Greater capital inflow from China expected in 2018, says Knight Frank

By ALIFAH ZAINUDDIN / Pic By BLOOMBERG

MALAYSIA can expect greater capital inflow from China’s Belt and Road Initiative (BRI) this year, as the country’s rail and port projects continue to attract Chinese government-linked investors.

Real estate consultancy Knight Frank Malaysia said the tightening of the China’s housing policies and its moderating economy will consequently lead to more Chinese investors seeking opportunities in Malaysian properties, particularly in industrial driven township developments.

“With Beijing’s tightening of regulations leading to slower inflow of Chinese capital, we now see more developers from China making inroads into the local development scene via joint-venture arrangements, where there is less strain on capital flow rather than outright purchase of land,” Knight Frank Asia-Pacific head of research Nicholas Holt said in a statement yesterday.

According to Knight Frank’s latest report, which assesses 67 countries considered core to China’s initiative, Malaysia is ranked sixth in the Belt and Road Index, with Chinese real estate investments amounting to US$2.37 billion (RM9.26 billion) from September 2013 to October 2017.

Knight Frank Malaysia MD Sarkunan Subramaniam said despite the capital controls that would likely slow China’s private capital investments in the BRI, state-owned companies have continued to invest in port and rail infrastructures globally to ensure “all roads now lead to China”.

“China’s BRI policy comes at a time when many of its neighbours need capital to boost their economy.

“Malaysia’s strategic location in the BRI can propel the country as a key regional ally to China’s initiative, reaping economic benefits in the process,” he said.

Meanwhile, Knight Frank capital markets ED Allan Sim said that the rising interests from Chinese investors in the local manufacturing sector will benefit the country’s industrial and mixed-used assets.

“Chinese manufacturers are expected to set up production facilities here. Similarly, the industrial sector will also benefit from China’s pivotal role in developing Malaysia’s digital economy alongside the rapid development in Malaysia’s logistics and warehousing sectors,” Sim said.

He added that flow-on effect to business activities will also create demands for hospitality-related services in the longer term.

China has quickly risen through the ranks over the last five years to become the singlelargest foreign direct investor in Malaysia.

In 2016, Prime Minister Datuk Seri Mohd Najib Razak’s visit to China led to 14 memoranda of understanding (MoUs) and agreements worth US$35 billion in various areas — such as trade and investment, development of technology parks, as well as supply of goods and services.

An additional 16 government- to-government MoUs and agreements were also signed, including US$13 billion in soft loans from China for the East Coast Rail Link and the Malaysia-China Kuantan Industrial Park in Pahang.