WALL STREET JOURNAL

2-11-16

China-Malaysia Summit Marks New Test for U.S. Sway in Asia

Malaysian leader Najib Razak visits China as the Philippines signals closer ties to Beijing

James Hookway

Malaysian Prime Minister Najib Razak is visiting China this week, giving Beijing another opportunity to dilute the U.S.’s influence in Asia.

The two countries were expected to sign deals including a $13 billion, Chinese-financed rail line connecting Kuala Lumpur with Malaysia’s northeast coast. Malaysia’s New Straits Times newspaper reported late Tuesday that Malaysia would buy four coastal patrol ships from China, quoting Mr. Najib as telling Malaysian media that this was a “landmark decision.”

Mr. Najib met with Premier Li Keqiang Tuesday at Beijing’s Great Hall of the People and was due to meet President Xi Jinping later this week. The countries’ defense ministers, meeting on Monday, expressed a desire to expand cooperation, Chinese state media said.

The visits reflected geopolitical jostling between Washington and Beijing. That also played out on Tuesday when Indonesia and Australia, a close U.S. ally, said they were considering joint patrols in the contested South China Sea. Washington has urged its allies in the region to carry out such “freedom-of-navigation” exercises to challenge Beijing’s territorial claims in the sea.

The Malaysian visits to China came as the Philippines shifts its diplomatic and economic focus away from its longstanding ally the U.S. and toward China. Philippine President Rodrigo Duterte said while visiting Beijing last month that he would pursue a more independent foreign policy. He also cast down on the future of military-cooperation accords between Manila and Washington. Mr. Duterte returned home with economic agreements and business deals worth some $24 billion.

Mr. Najib also is recalibrating relations with U.S. as the Obama administration winds down, experts said.

“The bottom line is that in this period of uncertain leadership transition in the United States, and Xi Jinping’s consolidation of power in Beijing, Malaysia is pursuing a hedging strategy,” said Carlyle Thayer, emeritus professor at the Australian Defense Force Academy in Canberra.

Malaysia’s military ties to the U.S. run deep, involving joint training, purchases of U.S. fighter aircraft, and regular port calls by U.S. vessels. But relations have grown strained. The U.S. Department of Justice acted in July to seize $1 billion in assets—including real estate and art—that investigators believe were purchased with money stolen from a state investment fund. One person close to the Malaysian government called that “a strategic mistake.”

Swiss investigators have said they believe as much as $4 billion disappeared from the 1Malaysia Development Bhd. fund, established by Mr. Najib to promote economic development. Mr. Najib has been cleared of wrongdoing by Malaysia’s attorney general. The fund has denied wrongdoing and said it was cooperating with any investigation.

U.S. officials have said they encourage warm ties between China and its neighbors. That, they believe, lessens the risk that the U.S. will be dragged into a conflict over disputed waters in the South China Sea. They also insist the U.S. still has strong relationships across East Asia.

“This idea that people are turning away from the United States and turning to China I think is just not borne out by the facts,” U.S. State Department spokesman John Kirby told reporters in Washington on Tuesday. “Everywhere we go in the Asia Pacific region it’s reiterated time and time and time again how important foreign leaders there view American presence, American economic assistance and participation and trade, as well as American leadership. So we don’t view it, again, as a binary sort of equation, and we don’t view it as a zero-sum game.”

Malaysia’s embrace of China appears less surprising than Mr. Duterte’s distancing from the U.S. While the Philippines had contested China’s expansive claims in the South China Sea, winning a ruling at a tribunal in The Hague in July, Malaysia has been more circumspect in pressing its own claims to the waters.

Economic and diplomatic ties between the two countries are generally strong.

A Chinese company, for instance, last year bought 1MDB’s power assets for $2.3 billion. 1MDB later sold a Kuala Lumpur real-estate project to a consortium including a Chinese railway group for $1.72 billion.

Chinese companies are also lobbying to build a proposed high-speed train linking Kuala Lumpur and Singapore. A member of a Chinese consortium said late Tuesday in a stock-exchange filing that it had won a bid to build a separate $2.1 billion line. Last year, Malaysian and Chinese armed forces held their first combined military exercises, focused on disaster response in the Strait of Malacca.

“Winning over Malaysia is a major coup for China considering Najib’s previous support for the U.S. pivot and his reported warm personal ties with President Barack Obama,” said Tang Siew Mun, a senior fellow at ISEAS-Yusof Ishak Institute in Singapore.