Malaysia’s PM Teams Up With China to Tackle Fiscal Fiasco
Entrepreneurial Prime Minister Mahathir Mohamad pulled a diplomatic power‑move on August 20, 2018, telling a Beijing press briefing that he hopes China will “sympathize” with Malaysia’s internal fiscal woes as he eyes a potential renegotiation—or even cancellation—of over $20 billion in Chinese‑backed projects.
The Diplomatic Dance
After a friendly meeting with Li Keqiang, China’s Premier, Mahathir made it clear that confrontation isn’t on the menu. He highlighted the “tremendous benefits” Malaysia could harvest from deeper ties in trade, tech and entrepreneurship.
“We hope China understands the challenges we’re facing today,” the seasoned leader said, “and that it will look sympathetically at our fiscal headaches—perhaps helping us straighten things out.”
Old Deals, New Doubts
The $20 billion East Coast Rail Link is the crown jewel of China’s Belt & Road Initiative in Malaysia, but work on the line has stalled pending price talks. Meanwhile, a Swiss‑style auction of two additional projects—worth more than $2.3 billion and tied to the infamous 1MDB scandal—has been put on hold.
- East Coast Rail Link – suspended, await price renegotiation.
- China Petroleum Pipeline Bureau – two projects, >$2.3 billion, tied to 1MDB graft.
Back in Kuala Lumpur, Mahathir has consistently called the earlier deals swooned onto by former Prime Minister Najib Razak “unfair.” Najib was a raving fan of President Xi’s Belt & Road plan during his decade in office, courting Chinese investment like a hawker sells satay. Now, Mahathir warns, it could leave Malaysia indebted to Beijing.
Free Trade, Fair Trade: The Golden Rule
When Li asked the 93‑year‑old veteran about free trade, Mahathir didn’t mince words.
“I agree that free trade should be the way to go, but let’s keep it fair too,” he said. “We don’t want a new version of colonialism, where poor countries can’t compete with rich ones.”
China’s Trade Rapture
Now, China is eager to deepen gloves‑on commerce with Malaysia, boasting that it is ready to boost palm oil, rubber and durian imports “to a fairly large extent” to satisfy Chinese consumers’ cravings. This is after a slew of memoranda of understanding—including a bilateral currency swap—were signed in the PM’s visit.
He notes that the bond between the two countries is strong, with China being Malaysia’s third‑largest export market after India and the European Union.
In short, Mahathir feels confident that China will help lift Malaysia from the debt trap while keeping the trade relationship friendly for the long haul. Whether the projects can be salvaged or scrapped remains to be seen.
