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Wrestling with the giant

  • To China, the change of administration in Malaysia has nothing to do with them, and the new government is legally obliged to execute whatsoever contracts signed by the previous administration. Photo courtesy: Bernama

By TAY TIAN YAN
Sin Chew Daily

The cancellation of three mega projects involving Chinese investors by PM Mahathir has dealt a severe blow on China's "One Belt, One Road" initiative.

And the impact is more than just a simple "understanding" can explain.

Observers familiar with Chinese politics understand that OBOR is the Chinese government's most important strategy after the "reform and opening up".

The "reform and opening up" policy has delivered China out of poverty and seclusion into the international community, while OBOR is a global move to take China into the league of superpowers.

I could notice that President Xi was expressionless when he was meeting with Mahathir.

OBOR's short-term objective is to address the problem of China's domestic overcapacity, while the long-term objective is to ensure stable and secured trade and energy supply, with the country's dominance in Asia's transportation, economy, politics and military security being its long-term goal.

China's participation in rail, port, oil & gas, electricity-generating projects in countries along the "One Belt, One Road" has been geared towards fulfilling its ambitious mega plan.

Melaka, strategically located along the key sea passage between South China Sea and the Straits of Melaka, is key to the success of the OBOR initiative, especially in view of its traditional pro-Beijing stand.

Malaysia's east coast rail link, natural gas pipeline, port and HSR to Singapore all go well with Beijing's strategic interests. The ECRL project, for instance, has been viewed as a "land bridge" that would lessen China's dependence on the sea route past Singapore.

When Mahathir announced the cancellation of ECRL and SSER pipeline project, China's actual reaction was more than just a simple word of "understanding" from Mahathir could explain.

So far China has not struck back mainly because it wants to keep the good relationship with Malaysia. Besides, China also has other projects here such as the KL-Singapore HSR project the fate of which is yet to be decided.

But that does not mean China is going to give in to Mahathir's demands. Of course, the Beijing authorities must also make sure that its OBOR strategy will not be affected.

To China, legally speaking Malaysia has unilaterally repudiated the agreement, but strategically, it is contrary to China's interests.

To China, the change of administration in Malaysia has nothing to do with them, and the new government is legally obliged to execute whatsoever contracts signed by the previous administration.

Mahathir called the agreement with China a "stupid deal". Perhaps he was just trying to imply the corruption on the part of teh najib administation, but to the Chinese authorities, it seemed to have implied that Beijing had involved itself in an indecent deal.

If China were to accept Mahathir's request to renegotiate the deals and lower the construction and borrowing cost, it would be seen as having admitted its participation in an improper deal with Najib's administration.

China says it understands Malaysia's move, but this does not mean it will not seek legal liabilities.

Sure enough the involved Chinese companies will seek compensation from Malaysia, and the amount could be colossal and could spell another financial disaster for the country.

 

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