China offered to bail out 1MDB in exchange for billion-dollar deals

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Photo: YouTube screengrab

The Wall Street Journal (WSJ) reported on January 7 that in 2016 senior officials from China offered to bail out 1MDB by using China’s influence to endeavor to stop an investigation from the United States and other countries on the multibillion-dollar money laundering and corruption scandal that rocked Malaysia.

The report was written by Tom Wright and Bradley Hope, WSJ reporters who wrote a book called Billion Dollar Whale about the scandal and in particular, Low Taek Jho, the high-flying Malaysian financier at the heart of the scandal.

The journalists reviewed minutes from meetings between Chinese and Malaysian officials that had not been disclosed before. The minutes showed that the Chinese leaders said they would endeavor to use their influence so that probes into the involvement of the cohorts of former Malaysian Prime Minister Najib Razak in the scandal would be dropped.

Moreover, Chinese officials also said that they would put recording devices into the offices and homes of WSJ reporters in Hong Kong who were looking into the 1MDB scandal, in order to ascertain the identities of their sources of information.

What China wanted in exchange were stakes in pipeline and railway projects for China’s One Belt, One Road program of building infrastructure overseas.

Though he has protested his innocence, Najib signed tens of billions of dollars worth of contracts with Chinese state companies, to be funded by Chinese banks and built by Chinese workers, within a short period after the meetings.

The former Prime Minister also met secretly with Chinese leaders in order to discuss allowing Chinese navy ships dock at two different ports in Malaysia. These plans did not push through, but they would have meant a great deal to China’s ambitions over the waters in the South China Sea.

While the projects that China proposed in Malaysia were “political in nature,” according to the WSJ, “it was imperative the public see them as market-driven.”

The WSJ reached out to the Chinese government information office for a comment on the story but has yet to receive an answer. However, since China posits that its Belt and Road projects are intended for mutually beneficial development, its Foreign Ministry denies that the money involved in the projects were involved in bailing out 1MDB.

But according to the documents that WSJ saw, some of the projects were financed at above-market values, and Malaysian investigators tend to think that the surplus was utilized in Najib’s political endeavors as well as to “cover maturing debts of 1MDB, a fund he set up in 2009 to finance local development.”

Najib’s successor, Dr. Mahathir Mohammad, has put a halt to these projects, and Najib is now facing multiple charges of corruption, money laundering, and others.

The documents in question were found in Najib’s office after he stepped down, and describe multibillion-dollar projects that would be financed by China’s state banks. “One, the $16 billion East Coast Rail Link, would be a railway across Malaysia connecting two ports. The other, the $2.5 billion Trans Sabah Gas Pipeline, would be built partly on Malaysia’s portion of the island of Borneo.”

China supported Najib in the last elections, with the ambassador from Beijing campaigning with candidates from Najib’s coalition. After Mahathir won the election, the current Prime Minister has been in talks with China for the return to Malaysia of Low Taek Jho, as well as new terms for a railroad project began under Najib’s term. Several of the projects from that time are currently idle.

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