Malaysia cancels two big Chinese projects, fearing they will bankrupt the country

[Cybernetics]

It has little to do with monetary policy or savings really. It's simply economies of scale. Malaysia will still contract foreign firms for massive infrastructure projects even if she has a high saving rate.

I'm referring to the financing aspect and external debt caused by low domestic savings rate. Financing and contracting are separate things. Malaysia takes on external debt to finance many of its projects.

For example a luxury hotel project in China can be entirely domestically financed but contract an foreign interior design firm due to their expertise and economies of scale. The story is not true with Malaysia overall. Low savings creates the necessity for greater external financing of projects.

Financial hubs are another story.

As for monetary policy, nations that take on USD denominated debt will be affected by Federal Reserve monetary policy. Rates increase, their interest payments increase (depends on their contract), and USD value increases. Domestically funded debt and domestically controlled monetary policy can mitigate some of the shocks through better coordination and timing. When the FED adjusts rates they won't consider the externalities that much, only the impacts on the domestic economy.

Some Russians took out mortgages denominated in USD. It is all fine and good when the situation is stable but when your currency is hit by a shock, some cannot afford to repay USD denominated debt. If there was sufficient savings in the Russian banking system, there wouldn't be the need for seemingly low interest USD denominated mortgages.

Federal reserve rates affects the monetary policy of the central banks around the world but to varying degrees (affected by structure of their economy) because the FED affects the money supply for everyone. FED adjusts rates, others follow to save themselves. US tightens money supply, everyone else feels the shortage.

Many of these developing country's economies are interwoven with the US economy. US goes into recession, the world gets hurt. Even if your business is doing well you might find your strategy of rapid expansion with low cash on hand and depending on financing for working capital to be doomed because the banks don't have enough money for your business to run. How do you get money when your economy doesn't save enough and are depending on a foreign bank that doesn't have enough because its in a crisis?

 

[Viet]

Vietnam can always put her women folk as mortgage for the loans. Vietnamese women(east asian type, not jungle austroasiatic) r in high demand in the sinosphere.

Also, nobody ever forces any1 to take loans. No guns were pointed at any1s head to accept those loans.
Its always human greed tt takes over

Pls remain in topic and not again about Viet girls. Sometimes one does not know it is a scam. I once fell into the trap buying a part time apartment in Singapore.

 

[Viet]

Looks like uncle sam is here to stay

China silkroad is a scam.

Chinese banks earn interest on loans.

Chinese companies profit from contracts.

Chinese workers earn salaries.

Chinese media can sell more propaganda.

The losers are countries and people that have overpaid construction projects that nobody need, financed by money they don’t have, to impress people they don’t know.

 

[Cybernetics]

China silkroad is a scam.

Chinese banks earn interest on loans.

Chinese companies profit from contracts.

Chinese workers earn salaries.

Chinese media can sell more propaganda.

The losers are countries and people that have overpaid construction projects that nobody need, financed by money they don’t have, to impress people they don’t know.

For China its loans to others and investments don't come from just a printing press printing as much as is desired because it is not an global reserve currency such as the USD, doing such would hurt the currency immensely. China's money comes from savings of households who worked hard for their money and withheld consumption in order to save and will want to see their money again in the future. They don't want to see their hard earned money be squandered though bad loans to others, why act responsible for others to be irresponsible? This means they want to see their investments into other nations be profitable or loans on projects to be viable so the money can be paid back. There is desire for these countries do do well.

How other nations borrow is up to them to decide, that is their freewill. If the other government feels the deal is worthwhile then they will act accordingly if they don't think its a good deal they won't take the money. It is mutual respect, respect the hard earned savings of Chinese and Chinese respects the choices of others. Don't blame others when one's nation collectively chose bad decisions, make good choices and you will be rewarded.

Many projects China participates in hires local workers for some nations they want a greater percentage of Chinese workers maybe due to desire for low costs and on schedule completion.

Some of the projects China undertakes are in high risk nations meaning they don't have other places to look for reasonable rates but these countries need money to develop necessary projects. These are not random vanity projects like Burj Khalifa. The rates would be too high to borrow from because very few nations want their money in those high risk countries. China offers reasonable rates, of course this doesn't make sense from a financial perspective if China operates like just a bank as it doesn't properly adjust for the risk premium in these countries. China changes the equation by lowering risk through government coordination, on time completion, basically end to end management. In the end the high risk nations gets their finished project on time and on budget with low risk of project failure under low rates while China maintains low risk of their money being squandered.

We live in the real world, actionable words have high value. What is a better way to invest in these high risk nations or nations that don't want to use domestic workers? Even Poland which is a source of relatively cheap labour for EU hires forigen workers because it makes financial sense for them.

 

[Viet]

For China its loans to others and investments don't come from just a printing press printing as much as is desired because it is not an global reserve currency such as the USD, doing such would hurt the currency immensely. China's money comes from savings of households who worked hard for their money and withheld consumption in order to save and will want to see their money again in the future. They don't want to see their hard earned money be squandered though bad loans to others, why act responsible for others to be irresponsible? This means they want to see their investments into other nations be profitable or loans on projects to be viable so the money can be paid back. There is desire for these countries do do well.

How other nations borrow is up to them to decide, that is their freewill. If the other government feels the deal is worthwhile then they will act accordingly if they don't think its a good deal they won't take the money. It is mutual respect, respect the hard earned savings of Chinese and Chinese respects the choices of others. Don't blame others when one's nation collectively chose bad decisions, make good choices and you will be rewarded.

Many projects China participates in hires local workers for some nations they want a greater percentage of Chinese workers maybe due to desire for low costs and on schedule completion.

Some of the projects China undertakes are in high risk nations meaning they don't have other places to look for reasonable rates but these countries need money to develop necessary projects. These are not random vanity projects like Burj Khalifa. The rates would be too high to borrow from because very few nations want their money in those high risk countries. China offers reasonable rates, of course this doesn't make sense from a financial perspective if China operates like just a bank as it doesn't properly adjust for the risk premium in these countries. China changes the equation by lowering risk through government coordination, on time completion, basically end to end management. In the end the high risk nations gets their finished project on time and on budget with low risk of project failure under low rates while China maintains low risk of their money being squandered.

We live in the real world, actionable words have high value. What is a better way to invest in these high risk nations or nations that don't want to use domestic workers? Even Poland which is a source of relatively cheap labour for EU hires forigen workers because it makes financial sense for them.

I never say China is dumb. In fact you are smart while other ...well...not.
Malaya’s low savings rate is not a problem.The country credit rating is high,so it’s not a problem for her at all to take loans on international markets. It’s just dumb to take a loan from China with the conditions by employing Chinese workers, contracting Chinese companies. With a price tag that is probably double than it should be. The best way is to make a bidding process then pick the best company with the best price.

 

[powastick]

First of all, these projects are Najibs, not China. Secondly only 18%-20% workers are from China. Which shouldn't be an issue because Malaysia construction workers these days are 80% Bangaladesh/Indonesian laborers. Locals workers aren't cheap, and they don't want difficult jobs. Also Malaysia do not have that many skilled workers.

 

[thesolar65]

I don't care for Pakistan. But democracy will play its part. I wonder when Maldives will also starts to think! Democracy acts in strange ways (strange for Chinese)

 

[Khanate]

You build when interest rates are low. You start reducing the debt once interest rates are about to go up which they are now. Mahathir is making the right call here.

 

[Mista]

I'm referring to the financing aspect and external debt caused by low domestic savings rate. Financing and contracting are separate things. Malaysia takes on external debt to finance many of its projects.

For example a luxury hotel project in China can be entirely domestically financed but contract an foreign interior design firm due to their expertise and economies of scale. The story is not true with Malaysia overall. Low savings creates the necessity for greater external financing of projects.

Financial hubs are another story.

As for monetary policy, nations that take on USD denominated debt will be affected by Federal Reserve monetary policy. Rates increase, their interest payments increase (depends on their contract), and USD value increases. Domestically funded debt and domestically controlled monetary policy can mitigate some of the shocks through better coordination and timing. When the FED adjusts rates they won't consider the externalities that much, only the impacts on the domestic economy.

Some Russians took out mortgages denominated in USD. It is all fine and good when the situation is stable but when your currency is hit by a shock, some cannot afford to repay USD denominated debt. If there was sufficient savings in the Russian banking system, there wouldn't be the need for seemingly low interest USD denominated mortgages.

Federal reserve rates affects the monetary policy of the central banks around the world but to varying degrees (affected by structure of their economy) because the FED affects the money supply for everyone. FED adjusts rates, others follow to save themselves. US tightens money supply, everyone else feels the shortage.

Many of these developing country's economies are interwoven with the US economy. US goes into recession, the world gets hurt. Even if your business is doing well you might find your strategy of rapid expansion with low cash on hand and depending on financing for working capital to be doomed because the banks don't have enough money for your business to run. How do you get money when your economy doesn't save enough and are depending on a foreign bank that doesn't have enough because its in a crisis?

You're moving too far-fetched with Russia, USD, FED etc.

The original post by Menthol states that Malaysia is unable to build massive infrastructure even though she has higher GDP per capita. And I point out that it's simply due to economies of scale. Simple as that. It's the same reason why India has space programs even though her GDP per capita is so low. The cost per person when averaged is far lower than most countries.

https://www.zhihu.com/question/62051327/answer/221027182

Anyway Malaysia cancelling these projects is mostly due to political reasons rather than economical or financial reasons. The RM1trillion debt is exaggerated by Mahathir to put down Najib and garner support.

 

[powastick]

You're moving too far-fetched with Russia, USD, FED etc.

The original post by Menthol states that Malaysia is unable to build massive infrastructure even though she has higher GDP per capita. And I point out that it's simply due to economies of scale. Simple as that. It's the same reason why India has space programs even though her GDP per capita is so low. The cost per person when averaged is far lower than most countries.

https://www.zhihu.com/question/62051327/answer/221027182

Anyway Malaysia cancelling these projects is mostly due to political reasons rather than economical or financial reasons. The RM1trillion debt is exaggerated by Mahathir to put down Najib and garner support.

The one trillion debt is exaggerated, they added unfunded liabilities into it.

 

[Harvey Pandit]

China silkroad is a scam.

Chinese banks earn interest on loans.

Chinese companies profit from contracts.

Chinese workers earn salaries.

Chinese media can sell more propaganda.

The losers are countries and people that have overpaid construction projects that nobody need, financed by money they don’t have, to impress people they don’t know.

US is always going to stay there and commies cant do anything about it.

Personally i feel that we have shared history after visiting (and studying Hindu heritage of Champa and Kashmir )Vietnam and Bali with my friends and GF for vacations.

 

[my2cents]

In term of GDP per capita, Malaysia is higher than China's.

While the poorer China is able to build massive infrastructures, Malaysia can't.

Economy of scale. 1.5 billion population vs few hundred million of Malaysia

 

[Adam WANG SHANGHAI MEGA]

That's to save China's face

Thanks for save money for us.
We would like to build ten railway line for Pakistan and zero for india and malasia whatever price you offer！

 

[Adam WANG SHANGHAI MEGA]

HSR built by Jap for india where is it ，i can not see it??!!

 

[kris]

Thanks for save money for us.
We would like to build ten railway line for Pakistan and zero for india and malasia whatever price you offer！

Lol. So Pakistan is going to be indebted to you..