Washington's Malaysia Malaise
Malaysia Tilts Toward China

Malaysia will buy ten navy vessels from China in the country’s first major defense deal with China. All signs suggest that the deal is not politically neutral. Rather, Malaysia is rebuking the U.S. for DOJ lawsuits on Malaysian money laundering, while thanking China for standing by Malaysia. Reuters:

Malaysia could buy up to 10 of the littoral mission ships at a cost of approximately 300 million ringgit ($71.43 million) each, said Lam Choong Wah, senior fellow at REFSA, a Malaysia research institute. […]

“The truth is we could have bought these from a number of countries. But China is the only country that has provided political support for Malaysia during the 1MDB scandal. This is payback for that political support.”

The “political support” in question is the $2.3 billion deal where China agreed to purchase assets of the troubled Malaysian state fund 1MDB. The 1MDB fund was the center of scandal when investigations turned up that it had misappropriated $3.5 billion—much of it ending up in the pockets of Malaysian Prime Minister Najib Razak, according to U.S. Department of Justice lawsuits filed in July.

The DOJ lawsuits have strained U.S.-Malaysian relations, while China has seized its opportunity to play the “good neighbor” role. The Malaysia episode is a textbook example of Chinese diplomacy, combining a non-judgmental stance toward the internal affairs of other countries with a charm offensive and robust investment. When Malaysia was rocked by international scandal and economic turmoil over 1MDB, China offered Malaysia a lifeline. Now, Malaysia is beginning to repay the favor.

China made a similar play in the Philippines, helping to sponsor President Duterte’s drug crackdown even as the U.S. condemned it. That gambit cannot fully explain Duterte’s dramatic pivot to China, but it certainly sweetened the deal for him.

Malaysia’s leadership seems to be tilting Beijing’s way as well, albeit more subtly. Last week, Malaysia scrapped a project to develop an amphibious corps alongside U.S. Marines. Next week, Najib is travelling to Beijing with a delegation of business leaders, carrying promises to bring China-Malaysia ties to “new highs.” The trip is likely to bring even more Chinese investment into Malaysia, while Washington watches with unease.

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