China’s new Malaysian invasion: both friends and foes in Beijing

Photo: Donaldytong/CC BY-SA 3.0

Beijing has overtaken Singapore as Malaysia’s top source of real estate investment after thousands of rich Chinese citizens took opportunities for residency. Is this new wave of Chinese influence going to boom or bust Malaysian interests?

By Holly Reeves

“So many Chinese have been coming to Penang. It is hard for children to enrol in an international school now. They are all packed.” said Chinese citizen and Malaysian resident Hu Yiqing.

Hu is one of thousands of Chinese passport holders that have moved to Malaysia under the country’s Malaysia My Second Home (MMH2) programme. There were 31,723 applications for the right to live on the peninsula under the terms of this project in 2016. A quarter of those were from China.

“If we had a better internet connection my husband would stay the whole year. But even now, we still do not want to go back to China,” Hu explains.

China has overtaken Singapore as Malaysia’s biggest investor

MMH2 brought RM 2.9 billion (US$ 655.3 million) into the country’s economy in 2016, the parliament recently heard. That included RM 6.9 million (US$ 1.6 million) in payment for visas, RM 542.6 million (US$ 122.6 million) that now sits in savings accounts and RM 673.9 million (US$ 152.3 million) invested into property.

Soaring domestic property prices in China are fuelling this capital flight. China is now Malaysia’s single biggest source of property investment, bringing in more than US$ 2.1 billion in real estate over the past three years. Chinese investors make up 46% of property investors and completed some of the largest land transactions in the country.

The Chinese-Malaysian relationship is as complicated as it is lucrative. Chinese citizens are flooding into the country. Over three-quarters of the Malaysians that replied to a recent survey said China had a positive influence on their country.

Beneath the surface there are darker sentiments about the intentions of one side for the other. Many of the Chinese investment projects are actually long-term loans. The money put into the plans will need to be repaid at some point in the future. This ultimately takes money out of Malaysia, not into it.

Malaysia is buying Chinese ships to protect itself from China

The other issue is security. The Malaysian government has agreed to buy four littoral class ships from China to reinforce its defence capacity. These will help meet the challenges posed by sea pirates, tensions in the South China Sea and the threat from China itself.

Prime Minister Najib has been under pressure to show a strong position against Beijing’s aggressive stance on regional issues. China maintains the world’s third strongest military. Malaysia sits in 34th place.

“No matter how much Malaysia is going to upgrade the navy, it is not going to catch up with China’s naval expansion by a far stretch,” said Oh Ei Sun, international studies instructor at Singapore Nanyang University.

High-level government cooperation is growing

The two countries are in ever-deeper discussions about their common security and defence issues. A high-level committee to look at cooperation in these areas will be formed soon, a recent announcement said.

This suggests that Malaysia is keen to see an invasion of wealthy Chinese investors, but careful to keep a close eye on their partner’s manoeuvres out on the sea. A Chinese influx to that, more delicate, territory is far less welcome.

Malaysian Defence Minister Hishammuddin Hussein said the committee reflected the unique relationship his country had with China and, “Under the high-level committee, we will set up specific working groups for military cooperation, exchange of information and intelligence.”

He added, “We will also emphasise education, training, strategic affairs and current issues such as threats in the South China Sea, the Sulu Straits, the Malacca Straits and terrorism.”

He may have heard the mantra of keeping your friends close and your enemies closer. The question is; which is Beijing? Just how close should they be?

China’s influence is economic today but where money goes, culture follows

One Penang businessman believes Malaysia should be moving closer to China in more than just military matters.

“I think in the next 10 to 20 years, it will be very important to reform the Malaysian education system… [and] put much more emphasis on the Chinese language, maybe on an equal bearing with [the] English language.” said Cheah Cheng Hye, chairman of the Hong Kong-based Value Partners Group.

The future of his country may lay with Chinese interests, he believed. China has a savings rate of 46% and as the economy liberalised more of that money would be, “looking for a home to invest in”. The increasing rate of Chinese investment and the strategic moves by high-level figures to engage with Malaysia suggest he is correct.

Has Malaysia “missed the boat” in reinforcing its ability to push back against the power of China? Chinese faces, Chinese money and Chinese influence have emerged at the forefront of the nation’s economy. Meanwhile, voices in Malaysian society are suggesting that China is not just a positive influence, but a model for future development.

Buying new boats will make no difference. The invasion already happened.