Ahead of Twin Congressional Sessions: Rural Reform, Poverty Elimination, SOE Reform, Green China, Demographics, Ant Group: A Special Weekend Edition

Intelligence and Insights on China's government actions, foreign policy, economy, and the capital markets

Letter from the Editor

One week leading to China’s twin congressional Sessions, China boasted the “historic human miracle” that it had lifted the last nearly 100 million Chinese people out of absolute poverty by 2020. This feat marks a necessary condition to validate the accomplishment of China’s first centenary goal of building a “moderately prosperous society” by 2021, upon the 100th birthday of the Communist Party of China.

There are trivial traces of success that excites the commonsense minds. Over President Xi Jinping era, China has built 1.1 million km of new rural roads and 35,000 km of new railways. Optical fiber and 4G have reached 98% of Chinese territories and 99% of the Chinese population, including the economic backwaters and the socially disadvantaged. 2.66 million new settlement houses have been built. 

However, what truly captures the excitement are the deepwater reforms that China has boldly envisioned and must carry through over the coming 5 years to unleash further economic vitality to leap China to the next phase of development. 

After 40+ years of reform and opening up, some core areas within the economy are still left little touched. 

A landmark agricultural reform plan was launched this week, which single-handedly can boost China for another decade and a half’s economic growth. Rural and agricultural reform will tackle rural non-farming land’s entry into the market. The floating of land value based on market forces will turn the most significant assets held by China’s rural population into valuable equities. China still is a country with 45% rural population. This landmark rural reform will propel China’s urbanization to 75-80%, comparable to developed world standards, over time. The rural population’s wealth appreciation naturally unleashes significant power of consumption, and rural industry development, therefore creating incremental growth drivers for China’s domestic economic circulation. 

The State-owned enterprises’ (SoEs) 3-year Reform introduced in 2020 focuses on the permeation of market forces within the state sector, including the introduction of modern HR governance, profit targeting against GDP growth, and the creation of mixed-ownership companies at all levels-a hybrid corporate ownership model that is partly state and partly private-led by local companies prototyping innovative structures.

More financial reforms are about to break ground, including soon the lift of the $50,000 capital account outflow limit for Chinese citizens. A closed capital account, long considered an advantage for China to avert previous rounds of systemic financial shocks, is no longer economically optimal for China. China’s financial liberalization will surely excite the world. 

Every reform comes with great courage, reminiscent of China’s early reform era. In 1984-1985, early reformers in China jokingly called their economic experiments daring to touch the “butt of the tiger.” China is about to touch the butt of the tiger again. 

The Chinese economy is forecast to grow by 7.9% in 2021 by the IMF. Domestic estimates confidently put the growth projection over half a percent higher than the IMF at the moment. Most likely, however, at the conclusion of the Twin Sessions, China won’t be announcing an official growth rate for 2021. GDP targeting is no longer an economic impetus. Structural economic reform is. 

At the twin congressional sessions, people also anticipate the specific carbon reduction roadmap between now and 2060 for China to reach its ambitious target of carbon neutrality by 2060. Bits of the plan have snuck out of the policy space lately, nowhere near a comprehensive plan, however. When Xie Zhenhua meets his counterpart John Kerry sometime in the near future, rest assured, China would be closer to a plan to deliver set targets, with support from the US or not. 

See you post the twin congressional sessions! 

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Rural Modernization & Poverty Alleviation

China’s No. 1 Document Released Focusing on Agricultural and Rural Modernization

China’s No.1 document is usually reserved for agriculture policies. This year’s No. 1 document unveiled a renewed focus on comprehensive rural and agricultural modernization.

Comprehensive agricultural and rural modernization will be achieved by 2035, according to the current state plan.

In this year’s No. 1 document, the framework includes “ Two Forbidden, Two Beginnings, and One Comprehensive Enforcement.”

  1. Two Forbidden: Poverty eradication is forbidden to be reversed. Food security is forbidden to go wrong.

  2. Two Beginnings: New agricultural modernization and rural modernization must begin with sound planning.

  3. One Comprehensive Enforcement: The Party’s leadership to agricultural and rural development must be enforced.

主要内容可以概括为“两个决不能,两个开好局起好步,一个全面加强”。简单来说,“两个决不能”就是巩固拓展脱贫攻坚成果决不能出问题、粮食安全决不能出问题,“两个开好局起好步”就是农业现代化、农村现代化都要开好局起好步,“一个全面加强”就是加强党对“三农”工作的全面领导。

3 major opportunities to increase income levels of the rural population

Chinese rural disposable income, according to the national bureau of statistics, was less than $3,000 ( RMB 17131) in 2020, roughly a little over half of the urban counterparts. Rural income rise has been considered a key priority with important reform policies put in place.

  1. Increase production efficiency. Efficiency will come from upgrading the agricultural supply chains, building agricultural brands, and enhancing online-offline sales channels. Efficiency and brand value creation will enhance rural income levels.

  2. Expand rural employment. Expand and invest in rural infrastructure to create local jobs for the recently lifted poverty-stricken population. Provide training to farmers and the population who have just been lifted out of poverty.

  3. Deepen rural reforms. Allow agricultural land to enter the market circulation. Encourage equity participation by farmers in rural development. Turn farmers into equity holders.

Rural Revitalization

As a comprehensive part of the "14th Five-Year Plan", the Chinese government released the "Opinions of the Central Committee of the CPC and the State Council on Comprehensively Promoting Rural Revitalization Accelerating Agricultural and Rural Modernization" This policy determines new key targets in the revitalization of the rural industry, including its structure, efficiency, culture, technologies, and approaches to the environment. (read more)

The Party expects to revolutionize and modernize rural areas by: 

1.     Connecting Poverty Alleviation and Rural Revitalization

This means to target areas that have been recently alleviated from poverty by assisting rural communities in producing agricultural products and expanding the consumption of these. Stressing on poverty alleviation remains significant to ensure a higher demand of goods, bringing more resources and prosperity to local communities. The CPC remains focused on preventing a return to poverty in lower-income areas.

2.     Modernizing the Agricultural Value Chain

The goal is to build a greener, self-reliant, and more modern agricultural supply chain to guarantee the supply of key agricultural products like grains and seeds.  This includes improving the responsibility system in food security cross-province, giving subsidies to grain, corn, wheat, and rice producers. Modernizing agriculture will also focus on land use and control for better supervision, modern technology and equipment for irrigation and other activities, innovative methods for sustainable agriculture, and improved agricultural management of small, medium, and large enterprises.

3.     Improving Rural Infrastructure

The aim is to focus on constructing public infrastructure in rural areas, clean energy, and water projects that can better integrate remote villages with other rural and urban areas. By 2025, the rural tap water penetration rate should reach 88%. Another key target will be to construct safe and reliable rural gas storage tank stations, micro-pipe network gas supply systems, develop rural biomass energy, improve telecommunications, basic public services for healthcare and education, and construct rural gigabit optical networks for the new 5G.

4.     Strengthening Rural Governance

To establish a system of contact points for rural revitalization, the provincial, city, and county party committees shall develop an efficient network to supervise and assess rural work efficiency. This includes a rural revitalization rotation training at three-levels of the party organization.

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Policy

Three-Year SOE Reform Agenda 70% Completed in 2021

State-Owned Enterprise (SOE) Three-Year Reform Agenda 2020-2022 (国企改革三年行动)aims to complete 70% of its set goals in 2021 alone. Hao Peng, chairman of the State-owned Assets Supervision and Administration Commission of the State Council (SASAC), made the announcement.

2021 targets for the 3-year SOE reform agenda

(read more in Chinese)

  • 1.     The net profits and gross profit of central SOEs will grow faster than the GDP growth rate.

  • 2.     Operating profit margin, R&D investment, and labor productivity should all increase significantly. 

  • 3.     Debt leverage ratio remains stable and manageable. By 2020, central SOEs reached their earlier-set deleverage threshold. The average debt/asset ratio of central SOEs reached 64.5% by 2020. (中央企业平均资产负债率为64.5%)

2021年将推动中央企业净利润、利润总额增速高于国民经济增速,营业收入利润率、研发投入强度、全员劳动生产率明显提高,同时保持资产负债率的稳健可控。

Reform implementation measures

To achieve these results, the below key tasks are required. (read more in Chinese)

1.     Build a modern corporate governance system with Chinese characteristics (中国特色现代企业制度), and set clear boundaries amongst SOEs stakeholders.

22 central SOEs introduced equity incentive programs in 2020, covering 18,000 key executives. Central SOEs reduced 20% of personnel on average in 2020, enhancing operating efficiency.

去年新增22户中央企业控股上市公司实施股权激励,涵盖了近1.8万名关键核心人才。中央企业集团总部部门数量平均压缩超过17%,人员编制平均减少20%,企业活力和效率得到了明显增强。

SOE executives will be employed on a termed and contractual basis. HR management should follow market-based mechanisms to remove lifetime employment security.

今年,将重点完善中国特色现代企业制度,企业各治理主体权责边界更加清晰;同时,更加注重激发活力,健全市场化经营机制,推动各层级企业普遍推行经理层成员任期制和契约化管理,推进末等调整和用工市场化,坚决破除“平均主义”“大锅饭”;

2.     Stimulate vitality and competitiveness, improve market-based operation mechanisms, and nurture a more efficient decision-making process.

Mixed-ownership reform will be the key breakthrough for SOE reforms. Mixed-ownership reform will need to ensure the fair valuation and security of SOE assets.

“混改一直是国企改革的重要突破口,混改会向纵深发展,监管部门不再片面追求‘混改面’,而是要在‘引机制’方面下功夫,同时防止国有资产流失。”

3.     Recognize that innovation capabilities are crucial to SOE’s efficiency. Grassroots have to be innovated as they are set to be the principal reform makers.

SOE deleverage targets

By the end of 2020, the average debt-to-asset ratio of the central SOEs was down to 64.5%, down 0.5% from the previous year, achieving the SOEs’ deleveraging target of 64.7% for SOEs by 2020. 

A 2018 guideline on restricting the debt-to-asset ratio of SOEs mandated that SOEs reduce their average debt-to-asset ratio by 2% by the end of 2020 from that at the end of 2017. (read more)

The 2020-2022 target will shift from deleveraging to maintaining stable leverage at SOEs.

SOE profit rises

Meanwhile, SOEs reported steady profit growth. Net profits of the country's 97 central SOEs expanded 2.1% YoY in 2020, with around 80% reporting rising profits.

Simultaneously, the Central Authorities have transferred $187.11 billion (RMB1.21 trillion) from SOEs to the social security fund by the end of 2020 as the pandemic has impacted the capital inflows.


Government in Action

Green China Investment Policy 2025

China is determined to step forward on its path to achieving carbon neutrality by 2060 and “win the blue-sky war.” Recently, as part of China’s comprehensive green investment policy to combat its environmental challenges, the State Council issued the “Guiding Opinions on Accelerating the Establishment of a Green Low-Carbon and Circular Economic System”《关于加快建立健全绿色低碳循环发展经济体系的指导意见》 (read more here in Chinese).

  1. The two key targets timelines:

  • By 2025, there will be a significant increase in the proportion of green industries. With that, the production, circulation, and consumption ecosystem for a green and low-carbon circular economy will be formed as industrial, energy, and transportation structures are optimized. 

  • By 2035, efficient energy and resource allocation in key industries and products will be expected to reach the advanced international level. Carbon emissions will steadily decrease, achieving the goal of building a beautiful China (read more here). 

  1. Transforming the Production, Circulation, & Consumption System

As the world’s largest energy producer and consumer, China has been actively reforming its energy consumption system to build a cleaner and diversified energy supply system and successfully integrate innovation-led energy strategies.

Under the new green investment policy, the need for renewable energies is stressed. Placing a priority on investing in renewable energy will significantly reduce air and water pollution and ensure socio-economic stability.

  1. China’s delivery of renewable energy solutions

Currently, Chinese firms are achieving new milestones in the renewables industry. China’s wind-turbine makers account for 26% of global capacity and its battery-makers, 78%.

Additionally, China is accountable for 91% of silicon wafer production used in solar energy (source).

Last year, a significant proportion of China’s overseas energy investment went into renewable energy rather than fossil fuels.

Compared to 39% in 2019, solar, wind, and hydropower projects account for 57% of China’s overseas energy investment (read more here).

There has also been an increase in the opportunity to invest in the electrification of transport, battery makers that power NEVs, and firms that help China enhance its national electricity grid to deal with the potential growth of wind and solar energy (read more here).

By 2030, it is expected that regional grid firms will buy at least 40% of power from non-fossils fuel sources to meet their climate targets (source).  

Rebalancing Economic Growth & Environmental Challenges

China draws greater attention to the challenge between environmental protection and economic growth post-COVID -19. During the COVID-19 lockdown, the national average PM2.5 levels fell by 33%, while NO2 levels dropped by 40% compared to the same period in 2019. CO2 emissions fell by an estimated 25%, with coal-fired power generation, cement manufacturing, and oil consumption activity all significantly reduced. Due to the emphasis on GDP targets and infrastructure developments, China’s economic rebound also means that pollution levels are rebounding as air pollutant levels – PM2.5, NO2, SO2, and ozone – have rebounded or exceeded the monthly levels recorded in the previous year. Though, it is uncertain whether pollution levels will continue to exceed previous records (source). 

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China Plans to Delay Retirement Age to Cope with Rapid Society Aging

Minister of Human Resources and Social Security Zhang Jinan confirmed at the State Council meeting that the Ministry is conducting feasibility studies to postpone China’s retirement age, to cope with the rapid aging process and labor force decline.

18.1% of Chinese were over the age of 60 in 2019. Over the 14th Five-Year Plan period, 300 million Chinese will turn to the aged population cohort.

China’s productive labor force has declined by 3 million per year on average since 2012. Over the 14th Five-Year Plan, the labor force will be reduced further by 35 million. (read more)

Delay retirement

The new retirement age will be benchmarked with international norms. There are talks currently that, in the initial phase, the retirement age for males and females will be adjusted to 65 and 60 respectively.

Retirement delays can alleviate the exponential labor force decline and, therefore, burden the social security and welfare system.

Introduce individual retirement savings accounts system

China is also undergoing feasibility studies to introduce individual retirement savings accounts. This will be, in theory, similar to the US 401(k), to allow retirement contributions to be individually managed through investment participation. The government will offer tax incentives to encourage contribution.


Test Pilot of Complete Removal of Birth Control Policies in Northeast China

The National Health Commission has recently issued document No. 9839 on the "Recommendations on Solving the Problem of Population Decline in Northeast China," encouraging deeper research on family planning and studying the effects and prediction of liberalizing birth control policies to solve this long-term demographic decline.

China’s one-child policy has been in implementation since 1978, later relaxed to a two-child policy in the 2010s.

The Population Cliff Dive

Song Limin, Director of the Public Policy Research Center of the Population Research Institute of Liaoning University, argues that the liberalization of fertility policies is especially needed for the provinces of Liaoning, Jilin, and Heilongjiang. 

  • This means the natural population growth rates were -0.80‰, -0.85‰, and -1.01‰, and are expected to show a further decline in 2020 data.

National Health Commission Resolutions (read more)

  • The National Health Commission has entrusted Jilin University, Liaoning University, and other institutions to research issues related to negative population growth in Northeast China.

  • The North-eastern Provinces will need to work on comprehensive plans to attract the youth to better job opportunities and higher wages. The costs of childcare, higher demands for women's careers, and economic development have impacted child-bearing opportunities. 

  • Investing in nursery service institutions and training kindergarten teachers may have a positive effect. Exempting childcare services from VAT and other taxes and registration fees may encourage the development of more facilities able to welcome and foster new children. 

Relaxing all the birth control policies is undoubtedly the national direction. China’s demographic urgency may push the timeline earlier based on currency worrisome signs.

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Mr. Xi Stresses Education of Party History as CPC Prepares for Centenary

China awaits its next grand celebration to be held in July – the 100th anniversary of the CPC that will outline the achievements of the first centennial goal. 

The “Two Centennial Goals” serves as the pillar to achieve the “Chinese Dream.” The first milestone was set to be accomplished this year, leading up to the CPC's centenary, with China set to build a “moderately prosperous society” by doubling its 2010’s per capita GDP to $10,000.

Secondly, the CPC aims to build a “fully developed, rich, and powerful” nation by the centenary of the People’s Republic of China – in 2049. 

A “moderately prosperous society.”

China registered an RMB 100 trillion GDP in 2020, as the per capita GDP reaches the level of 11,000 U.S. dollars. China reported a year-on-year increase of 6.5% for the fourth quarter of 2020 and an overall 2.3% increase for 2020. While major economies struggle to return to pre-pandemic economic growth amidst COVID-19, China’s domestic economy rebounds are projected to overtake the U.S. as the world’s largest economy by as early as 2026 (source). 

As China embarks on a new year, President Xi is confident that the country is moving toward building a prosperous society, telling officials in January that the world is facing “turbulent times…but time and forces are on our side. This is where we show our conviction and resilience, as well as our determination and confidence” (read more here).

“Rectify” the Party’s oxthodox history.

Chinese president Xi has also announced a new campaign for the learning and the education of the Party’s history.

To support the campaign,Mr. Xi’s “On the History of the Chinese Communist Party” was recently published and nationally distributed. The collection contains 40 critical manuscripts on the CPC history (read more here in Chinese). Mr. Xi emphasized that “the great rejuvenation of the Chinese nation requires the development and prosperity of Chinese culture as a condition,” implying that strengthening cultural self-confidence is critical toward dealing with major unprecedented changes such as the ongoing pandemic (read more here in Chinese and here). 

Redefine the historical assessment of Hua Guofeng, China’s transitional leader between Mao and Deng.

Hua Guofeng has remained a controversial Chinese leader through the subsequent Chinese Communist Party history. He was accredited as the one who destroyed the Gang of Four led by Mao's widow and remembered for his “Two Whatevers” doctrine to uphold Mao Zedong Thought. He had been recorded with a mixed legacy, perhaps more negative than positive up till recently.

This week, his centenary anniversary was celebrated by China’s top leadership, emphasizing his contribution in destroying the Gang of Four, the anti-communist anti-revolutionary clique. This may signal President Xi’s determination to further clean out the Party, and enforce the unified Party ideology under the Xi Jinping Thought.

2021 will be an important year

This year marks a critical juncture in China’s political and economic growth. President Xi and the CPC are gearing up to maintain political and social order leading up to the July celebrations and onwards. Furthermore, the next few months will involve some of the most important legislative reforms and policy-planning as China looks to plan the achievement of its second centennial goal. (read more here). 


Capital Markets

Regulators increase supervision of online lending platforms such as Ant Financial; requires platforms to provide a minimum of 30% of loan capital from 2022.

The China Banking and Insurance Regulatory Commission announced a tightening regulation of online lending platforms, as authorities continue to clamp down on the rapidly expanding industry.  The online lending sector has seen explosive growth in recent years, lending an equivalent of US$516bn in 2019. (Source)

The new sector’s model has been built on a partnership between fintech companies, who provide the platform and credit assessment, and traditional banks, who provide the vast majority of the funding. The interest income is subsequently packaged in ABS for capital leverage. The headline additionally requires that platforms contribute at least 30% of the capital for customer loans, starting in 2022. (Source)

The move will force fintech companies to shoulder more credit risk, and curb regional lenders’ reliance on mobile platforms for credit assessment and client access. Alibaba’s Ant Financial (‘Ant’), the largest online market player, lent c. US$267bn as of June 2020 in collaboration with around 100 partner institutions. Of this volume, only 2% were contributed by Ant, with the rest of the funds coming from a range of commercial lending institutions. (Source). 

The announcement has been widely interpreted as a part of a broader anti-trust effort to curb the power of China’s fintech giants.

The new regulation is also expected to reshape China’s lending landscape at the expense of smaller regional banks. Authorities also announced a cap on the online lending proportion of banks’ loan portfolio at 50% and restricted the geographical business scope of regional lenders, such as provincial banks. This is expected to benefit national lenders such as Ping An and the big state-owned banks at the expense of regional lenders, which depend on online platforms for market access. (Source)

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Tencent and Ant Group Participate in Digital Yuan Trial

WeBank and MyBank—the banks of Tencent and Ant Group—will be the first two non-publicly owned banks to participate in digital yuan trials. This report has just been released after Ant Group cut a deal with Chinese regulators to restructure its operations in the middle of a crackdown on fintech and tech companies.

During the previous tests, four publicly-owned commercial banks—the Industrial and Commercial Bank of China, China Construction Bank, Agricultural Bank of China, and Bank of China—offered to activate digital yuan wallets to make digital payments.

Context

Ant Group’s Alipay and Tencent’s WeChat Pay digital payment platforms respectively account for 56% and 38.8% of the Chinese digital payments market. Collectively retaining such a considerable portion of this market fulfills the criteria to regard the two as duopolists, therefore subject to antitrust regulations, according to the draft antitrust rules released by the People’s Bank of China in January.

China has been trying to curb the market monopoly of digital payment companies. The addition of MyBank and WeBank to the digital yuan trials could represent a major rebalancing act to remove the competitive edge of fintech companies such as Alipay and WeChat Pay. Yet, this is not necessarily true, and the two privately owned financial institutions might benefit from this, thus gaining an edge over their competitors in the booming industry of digital currencies.


Technology

US-China 21st Century Space Race 

China’s space agency recently released footage from its spacecraft orbiting Mars before attempting to land a rover on the red planet in May. (source). If the mission succeeds, it will make the country the second, only after the US, to land a rover on the surface of Mars. “Mars has moved into the symbolic role of demonstrating the superiority of technology.” This is just the latest step in China’s ambitious space program.

In 2020 China held 39 launches, sending 89 spacecraft into space, including Galaxy Space’s (a rival to Elon Musk’s Starlink) first low-earth-orbit 5G broadband satellite (source).

China attempts over 40 launches in 2021, including the core cabinet of the country’s future space station and another 7 commercial launches allowing firms to send micro and small satellites into orbit (source).  

US-China Space Competition

China has been barred from the International Space Station (ISS) program since 2011 following the US congress banning official US contact with the Chinese space program due to concerns over national security (source).

This exclusion from the ISS has forced the Chinese to develop their own space station, with the first components set to launch later this year. The station is expected to be completed by 2022 and will be approximately a fifth of the size of the ISS, but will enable the country to further scientific and technological advancement whilst supporting the country’s long-term exploration goals (source)(source).  

The Moon

China and Russia are set to sign a memorandum of understanding to cooperate on an international lunar research station. The goal is to set up a long-term human presence on the Lunar south pole between 2036 and 2045 (source).

Research is not the only objective of a lunar presence. Mining is another significant objective for China. The moon is rich in hydrogen, oxygen, rare earth metals, and Helium-3, which can be used as a fuel in nuclear Fusion (source). It would allow China to gain access to vast amounts of natural resources and have a strategic advantage in Fusion energy (source).

There is also the potential for rocket fuel to be produced on the moon. The production of rocket fuel would be possible because of the large quantities of water on the lunar surface. This ability would allow China to use the moon as a launchpad for future missions, as they can use lighter rockets and have cheaper launches (source). 

The Trump administration proposed the Artemis Accords, an international agreement that allows countries or companies to establish exclusive zones on the moon in which both Russia and China rejected. The two countries accuse the accord of being US-centric and a political agenda of moon colonization.

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China Plans to Invest Heavily in High-Speed Maglev Trains

The Department of Natural Resources of Guangdong Province has recently published "Guangdong Province Land and Space Planning 2020-2035", which interprets and displays the land and space arrangements for the next 15 years.

According to the plan, two high-speed magnetic levitation lines will be built in the area. One line will serve the Beijing-Hong Kong-Macao route, whereas the other will connect Shanghai, Shenzhen, and Guangzhou

2.5 hours travel from Shenzhen to Shanghai, and 3.3 hours travel from Shenzhen to Beijing.

Shenzhen is about 1,500 km away from Shanghai. If the average speed is 600 km per hour, the two metropolises can be connected in about 2.5 hours. Shenzhen is about 2,200 km from Beijing, and thanks to the new high-speed magnetic levitation, it will be possible to reach China’s capital city in about 3.3 hours—less than half the time than the normal high-speed train takes.

According to a diagram in the planning document, the two major corridors between the Guangzhou-Shenzhen section will further connect the Greater Bay Area and the Yangtze River Delta with Beijing, thus fostering the economic connectivity of the major cities on the east coast.

China’s high-speed train industry

China is leading the development of global high-speed trains. 350-kilometre-per-hour high-speed train now covers most of the important economic areas of the country.

However, people in the transportation industry pointed out that high-speed magnetic levitation trains are the future thanks to their higher speed and greater capacity—something of paramount importance in a country with a large population such as China.


Malaysia Strengthens Huawei Partnership

Amirudin Abdul Wahab – CEO of Cyber Security Malaysia – has unveiled a partnership project with Huawei Technologies, including building a cybersecurity lab in Malaysia. The agency under the purview of the Malaysian Ministry of Communications and Multimedia is a long-standing partner of the Chinese tech giant and has signaled the intent to deepen the relationship. (source).

Malaysian Prime Minister Muhyiddin Yassin has called for accelerating the 5G network rollout in the country (source). Huawei’s supplies and know-how are key to Malaysia’s digital transition and cybersecurity goals.

The partners are developing a strategic framework for collaboration in cybersecurity governance, talent development, and cybersecurity standards and certification in Malaysia. Ahead of the 2021 Mobile World Congress in Shanghai, Amirudin has stated to a Huawei forum that Malaysia aims at positioning “itself as the first regional cybersecurity center of excellence” (source). 

A long-standing collaboration

The cooperation between Kuala Lumpur and Huawei dates back to 2017 when the Chinese tech company and Cyber Security Malaysia established a joint committee. The body meets twice a year to discuss standards and cybersecurity enhancement measures. 

In 2019 former Prime Minister Mahathir Mohamad has stated the intent to “make use of Huawei’s technology as much as possible,” brushing aside concerns about alleged risks of espionage by the Chinese company (source).

Since Muhyiddin has unseated Mahathir in a coup in early 2020, the Malaysian government has maintained the same welcoming approach.

Huawei currently has six cybersecurity labs and centers located in Shenzhen, Banbury (UK), Bonn, Brussels, Toronto, and Dubai. A new one in Malaysia will demonstrate Huawei’s efforts to build trust with global partners and help offset losses due to restrictions in several countries such as the US, the UK, and Australia (source).