News Release
23 June 2015
Malaysia to play a strategic role in China’s “One Belt, One Road”
In response to expected flat world trade growth abroad 1 and moderating economic activity at
home, China is packaging a series of initiatives to help bolster both. Malaysia can leverage
its strengths to play a vital role in support of China’s strategic plan, and to broadly benefit
from the opportunities created.
China’s recently announced “One Belt, One Road” plan embraces twin goals to tackle these
challenges. Southeast Asia is considered as one of the focal points in the “One Belt, One
Road” initiative.
‘One Belt’ refers to the economic belt along China’s traditional Silk Road connecting China
with Europe. The ‘One Road’ is the new ‘Maritime Silk Road’ between China, Southeast Asia
and Africa. The aim is for China to invest in the infrastructure and linkages associated with
these ‘Roads’ to help bolster its overseas trade. This in turn will stimulate production and
consumption demand at home.
Asean countries are prioritized on the Maritime Silk Road and will be the beneficiary of the
early harvest. With the strategic location, Malaysia is located at the centre of Southeast Asia
and holds the Straits of Malacca as an incomparable advantage in the cooperation of the
construction of the 21st Century Maritime Silk Road.
Last year, trade between Malaysia and China registered USD 102 billion. Malaysia remained
as China’s largest Asean trading partner for six consecutive years since 2008, and also
China’s third biggest Asian trading partner after Japan and South Korea.
To further deepen bilateral and economic relations, both the Malaysian and Chinese
governments have signed a five year plan to strive for USD 160 billion by 2017, by expanding
trade, investment, tourism, education, financial and infrastructure.
In one policy, China hopes to address challenging internal and external economic headwinds
and rebalance its economy.
By ‘rebalancing’, Beijing intends to promote the development of a consumption-led economy,
to supplement its traditional success in exports. The policy will also have the planned benefit
1
Fred Neumann latest econ global research for Asia
This news release is issued by
HSBC Bank Malaysia Berhad
(Company No. 127776-V)
Registered Office and Head Office:
2 Leboh Ampang, 50100 Kuala Lumpur, Malaysia.
Web: www.hsbc.com.my
of spurring economic growth in its laggard western provinces, to compliment the economic
dynamos in the east of the country.
If all goes to plan, China’s President Xi Jinping predicts “One Belt and One Road” will lift
China’s GDP this year by 0.25 per cent.2 In the next decade, he estimates it will comprise
annual trade volumes, between China and belt and road countries, surpassing USD 2.5
trillion. The policy is expected to benefit a massive 4.4 billion people in 65 countries. 3
An example of how this policy is intended to work is in infrastructure development. China has
far more steel than it needs. A shrinking construction market at home has meant a surplus is
piling up. Meanwhile, many developing countries in Asia suffer from massive infrastructure
deficits. China has the capital, expertise and excess capacity to bridge these gaps. By
investing in Asia’s infrastructure needs, China is helping Asian economic development
abroad and priming demand for its domestic heavy industry at home.
The policy will reinforce China’s centre stage position in Asian trade and transport. China’s
vast transport and shipping sectors would be the biggest beneficiaries of this initiative.
Agriculture, textiles, telecommunications, financial and high-tech sectors are also expected to
see knock-on benefits.
China’s western provinces in line to benefit from the Silk Road renewal include Gansu,
Qinghai, Shaanxi, Shanxi and the plans incorporate Inner Mongolia to the north – a total of
18 provinces and regions have been selected as key development zones for the initiates.
Beijing has vowed to allocate an initial investment of USD 40 billion to set up a Silk Road
fund for the construction of major infrastructure such as high-speed railways, bridges and
ports in Southeast and Central Asia. This figure is above and beyond the USD 64 billion of
new investments already announced for infrastructure projects.
China wants to open up the Asean route of the “Trans-Asian Railway” in order to link up
Southeast Asian countries such as Thailand, Burma, Vietnam, Malaysia and Singapore. After
the opening of the entire Trans-Asian Railway, goods can be sent in both directions: east to
Kazakhstan, Mongolia, Russia and other places; west to reach Central Asia. The project can
thus bridge “One Belt, One Road”, and integrate the region.
Mukhtar Hussain, Deputy Chairman & Chief Executive Officer, HSBC Malaysia Bank Berhad
said, “Malaysia can play a strategic role in making Asean a key part of China's “One Belt,
One Road” initiative and the Asian Infrastructure Investment Bank set up, by tapping on
2
http://usa.chinadaily.com.cn/business/2015-03/25/content_19908927.htm
http://www.scmp.com/comment/insight-opinion/article/1753773/one-belt-one-road-initiative-will-define-chinas-roleworld
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Malaysia's chairmanship of ASEAN and taking note of China's interests in partnering with
Asean.”
“Chinese entrepreneurs can make use of Malaysia’s strength for their “Going Global” strategy,
and use Malaysia as the gateway for China to Asean Economic Community (AEC), discover
more business opportunities and create a win-win situation.” continued Mukhtar Hussain.
To cope with the huge funding need, Beijing is launching a new supra-national financial body
– the Asian Infrastructure Investment Bank (AIIB) to make “One Belt, One Road” happen.
AIIB has garnered support from 57 countries as prospective founding members. This will
create a large fund that can be sought by countries to develop infrastructure throughout Asia.
China is proposing to furnish USD 100 billion worth of authorised capital, to give the AIIB the
financial firepower needed to turn the plan into reality.
Being a member of AIIB provides a new funding avenue for Malaysia's infrastructure
development, which in turn will promote the connectivity between China and Asean, and the
region's economic growth. The Asian Development Bank (ADB) estimated that around USD 8
trillion of investment will be needed in the Asia Pacific region between 2010 and 2020 to
improve its infrastructure.4 However, the ADB provides only around USD 21 billion per year.
This has led to the creation of a number of new multinational, quasi-sovereign entities.
From Beijing’s perspective developments under ‘One Belt, One Road’ and via the AIIB are
part of a bigger picture. This is to encourage the further economic integration of participating
countries and the formation of a new regional economic trading and investment bloc. More
importantly, it will expand the global use of the Chinese currency, increasing the speed of the
renminbi’s internationalisation.
“One Belt, One Road’s” investments will result in more widespread use of renminbi. Since
China will be responsible for most of the financing, it is likely that some of the financing will
be provided in renminbi rather than in US dollars to help push the agenda of renminbi’s
internationalisation and capital account convertibility. Renminbi is already the second most
used currency in trade. In March of this year, renminbi climbed to the top five most used
global payment currency, according to Swift.
“Last year, Bank Negara Malaysia signed a Memorandum of Understanding (MoU) with the
People’s Bank of China (PBoC) on the RMB clearing arrangements to recognise the
importance of the rise of renminbi. In the MoU, both central banks agreed to coordinate and
cooperate on the supervision and oversight of the RMB business, exchange of information,
and to facilitate the continuous improvement and development of the arrangement 5. This is
4
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HSBC Global Research "On the New Silk Road III"
http://www.bnm.gov.my/index.php?ch=en_press&pg=en_press_all&ac=3100
important to the Malaysian financial system as it will cater for the ever rising bilateral trade,
investments and financial flows between the two countries, minimising financial friction and
maximising the benefits of efficient payments and cash management.” added Mukhtar
Hussain.
Beijing’s “One Belt, One Road” is a small phrase with big ambitions. The path to success
might be long and tough, but China has certainly made an impressive start.
Given Malaysia’s role with China and Chairmanship in Asean, HSBC Malaysia believes the
timing is opportune and will be hosting the RMB and China’s Global Future Forum in Kuala
Lumpur on 17 August bringing expert insights into the future with China and RMB in 2015
and beyond.
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About HSBC in Malaysia
HSBC Bank Malaysia Berhad was locally incorporated in 1984 and is a wholly-owned subsidiary of The
Hongkong and Shanghai Banking Corporation Limited (a company under the HSBC Group). In 2007, HSBC
Bank Malaysia was the first locally incorporated foreign bank to be awarded an Islamic banking subsidiary
licence in Malaysia, and HSBC Amanah Malaysia Berhad, a full-fledged Islamic bank wholly owned by HSBC
Bank Malaysia, commenced operations in August 2008. HSBC in Malaysia has a network of 68 branches
nationwide, of which 26 are HSBC Amanah Malaysia Berhad branches. HSBC Amanah Malaysia Berhad also
has offsite ATMs established in 25 locations nationwide. In 2006, HSBC was the first foreign bank to be
awarded a Takaful (Islamic insurance) license in Malaysia. HSBC Amanah Takaful (Malaysia) Sdn Bhd, a joint
venture between HSBC Insurance (Asia Pacific) Holdings Limited (49% shareholding), Jerneh Asia Berhad
(31% shareholding) and Employees Provident Fund Board of Malaysia (20% shareholding) commenced
operations in August 2006.
The Hongkong and Shanghai Banking Corporation Limited
The Hongkong and Shanghai Banking Corporation Limited is the founding member of the HSBC Group, which
serves around 51 million customers through four global businesses: Retail Banking and Wealth Management,
Commercial Banking, Global Banking and Markets, and Global Private Banking. The Group serves customers
worldwide from over 6,100 offices in 73 countries and territories in Asia, Europe, North and Latin America, and
the Middle East and North Africa. With assets of US$2,670bn at 31 March 2015, HSBC is one of the world’s
largest banking and financial services organisations.