China’s investments into Malaysia may not pay off

Almaty. July 5. Silkroadnews – China’s investments into Malaysia may not pay off, CBNC reports referring to data by Citi Research.
“As China expands its influence into Southeast Asia, Malaysia has emerged as one of the biggest winners, with its port and railway projects expected to receive as much as 400 billion ringgit ($93 billion) from the world’s second largest economy. But questions have persisted over the commercial viability and funding for those projects, which could have “significant implications” for Malaysia’s economic growth and the ringgit”, the publication said.
It is noted that foreign direct investment from China may underestimate the extent of Chinese involvement in the Malaysian economy and overestimate the impact on GDP growth and demand for the Malaysian ringgit. The excess capacity of the Malaysian port may indicate that China’s interest in these projects is mainly caused by geopolitical factors rather than profitability issues. In particular, the ports along the western coast of the peninsula would allow China to control the Straits of Malacca.
The financing projects through the loans from China’s state banks could increase the liabilities of the Malaysian government, while construction contracts are in fact “import services” that can undermine both GDP and demand for ringgit.
Over the past 5 months, the Malaysian budget deficit grew from 26 billion ringgit to 30.5 billion ringgit.