MALAYSIA is the fourth most desirable overseas direct investment (ODI) country for China, a report by the Economist Intelligence Unit (EIU) said, noting China’s strong support for Najib Razak’s administration amid the 1Malaysia Development Berhad scandal.

Malaysia is the only emerging economy to be ranked in the top five, out of 60 countries evaluated in the EIU’s China Going Global Index 2017 report, after Singapore, the US and Hong Kong.

“Malaysia leaps to fourth in the rankings from 21st in 2015.

“The country has emerged as a key node on the BRI (Belt and Road Initiative) and has a welcoming attitude towards Chinese investment, not least in part owing to the support it has provided to the embattled administration led by Najib, which has been embroiled in a scandal tied to the activities of sovereign wealth fund 1MDB,” said the EIU in its report yesterday.

Singapore beat the US to clinch the top spot, which the EIU attributed to the city-state’s “superior business environment, access to Southeast Asian markets and close links with China”, and higher trade tensions between the US and China.

The EIU said Malaysia and Singapore stood out as attractive BRI destinations because both countries provided an investment environment that offered opportunities and low risk levels.

“Although there were political tensions between Malaysia and China in the past, the bilateral relationship is currently strong.

“Furthermore, the country scores highly in the opportunity pillar owing to a favourable outlook for economic growth and export, manufacturing, as well as open policies towards foreign investment (several China-backed infrastructure projects are already under way in Malaysia).”

The report also produced six industry-specific rankings, covering the automotive, consumer goods, energy, financial services, healthcare and telecommunications sectors.

Malaysia is ranked the second most attractive foreign economy after the US for Chinese investors in the consumer goods sector, and is 10th in the telecommunications sector.

The US took the top spot in 2015 and 2013, when the EIU included 67 countries in its rankings.

The EIU did not explicitly say why it reduced the number of countries in this year’s index.

It said China’s ODI flows had dropped 40% year-on-year for the first 10 months of 2017 as the country rolled out policies to restrict excessive capital outflows.

However, the EIU said it believed the slump was temporary.

“Although approval processes may be more complicated, Chinese companies will still feel impelled to venture overseas for similar reasons as they did before – to drive higher revenue by tapping new markets and acquiring better technology.

“The rollout of the BRI, a government strategy announced in 2013 to boost trade and investment links between China and more than 60 (mainly developing) countries, has also given an additional impetus for some firms.”

Apart from Malaysia, other notable emerging market climbers in this year’s index include Kazakhstan (up 36 spots to 13th place), Thailand (up 23 spots to 19th place) and Iran (up 26 spots to 20th place).

Meanwhile, a few industrialised economies have slipped in the rankings, including Australia (from third to fifth), Canada (fourth to ninth), Germany (11th to 21st) and, particularly, the UK (12th to 41st), due to its poorer economic growth outlook following its impending exit from the European Union.

Some 110 Chinese companies were surveyed to inform this year’s index.

Indicators considered include an economy’s market size, natural resources, innovation, corporate brands, political stability, regulatory predictability, international tensions, cultural affinity and operational risks.

Set up in 1946, the EIU is the research and analysis division of The Economist Group, the sister company to the UK-based The Economist magazine. – December 8, 2017.