Within a span of four months, China's state-owned conglomerates have made acquisitions in Malaysia worth a total value of 25 billion ringgit (US$6.42 billion). Most analysts see this as laying the ground for its bid for the Kuala Lumpur-Singapore High Speed Rail (HSR) project planned for launch within one to two years.
Generally, China is now seen as the forerunner in the race for this anticipated project, which could cost 70 billion ringgit and spur economic growth in all of the towns that will have high-speed rail stations.
Last November, China General Nuclear Power Corp paid US$2.3 billion to acquire 1MDB's power assets in Edra Global Energy Bhd.
This has saved the embattled 1MDB, whose advisory board chairman is Prime Minister Najib Razak, from its 42 billion ringgit debt crisis. Since October 2014, 1MDB's debt troubles had weighed on Malaysia's sovereign credit rating. Moody's Ratings recently said 1MDB is no longer a concern.
In December, China Railway Construction Corp Ltd (CRCC) — one of the largest construction giants in the world, teamed up with Ekovest Bhd to buy a 60 percent stake in 1MDB's Bandar Malaysia for US$1.7 billion. Bandar Malaysia, a mixed-property project on a 196.7 hectare site, will host terminals for the HSR project.
And just two weeks ago, China Railway Engineering Corporation (CREC) — which is keen to bid for the HSR project — announced in Kuala Lumpur that it would invest US$2 billion to build its regional center in Bandar Malaysia.
'China has made inroads'
CREC, the parent company of Hong Kong and Shanghai listed CRCC, also promised to bring more Chinese investment to Malaysia. These recent favorable developments for Malaysia have convinced most market observers that China is likely to win the HSR project or to be involved in some way, overtaking Japan and other Western competitors.
"On the investment and political fronts, China has made inroads and many think it is the frontrunner for the HSR project. But it is premature to say who will get it now as the joint venture company to own and manage the HSR project has not been set up yet," says Goh Bok Yen, a well-known transportation planning consultant.
The governments of Malaysia and Singapore are expected to finalize the commercial model and procurement approach of the project this year. The HSR, starting at Bandar Malaysia, will have intermediate stations at Seremban, Ayer Keroh, Muar, Batu Pahat and Nusajaya, before ending in Singapore at Jurong East.
"Today, due to the fast development of new technology, nobody dares confidently say whose system is better. Even if the Chinese do not get the whole project, they have already gotten the terminal and with that kind of investment, they may be given participation in the supply of rolling stocks like locomotives and coaches," adds Goh in a telephone interview with Sunday Star.
Indeed, China has already gained a favorable spot at the conceptual stage when the cost of the HSR was estimated at 40 billion ringgit. The world's second largest economy pledged full-scale financing for the whole project and this augured well for the project during the economic slowdown.
Another advantage China has over its competitors from Japan, France and other Western players is that China has the experience of working with Malaysia on the latter's KTM and LRT rail lines. It supplied about 75 percent to 80 percent of the locomotives and coaches and related equipment to Malaysia, from its manufacturing plant in Malaysia.
On the ground, China is being favored by many Chinese Malaysian-owned firms — which are eyeing lucrative projects in the One Belt-One Road regional economic initiative of China. Indeed, Kinsteel Bhd's Tan Sri Pheng Yin Huah, who is also president of Hua Zong that groups all Chinese guilds in Malaysia, has openly urged the Government to give the HSR job to China. Several other trade leaders have followed suit.
Some business leaders, including Malaysia-China Chamber of Commerce President Datuk Bong Hon Liong, see spillovers into other areas of economic cooperation with Beijing if the HSR project is awarded to China. China has been Malaysia's largest trading partner since 2009. According to official data from China, which took into account Malaysia's indirect exports to China via Singapore and Hong Kong, total bilateral trade in 2014 exceeded 400 billion ringgit — with balance of trade heavily skewed toward Malaysia's favor.
In recent years, Malaysia's robust tourism has also relied heavily on tourist dollars from China. After a plunge of Chinese tourist arrivals in 2014 and 2015 caused by two plane disasters in 2014, the Chinese are now returning to Malaysia with a vengeance.
Although many people believe that Malaysia might return the favor to China for throwing a lifeline to 1MDB, Goh notes that Malaysia will have to take the views of Singapore into consideration as the republic will be an important stakeholder.
"Singapore culture is very different. They are very independent and professional in their approach and assessment," says Goh, noting there is a firm commitment by two governments to invite open tenders once all details are hammered out.
According to individuals who have communicated with rail consultants in Singapore, advisers to the Singapore Government are not leaning toward China.
Negative Safety Impression
Rightly or wrongly, incidents involving China's rail system and engineering technology have given the perception that they are not as safe as those from Japan or other nations.
This is partly due to the much shorter history of fast-train development in China but mainly because of several rail mishaps that have occurred in recent years.
The news that a crash in Wenzhou in 2011 killed 40 people and injured 190 others has not faded from memory. Negative perceptions of China's fast-rail systems are made worse by the recent problems China has encountered in Thailand and Indonesia.
According to a March 24 Bangkok Post story, the Thai government has finally decided to invest in a Thai-Sino fast-to-medium train project after it initially failed to agree with China on some crucial terms that had set back progress for months.
According to the Jakarta Post, the signing of an agreement on the development of the China-funded high-speed Jakarta-Bandung rail project between the Indonesian government and PT Kereta Cepat Indonesia China (KCIC) was delayed until March 17 after several allegations against KCIC emerged. Construction of the project had been suspended for two months after the groundbreaking ceremony in January.
The CERC has not replied to Sunday Star's emails on safety concerns. However, China is inviting journalists to experience the China-built rail system in mid-April and to brief them on developments.
In fact, China can now boast the fastest high speed railway development in the world. Its nine high-speed rail systems covered a total distance of 19,000 kilometers in 2015, accounting for 60 percent of the world's total high-speed rail track length.