A public spat between former Malaysian Prime Minister Mahathir Mohamad and the Sultan of Johor has drawn China into a dangerously racialized political dispute in Malaysia. The spat concerns Forest City, a massive USD 100 billion real estate project that is being constructed in Johor Bahru, capital of the southern Malaysian state of Johor. This project is developed by Country Garden Pacific View, a joint venture between Country Garden, a Chinese developer, and a local developer with an ownership stake held by the Sultan of Johor.

Forest City, which is being built on four artificial islands, will eventually “house 700,000 people on an area four times the size of New York’s Central Park,” and will also have “office towers, parks, hotels, shopping malls and an international school.” It is just one of almost 60 real estate projects in Johor’s Iskandar Malaysia special economic zone — an area three times the size of Singapore — which has attracted significant foreign direct investment (FDI) from Chinese developers like Country Garden (Lim, 2016; Mahrotri and Choong, 2016).

Responding to Mahathir’s Sinophobic charges that the 700,000 future residents of Forest City will consist of mainland Chinese nationals, “that citizenships will be given away, and that huge tracts of land have been sold to the Chinese,” the Sultan of Johor argued that Mahathir had “twisted” the facts to create “fear, using race, just to fulfil his political motives.” In response to Mahathir’s allegations that “Johor is surrendering land to the Chinese and that we are giving up our sovereignty,” the Sultan noted that the project, which is being built on reclaimed land, will instead “increase Johor land size and sovereignty,” and that the residential units are “not just for Chinese investors, but for anyone around the world, including Johoreans.”

The Sultan also recalled that when Mahathir was Prime Minister, he had persuaded Malaysians “to Look East but now he is criticizing when Chinese investors come here to invest.” The Chinese embassy in Malaysia made the same point when it issued a pointed statement that “somebody applauded Sino-Malaysian cooperation when in office but fanned the flame of anti-Chinese sentiment after … Saying China’s investment is stealing job opportunities from Malaysia is a complete lie with a secret agenda behind it” (Wong and Benjamin, 2017; “Johor Sultan slams,” 2017).

As Mahathir has joined a political coalition opposing the leadership of current Prime Minister Najib Razak, observers believe the spat over Forest City indicates that the issue of Chinese FDI in Malaysia will “dominate the general election expected to be called this year.” For example, Mustafa Izzuddin predicts: “Mahathir and other Malay politicians from the anti-Najib camp will use the sheer [scale of] Chinese investments into Malaysia to criticize Najib as selling Malaysia’s internal sovereignty to China … to the extent of drifting into the China orbit and becoming its satellite state” (Jaipragas, 2017).

The significant Chinese FDI that has been invested in Malaysia forms a large part of the economic background to the political challenge facing Prime Minister Najib’s leadership. In October 2016, the Malaysian government announced that China Communications Construction Co. will construct and China Export-Import Bank will finance the construction of the 620 km East Coast Rail Link (ECRL), a project estimated to cost RM 55 billion. The ECRL will connect Kuantan Port on the east coast of Peninsular Malaysia with Port Klang on the west coast, creating a land bridge that will allow the transshipment of goods between the Straits of Malacca and the South China Sea without having to go past Singapore (Lopez, 2016; “China to build,” 2016).

This expansion of transportation options will benefit corporations which have established factories in the Malaysia-China Kuantan Industrial Park (MCKIP), which has attracted investment in “high-tech industries including stainless steel products, electrical and electronics, information communication technology, and renewable energy.” The MCKIP has been twinned with the China-Malaysia Qinzhou Industrial Park in Guangxi province in China, and the increase in trade between Malaysia and China will be facilitated by the ongoing expansion and upgrading of Kuantan Port, of which China’s Guangxi Beibu Gulf International Port Group has a 40 percent stake (Lim, 2015, p. 9; Tuan, 2016).

In the state of Malacca on the west coast of Peninsular Malaysia, a RM 30 billion joint venture has been formed between KAJ Development Sdn Bhd, a local developer, and Powerchina International Group of China to construct the Melaka Gateway. This project consists of three artificial islands “for various tourism, commercial, property and maritime developments,” and a natural island that will be “designated as a container and bulk terminal, shipbuilding & ship repair services, and a maritime industrial park” (“KAJD and Powerchina,” 2016). The project will also include construction of the RM 8 billion Melaka Gateway Port, which is scheduled for completion in 2019. KAJ Development and the Chinese port operators Shenzhen Yantian Port Group Co. and Rizhao Port Group Co. have formed a partnership to develop this port, which is predicted “to attract 100,000 vessels annually,” with 70-80 percent of the expected traffic coming from China (Samah, 2016).





China generously offered financing to 1MDB in exchange for state assets to help 1MDB repay almost USD 6.5 billion in debts.

