imbd

China keeps on buying up hard assets and taking on positions of influence as it looks further into entering Malaysia as a whole. Recently a Chinese government affiliated company called State Grid Corporation of China (SGCC) announced its plans to unload US$11 billion into the Sarawak corridor. The investment will be spread over a couple of years but will primarily focus on developing specific sectors such as energy and manufacturing in the Sarawak economic corridor.

This investment is likely to be publicly confirmed today and at the signing of a framework agreement between 1Malaysia Development Berhad (IMBD).

What remains unsure is whether details of this direct foreign investment will be released today. SGCC is likely going to be providing capital and technical consulting. 1MDB on the other hand will be helping facilitate the investment overall.

To date the Sarawak economic corridor hasn’t seen very much growth since there has been a lack of investment and government funding.

The Najib administration of Malaysia has been very proactive in attempting to lure China to do more foreign direct investments within the country, as it is cash rich. The reality though is that Malaysia needs China for two primary reasons. First, Malaysia has a growing budget deficit issue. This has limited the ability of the government to fund and support development projects. Second, Malaysia to compete has been unable to successfully compete for foreign direct investment with other emerging market countries such as India, Vietnam, China, Thailand and Singapore.

What is to be taken away from this news and information is that Malaysia is definitely not one of the most thriving emerging markets that it is pumped up as in the media. Further, China looks to be increasing its sphere of influence by deploying capital in the form of direct foreign investment through proxy state owned companies. The concern that arises here is that should China continue this strategy not only in Malaysia but in other parts of the world and then run into its own domestic economic issues down the line it has the ability to pull down a lot of countries with it.

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