In Malaysia, China Risks a Neocolonialist Tint

At the end of his Aug. 17-21 China visit, Malaysian Prime Minister Mahathir Mohamad announced that US$22 billion of Chinese-backed infrastructure projects in his country would be temporarily or permanently cancelled. The world will be watching China’s subsequent actions to see whether they will take on a neocolonialist tint.

The Belt and Road Initiative is Chinese President Xi Jinping’s grandiose plan to connect China with South, Central and Southeast Asia, the Middle East, Russia, Africa, Latin America and Europe through infrastructure projects including roads, ports, airports and railways.

The broad geographic reach of the BRI, as it has come to be known, has raised questions whether China intends to use this project for imperial expansion. As Asia Sentinel has previously reported, Sri Lanka, Cambodia and Pakistan have found themselves so deep in debt to the Chinese that there are fears political domination will follow. The risk is that Malaysia is on the same course.

The postponed Malaysian projects include an East Coast Rail Link and two energy pipelines. Mahathir said told a Beijing press conference on Aug. 21 that the three would be “deferred until such time we can afford, and maybe we can reduce the cost also if we do it differently. It’s all about borrowing too much money which we can’t afford, can’t repay, and also we don’t need those projects for Malaysia at this moment.”

The vast majority of the funding for three -- US$20 billion for the rail link and US$2 billion for the pipelines – has been supplied by the Export-Import Bank of China (Exim Bank), a state-owned policy lender. Chinese state-owned firms are the main contractors of these three projects, raising criticism that Malaysians are being denied jobs, as they have been in several countries where the belt and the road have reached.

At a press conference of China’s Ministry of Foreign Affairs on the same day, when asked about the cancellation of these projects, a Chinese foreign ministry spokesman said, “Of course, cooperation between any two countries may encounter some problems, and different views may emerge at different times. These problems should be properly resolved through friendly consultations without losing sight of the friendship enjoyed by the two countries and the long-term development of bilateral ties, which, I can assure you, is also an important consensus reached during Prime Minister Mahathir's visit to China.”

Mahathir was tactful enough not to criticize China for these stalled projects, but to lay the blame on his predecessor Najib Razak, who had approved them projects while he was Malaysia’s premier. After being ousted in a shock defeat in the Malaysian elections on May 9, Najib is facing corruption charges over the hugely mismanaged and corrupt 1Malaysia Development Bhd, backed by the Ministry of Finance.

However, Mahathir warned China against being a neocolonialist. At a press conference in Beijing with Chinese Prime Minister Li Keqiang on Aug. 20, when asked by Li whether he supported free trade, Mahathir replied, “I agree free trade is the way to go, but, of course, free trade should also be fair trade. We do not want a situation where there is a new version of colonialism happening because poor countries are unable to compete with rich countries, therefore we need fair trade.”

Ironically, Chinese state propaganda expresses similar opposition to colonialism, in its messages conveyed in two Beijing museums, the National Museum and the China Railway Museum. As stated part of the reason for the Republican Revolution of 1911 was the Chinese people’s opposition to foreign domination of China’s railroads. By 1911, foreign powers, including Russia, Japan, Germany, Britain and France, controlled 93 percent of China’s railways, a display in the National Museum pointed out. The Qing government had to pay off huge debts to foreign banks which had bankrolled these railroads.

Around the turn of the 20th century, the Qing government nationalized railways owned by private Chinese businesses, then sold them to foreign interests. This sparked a rebellion, causing the Chinese imperial government to transfer troops from the Chinese city of Wuhan to quell a rail revolt in Sichuan province. As a result, the Wuhan garrison was undermanned, which enabled an uprising in Wuhan to succeed in October 1911, which in turn toppled the Qing dynasty.

Going forward, the Chinese government must avoid provoking resistance to Chinese-funded infrastructure projects in BRI countries whose governments and peoples fear dependency, just as China was reduced to a semi-colonial state by foreign dominance of its infrastructure. Currently, BRI projects are mostly financed by Chinese state-owned banks, just as foreign banks funded most of the railway in China during the Qing dynasty.

At the Aug. 20 press conference, Mahathir expressed his wish that Beijing will be sympathetic to Malaysia’s heavy debt and help resolve its fiscal problems. At the press conference on August 21, the 93-year old leader said, “I believe China itself does not want to see Malaysia become a bankrupt country.”

The Chinese government has a vested interest in ensuring Malaysia’s economy is not sunk by crushing debt if Beijing and Chinese state-owned firms wish to avoid a repeat of the derailment of a US$7.5 billion rail project in Venezuela.

On Apr. 11, 2013, the South China Morning Post reported that this 475 km railway, built by the state-owned China Railway Group, was delayed because the Venezuelan government was unable to pay the entire US$7.5 billion contract. The Venezuelan government owed China Railway US$400 million to US$500 million, Li Changjin, the chairman of China Railway, was quoted as saying. "The reason is the Venezuelan government has no money."

Onsite media reports in 2016 showed China Railway’s facilities in its Venezuela project were apparently abandoned.

Since 2013, Venezuela’s economy has been in a dire state, with high inflation and difficulty repaying its debts. If Beijing wants the BRI to succeed in countries like Venezuela and Malaysia, it must ensure that costly infrastructure projects do not harm these countries’ economies. Otherwise, trade and investment between them and China will suffer.

During their Aug. 20 meeting, Xi told Mahathir their nations should have pragmatic cooperation, seeking innovative new models of cooperation. Xi must find viable models of cooperation over BRI if he wishes to avoid blowback against Chinese projects in Malaysia. Only then can Xi demonstrate that Belt and Road is not a Trojan Horse for Chinese imperialism, and convince nations to accept the vast infrastructure projects.

Toh Han Shih is a Singaporean writer in Hong Kong