Get prepared for more China investments

THERE has been increased interest from Chinese investors to explore investment opportunities in Malaysia, and we can do more to make the country into a more attractive destination for investments.

The increasing significance of Chinese investments into Malaysia can be seen from the recent trip to China by Prime Minister Datuk Seri Anwar Ibrahim.

Chinese investments garnered at over US$38bil (RM175bil) will potentially make up 10% of Malaysia’s gross domestic product of US$373bil (RM1.72 trillion) in 2021.

China is a major investor in infrastructure around the world; by strengthening its infrastructure, Malaysia can make it easier for Chinese companies to do business in the country.

With a relatively business friendly environment, Malaysia can still reduce the cost of doing business by streamlining its regulations and making it easier to obtain permits.

It can also improve access to financing by providing more support for small and medium-sized enterprises.

Malaysia has a lot to offer to foreign investors but needs to do a better job at promoting investment opportunities, said Grant Thornton senior partner and head of China Business Practice, Desmond Tan.

This can be done by participating in trade shows and conferences, and creating more online resources for potential investors.

We can attract more investments from China by building relationships with Chinese companies, hosting business delegations and providing support for Malaysian companies that want to do business in China.

China is a major source of skilled labour, and Malaysia can attract more Chinese investments by developing its own human capital.

It should invest in education and training, and make it easier for Chinese workers to obtain visas and work permits.

Malaysia can also consider focusing on sectors such as manufacturing, infrastructure and natural resources where China has a comparative advantage.

It can partner with Chinese companies to develop new industries, and deepen co-operation in the Belt and Road Initiative, a major Chinese project to invest in infrastructure and connectivity projects around the world.

Some Chinese investors may have concerns about the political stability of Malaysia, or about the country’s legal system, which can be addressed by improving governance and strengthening the legal system.

China’s potential investments in Malaysia may include the digital economy; with their strong digital economy, Chinese investors could invest in digital infrastructure and startups.

China has a growing demand for healthcare services, and Malaysian healthcare companies can attract Chinese investors to expand their operations and provide services to Chinese consumers.

China has been investing heavily into advanced manufacturing technologies such as robotics and automation; they can invest in Malaysian manufacturing companies to help them adopt these technologies and further improve their competitiveness.

With its large population, China has a significant demand for food products and could invest in Malaysia’s agriculture sector to ensure a stable supply of food products.

In tourism, Chinese investors can invest in the development of new tourist attractions and infrastructure to enhance the local tourism industry.

China was involved in several infrastructure projects in Malaysia such as the East Coast Rail Link and the Bandar Malaysia project.

Chinese investors have been investing in Malaysian technology startups, with the aim of expanding their operations in South-East Asia.

They have also invested in Malaysia’s renewable energy sector such as solar power projects.

They have shown interest in Malaysian real estate, especially in high-end properties.

Among challenges faced by Chinese companies coming into Malaysia include the global economic slowdown, the rise of protectionism as well as language and cultural barriers.

They may not be familiar with the language, local customs and practices; it may be difficult for them to build relationships with local businesses and government officials.

Malaysia has a more developed legal system and transparent regulatory environment; Chinese investors may need to adapt their business practices to suit the local market.

Chinese investors may also face competition from Malaysia’s strong domestic sector; to succeed, they may have to offer something different.

The lack of skilled labour in Malaysia has made it difficult for foreign investors to find the workers they need to operate their businesses.

Chinese investors must comply with regulations such as obtaining a licence and paying taxes on their profits.

The risk of political instability poses a challenge for Chinese investors, as it can involve changes in government policy or even expropriation of assets.

For example, in 2018, the Malaysian government cancelled a multi-billion Chinese-backed project to build a high-speed rail line.

Grant Thornton, which has offices in 28 cities in China that include Beijing, Shanghai and Guangzhou, can assist Malaysia to attract Chinese investments by providing market intelligence and insights to Chinese investors, as well as help Chinese investors identify and evaluate investment opportunities.

It can also provide Chinese investors with access to government officials and business leaders, and advise Chinese investors on the financial, legal and regulatory requirements for doing business in Malaysia.

Despite the challenges, Malaysia remains an attractive destination for Chinese investors, with its strong economy, strategic location and growing middle class.

Chinese investors who are willing to overcome these challenges will be able to find success in Malaysia.

Yap Leng Kuen is a former StarBiz editor. The views expressed here are the writer’s own.