Property market observers are keeping a keen eye on Mahathir Mohamad, Malaysia's newly elected and second-time prime minister, to see if his return to power spells trouble for Chinese-backed projects underway in the country.
Second-time Malaysian prime minister Mahathir Mohamad |
Mahathir, who defeated former Prime Minister Najib Razak on May 9 to return to power, was openly critical of Chinese investment in Malaysia's property market during his campaign. He has since vowed to review a number of Chinese-led projects, creating uncertainty around the future of these developments.
During his tenure, Najib favored Chinese investments as a means to boost Malaysia's economy. In November 2016, the two countries signed 14 memorandums of understanding totaling US$33.00 billion covering a range of initiatives in various sectors from technology to property, and China has been Malaysia's top source of foreign investment in the last two years.
Chinese companies have also played an outsized role in the property sector, investing more than US$2.10 billion in Malaysian real estate between 2014 and 2016, according to commercial real estate data firm Real Capital Analytics. Country Garden Holdings Co. Ltd., Guangzhou R&F Properties Co. Ltd., Greenland Holdings Corp. Ltd. and Agile Group Holdings Ltd. are among the Chinese developers with significant projects underway in Malaysia.

Mahathir has claimed that Chinese investments do not benefit the local population and are akin to selling native land to the Chinese. He has been especially critical of one Chinese-led project in particular — County Garden's 450.00 billion ringgit Forest City development in Malaysia's Johor state.
In the wake of the election, Country Garden will likely slow work on the project until it renegotiates details such as land reclamation and investment scale with the government, Raymond Cheng, a property analyst at CIMB Securities, said in an interview. "The regulatory risks for Forest City are relatively high considering its significant scale," Cheng said.
Country Garden's planned Forest City development. |
A spokesperson for Country Garden's Malaysia unit, Country Garden Pacificview Sdn. Bhd., told S&P Global Market Intelligence that it is "business as usual" and that the change in government will not affect its property ownership in Malaysia, which is protected by local laws.
The spokesperson stressed that Forest City is a joint venture between Country Garden and the state government of Johor, not a project awarded by the federal government, and noted that 70% of its employees are local hires.
A spokesperson for Guangzhou R&F, which is building a large mixed-use neighborhood, R&F Princess Cove, in Johor, told S&P Global Market Intelligence that the company is not particularly concerned about the project and plans to continue with its existing development plan.
Despite the new government's protectionist tone, market observers continue to see long-term opportunities for Chinese developers in Malaysia. Carrie Law, CEO of Chinese overseas property portal Juwai.com, said the Malaysian government needs Chinese developers' expertise and capital to construct large-scale housing projects.
"For Mahathir, it's essential to take a clear-cut stand to catch the public's eye during the election campaign, but this is not necessarily his attitude after taking office," Law said in an interview.
Bryan Collins, head of Asian fixed income at Fidelity International, pointed to Mahathir's own track record from his previous stint as prime minister, when he took a pragmatic approach to the economy, as evidence that his bark may be worse than his bite.

As of June 8, US$1 was equivalent to 3.99 Malaysian ringgit.


