As the recipient of more than US$200 billion ^[1] worth of Chinese infrastructure and real estate investment, Malaysia is fast becoming the principal ASEAN partner in China’s One Belt One Road (OBOR) initiative. Malaysia’s need to upgrade its infrastructure to attract larger foreign investors and boost its slowing economy dovetails with China’s OBOR ambitions. But some of those investments have provoked suspicion ^[2] about their potential to enable a Chinese military presence. The Melaka Gateway is one such project, and provides a case study for a closer examination of the potential for OBOR investments in Malaysia to further Beijing’s strategic objectives.

Last October, the Malaysian government inked a US$6.8 billion deal ^[3] with three Chinese state-owned companies to construct and manage a deep-sea port and Maritime Industrial Park on three reclaimed islands off Malacca city, as part of the larger US$9.7 billion Melaka Gateway mega-development ^[4]. The facilities will include a container and bulk terminal, shipbuilding and repair services, and marine engineering and manufacturing services. Singapore’s Straits Times ^[2] claims that China harbours military designs for the port, since an additional port on Malaysia’s west coast will be redundant once the planned upgrade to Port Klang—which handles 40% of the country’s cargo ^[5]—alleviates existing overcapacity issues. Also, the reclaimed islands will also enjoy freehold status and the port a 99-year concession.

The Malaysian government denies claims that China would use the port as a naval base, asserting that it’s never allowed foreign powers to ‘set up’ ^[6] on Malaysian soil. Nevertheless, Sino-Malaysian defence diplomacy has matured in recent years ^[7]—a reflection of President Najib Razak’s desire to maintain transparency ^[8] around China’s military capabilities. The latest example came in January this year, when a Chinese nuclear-powered submarine visited Malaysia ^[7] for the first time, after the People’s Liberation Army Navy (PLAN) was granted access ^[8] to Sabah’s Kota Kinabalu port in 2015 by the Malaysian government.

Examining China’s other major investments in Malaysia brings the strategic picture into sharper focus. At Kuantan on Malaysia’s east coast, China jointly owns an industrial park and a 40% stake ^[9] in the construction of a deep-sea port. Sand’s being rapidly dredged there to facilitate the US$12.4 billion East-Coast Rail Link ^[10], 85% of which is financed by China. The line will run from Port Klang on the west coast to Kuantan Port in the east, ending at Tumpat, near Malaysia’s northwest border with Thailand. Once complete, the railway will be a land bridge between Klang and Kuantan, enabling China-bound goods to bypass Singapore and the southern Malacca Strait. That’ll divert significant volumes of traffic ^[11] away from Singapore and enhance China’s ability to control the flow of goods.

Ports like the Melaka Gateway that can accommodate container ships and have maritime engineering facilities can also accommodate ^[12] the refuelling and replenishing of warships. Malaysia should be alert to the fact that China’s making a habit of deploying the PLAN to protect its commercial activities as it brings its OBOR ports into operation. Last November, Chinese and Pakistani navies conducted drills ^[13] simulating the defence of Gwadar Port and the China–Pakistan Economic Corridor. And China’s recent decision to expand its Marine Corps personnel ^[14] from 20,000 to 100,000 also came with the announcement ^[14] that some would be stationed at Gwadar and its forthcoming naval base at Djibouti.

China has strong motivations to leverage its OBOR investments in Malaysia for strategic purposes, consistent with the PLAN’s revitalised focus. China’s 2015 defence white paper ^[15] outlined a combination of ‘near seas defense’ and ‘distant seas protection’.

China wishes to exercise strategic dominance ^[16] within the First Island Chain, which it considers its ‘near seas’. Having access to Malaysian ports facing the South China Sea, as do Kuantan, Kota Kinabalu and Samalaju ^[17], would increase the PLAN’s capacity to project power and deny access to adversaries, likely the US Navy, in that contested area. In particular, Kota Kinabalu’s close proximity to the Spratly Islands would allow the PLAN to better defend its outposts there.

China also wants to mitigate risk from its Malacca Dilemma ^[18], whereby 80% ^[11] of its oil imports from Africa and the Gulf passing through that bottleneck could be obstructed by an adversary in a military blockade. The establishment of alternative energy routes throughout Central and Southeast Asia brings this objective closer. Beijing also wants to be in a position where it can militarily protect those lines of communication in the ‘distant seas’ ^[15]. Access to Melaka and Penang ports would support PLAN deployments further south through the Lombok–Makassar and Sunda Straits—the alternative routes via which China can access the Indian Ocean. Those straits hold strategic value for PLAN because, unlike the Malacca Strait, Indonesia allows warships to conduct unchecked innocent passage ^[19] through its archipelagic sea lanes, and the Lombok–Makassar strait is deep enough for submarines to pass through fully submerged ^[20].

As China’s footprint along Malaysia’s port network enlarges, Australian defence planners should get used to seeing the PLAN in their northern maritime approaches more often. The PLAN’s recent 25-day flotilla tour ^[21] through the South China Sea, eastern Indian Ocean and Western Pacific is just the latest manifestation of its growing far-sea capabilities and ambitions. The strategic value of OBOR investments in Malaysia will not only increase China’s economic clout, but would also provide a solid logistical foundation to enable Beijing’s military aspirations.