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Malaysia examining whether China offered to bail out 1MDB

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Malaysia is looking into allegations that China offered to help deter probes into 1MDB in exchange for infrastructure projects, after The Wall Street Journal reported that senior Chinese leaders offered to help bail out the troubled state fund in 2016.

[SINGAPORE] Malaysia is looking into allegations that China offered to help deter probes into 1MDB in exchange for infrastructure projects, after The Wall Street Journal reported that senior Chinese leaders offered to help bail out the troubled state fund in 2016.

The government is unaware of the discussions detailed in the Journal report, which cited minutes from meetings the newspaper reviewed, and is examining the matter, said Finance Minister Lim Guan Eng. The cost of China-backed projects was certainly enlarged and Malaysia will check whether that was due to 1MDB links, Mr Lim said near Kuala Lumpur on Tuesday.

"But I have to refer back to see if there are details or thing explicitly said," he said. "If this is said, this is something we will pursue."

Chinese officials told visiting Malaysians that China would use its influence to try and get the US and other countries to drop probes of allegations that allies of then-prime minister Najib Razak and others plundered the fund, according to the Journal. In return, Malaysia offered stakes in railway and pipeline projects as part of China's Belt and Road Initiative.

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The Chinese government information office didn't respond to requests for comment, the Journal said, adding that China's foreign ministry has earlier denied that money in the programme was used to help bail out the 1MDB fund. The Malaysian Prime Minister's Office couldn't immediately comment.

Corruption Charges

1MDB is at the centre of a global scandal involving claims of embezzlement and money laundering, with jurisdictions from the US, Malaysia and Singapore probing cases related to the fund. Najib has been charged with dozens of counts of corruption, criminal breach of trust and money laundering involving 1MDB-related monies.

He also stands accused of altering the report on a government audit into the fund to protect himself from criminal, civil or regulatory action. He has denied wrongdoing and pleaded not guilty to all charges.

Malaysia's current government, which toppled Najib from power in a shock election victory last May, has halted billion-dollar projects backed by China. That includes the Sabah gas pipeline project awarded to China Petroleum Pipeline Bureau and overseen by Suria Strategic Energy Resources, which has had its office raided by the anti-graft agency.

Prime Minister Mahathir Mohamad said as recently as November that he was continuing talks with China on another project: the RM81 billion (S$26.8 billion) East Coast Rail Link, which remains in limbo after previously being halted and then cancelled. China Communications Construction Co was picked as the main contractor for the railway aimed to connect the eastern part of Peninsular Malaysia.

China also offered to bug the homes and offices of The Wall Street Journal reporters in Hong Kong who were investigating 1MDB, to learn who was leaking information to them, the Journal said, citing the minutes of the meetings. It couldn't be determined whether China provided any such information, the newspaper added.

BLOOMBERG