China Overtakes Singapore as Top Investor in Malaysia

China, accounting for 46 percent of total real estate investment in Malaysia over three years, has overtaken Singapore to become Malaysia’s number one investor, according to a new report from Cushman & Wakefield.

Thanks to some aggressive incentives from the Iskandar area in Malaysia’s Johor State, and from high property prices in neighboring Singapore, Chinese companies, largely developers, invested an estimated S$2.6 billion ($1.86 billion) across the causeway from 2014 to 2016. This compare to S$1.6 billion ($1.14 billion) by Singaporean firms over the same period.

“Boosted by its proximity to Singapore, development opportunities in Iskandar have been a favoured destination for Chinese capital in the emerging market space,” says Sigrid Zialcita, managing director for Asia Pacific research at Cushman & Wakefield. “Significant investments from Chinese companies have filled a crucial link in fuelling Malaysia’s economic vision.”

The Cushman & Wakefield report pointed to long-term, sustainable projects China added to in recent years, including China Railway in a joint project with Iskandar Waterfront Holdings, winning a 60 percent stake in the Bandar Malaysia project from state-owned firm 1MDB for S$2.3 billion ($1.64 billion) in one of the country’s largest land transactions. Also Huawei Technologies has set up a regional headquarters in Kuala Lumpur and Alibaba is said to be planning a regional distribution hub.

The ‘Third Wave’ of Chinese Immigration

A report earlier this week expounded on what is being called the “third wave” of Chinese immigration, with a special report from SCMP stating that nearly 8,000 Chinese nationals had immigrated to Malaysia since 2002. Unlike the 15th-century mass immigration and the tin mines in the 19th century, this wave of Chinese citizens is being helped by a Malaysian citizenship scheme.

The MM2H program, standing for Malaysia My Second Home, is open to foreigners under 50 years of age who are required to bring in at least RM 500,000 ($113,000) in terms of cash (less for those over 50) and have a monthly income of RM 10,000 ($2,200) for a 10-year, multiple entry visa. In 2016, 43.9 percent of applicants were Chinese, according to the report – the second most being the Japanese with 9.2 percent.

Trouble in Paradise

The MM2H program may be allowing for integration of Chinese investors into Malaysian neighborhoods, but the Chinese authorities have been less kind to money going overseas. China’s capital controls have hit projects around the world hard, and one of the most notable has been the Country Garden’s Forest City project two kilometers from Singapore, which closed its mainland offices earlier this month. The project has, however, reportedly reopened half of its mainland sales office since the initial shuttering.

“In a way Malaysia will also be indirectly affected because our total trade with China is 16 percent of Malaysia’s total trade of RM 1.5 trillion ($339 billion),” he told reporters at a community event today,” Malaysia’s Second Finance Minister Johari Abdul Ghani told reporters earlier this month. “So if China’s domestic economy is affected, to a certain extent we will be affected too.”