more fully in the region. Mahathir’s domestic machinations may be serving him well in securing his position, but he is doing so at the expense of external relations. A tussle with Beijing is one not even he, as a veteran prime minister, can win.