Economic analyst Hoo Ke Ping noted that fewer Chinese tourists had visited some countries which had been hostile to China, such as South Korea, Thailand and Vietnam.
“However, a lot of them visit Malaysia, especially Sabah and Langkawi, pouring in millions of ringgit to the service industry,” he told FMT. Last year, the previous government said it expected three million visitors from China every year.
Malaysian exports of palm oil and palm-based products to China amounted to RM8.52 billion between January and November last year, an increase of 9.8% compared with RM7.76 billion over the same period in 2016.
“We can’t really depend on Europe because several countries there have banned the sale of palm oil from us. We have to be careful with our dealings so that these two industries are not affected with China,” he added.
Hoo’s comments were made in response to recent statements by Prime Minister Dr Mahathir Mohamad involving China. The first was cancellation of mega projects involving China, such as the high-speed railway between Kuala Lumpur and Singapore and the East Coast Rail Link, and secondly, concern over the presence of warships in the South China Sea and Straits of Malacca.
Mahathir had said the new government would prefer not to have warships around Malaysia, in a possible hint about China’s aggressive moves in building up military bases in the South China Sea.
Mahathir, who was on a working visit to Japan recently, also announced he was seeking a soft loan from Japan, which has traditionally been a rival to China.
Hoo said Mahathir should tread carefully to avoid a show of hostility with China, which has the world’s second largest economy.
However, he said Mahathir was smart to borrow in yen to repay Malaysia’s debts, mostly back to China, which could be at interest rates of up to 6%. “It will reduce the country’s debt significantly,” he said.
Hoo said interest rates on Chinese loans would be higher, and that Japan would be able to provide loans at a low interest rate of 1% to 2%.
Japan was cash rich, with low interest rates for borrowings, and there would be benefits in projects with Japan as there would be
technology transfer from Japanese companies to Malaysia.
However, many Chinese projects were meaningless, he said, as Chinese firms were likely to bring in raw materials, such as steel for the two mega rail projects, from China and utilise manpower and expertise from China.
Another economist, Yeah Kim Leng of Sunway University Business School, felt that Mahathir had been careful in striking a balance between the two major economies.
“While visiting Japan, he said he would visit Beijing when his schedule permits. It shows he is not sidelining China,” he said.
Mahathir had also made it clear, when he came to power on May 9, that he would carry out open trade with any country in the world.
Dr M in power but China, Malaysia still need each other, says paper