Malaysia and China Move Forward on a Basis of Pragmatism Rather Than Vanity

Malaysian Prime Minister Mahathir Mohamad has concluded his five day visit to China after holding a meeting with President Xi Jinping that was described as positive by both sides. Headlines however have been dominated by the fact that Mahathir has suspended two joint megaprojects with China that were originally inked under his controversial and now widely discredited predecessor Najib Razak. Both the East Coast Rail Link and two gas pipeline projects that China was to help construct in Malaysia have been put on hold by Mahathir.

But while some quarters of the south east Asian media are portraying these developments as indicative of Mahathir moving against China, the reality is not only far more mundane but far more predicated on realism rather than indicative of any long term strategic schisms between Malaysia and its Chinese partner. As the leader responsible for the Malaysian economic boom of the 1980s and also the leader who helped navigate his country through the Asian financial crisis of 1997, Mahathir is keenly aware that fiscal mismanagement in times when the currencies of developing nations are being hit hard is crucial in order to avoid falling into an inflation induced debt trap.

Combined with the fact that in the eyes of the reformist Mahathir, many of his predecessor’s projects are viewed as extravagant exercises in vanity rather than pragmatic and cost effective endeavours, it is unsurprising that he has made the decision to suspend such projects at a time when Asian currencies are feeling levels of heat that hints at 1997 like pressures.

In this sense, the suspension of the rail and pipeline projects was not motivated by any suspicions regarding China on Mahathir’s part but instead were motivated by a combination of fiscal restraint and a cautious approach to all of the large projects inaugurated by his predecessor. Instead of focusing on megaprojects, Malaysia’s Premier has instead opted for other means of expanding positive trading ties with China. During his visit to meet with Chinese officials, Mahathir witnessed the signing of a memorandum of understanding that will lead to Malaysia’s Sime Darby Plantation Berhad produce palm oil-based products for the Chinese market.

The US instigated trade war against China has in fact opened up new avenues for developing economies to create closer ties with China in terms of agricultural exports as America’s powerful farming industry has now been largely cut off from its former Chinese customer base. In this sense, the palm oil deal while seemingly less grandiose than the suspended rail project is actually a win-win deal given the circumstances of China looking for agricultural imports to replace erstwhile American suppliers while Malaysia seeks to avoid excessive costs in terms of domestic investment at a time when a bullish US Dollar risks plunging growing economies into an inflationary crisis that stood to be fed by the kinds of projects that the Malaysian Premier has now overruled for the time being.

The meeting between Xi and Mahathir should therefore be classed a success as both partners found areas in which cooperation is practicable given the current global economic realities and Malaysia’s own drive to correct the mismanagement of the Najib years. Furthermore the successful meeting ought to assure market watchers and geopolitical observers that no rift in healthy bilateral relations between the two nations has developed since the new Malaysian coalition took office in May. Instead, the changes to Sino-Malaysian contracts signed during the previous government in Kuala Lumpur are best described as an outgrowth of Premier Mahathir’s desire to drastically reform Malaysia’s internal business culture. As part of this the re-arranging of deals with foreign partners is a natural outgrowth of such a domestic push.

Chinese officials can clearly relate to Mahathir’s anti-corruption drive as Chinese President Xi has himself embarked on an historic drive of his own to clean up all levels of politics and business. The result of these parallel processes will undoubtedly be a new healthier era in relations between Beijing and Kuala Lumpur build on trust, transparency and the win-win model of cooperation. Both sides have expressed a mutual desire to expand trade and cooperation in the future while President Xi has assured Mahathir that Malsyaia has a product role to play in the One Belt–One Road initiative.

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