China in Malaysia by Edmund Terence Gomez & Siew Yean Tham & Ran Li & Kee Cheok Cheong

Author:Edmund Terence Gomez & Siew Yean Tham & Ran Li & Kee Cheok Cheong
Language: eng
Format: epub
ISBN: 9789811553332
Publisher: Springer Singapore

C. State-Private Chinese Venture

Case Study 7: Alliance Steel (M) Sdn Bhd

The integrated steel project by Alliance Steel in the Malaysia-China Kuantan Industrial Park (MCKIP), with a production capacity of 3.5 million tons of steel per annum, is the first as well as the key project in this industrial park. As a leading enterprise in the MCKIP, Alliance Steel must be considered an outcome of the BRI. As indicated earlier, a twin project to the MCKIP, the China-Malaysia Qinzhou Industrial Park, is located in Qinzhou City. Both industrial parks have been designated as key nodes of the BRI’s Maritime Silk Road. Alliance Steel’s Malaysia venture also constitutes part of China’s ‘going out’ strategy, since it is in a key enterprise in the manufacturing sector.

Resource-seeking was clearly not a motive for Alliance Steel’s entry into Malaysia. As with other Malaysian steel plants, the raw material, iron ore, is imported from Australia, Indonesia and Canada.113 One possible reason for this project was the implementation of China’s policy to transfer its technology, an important aspect of its foreign investment planning.114 China sees market potential in Malaysia for the application of Alliance Steel’s technology, to test outcomes in its technology transfer. Moreover, if this potential is fulfilled, it will lock the Malaysian steel sector into China’s industrial eco-system for steel production.

The offshoring of steel production from China can conceivably be an outcome of wage pressures or competition within that country. And, it could mark the beginning of a new international supply chain for the Chinese steel industry, as Alliance Steel’s products are to be exported to China as well as the rest of Southeast Asia.

Further, with the emergence of the China-US trade war and the anti-dumping policy implemented by many other countries, Alliance Steel can take advantage of Malaysia’s regional trade preferential policies to export. In addition, its products should meet domestic demand for steel from mega infrastructure projects in Malaysia, such as the ECRL. These big infrastructure projects are expected to consume the most steel, while it is presumed that the needs of the domestic real estate and construction sector are to be met by Malaysian producers. Therefore, the competition that Malaysian producers will encounter with the presence of Alliance Steel is expected to be limited, although these presumptions may not be borne out.

Alliance Steel (M) Sdn Bhd was established in April 2014 with total investment of US$1.4 billion.115 It is a state-private-joint-stock enterprise, with joint investments by Guangxi Beibu Gulf Port International Group Co. Ltd. (GBG), a large provincial state-owned enterprise directly under the government of Guangxi Autonomous Region,116 and Guangxi Shenglong Metallurgical (GSM) Co. Ltd.,117 a private joint-stock enterprise.118 This project is GBG’s first overseas investment under its ‘mixed ownership’ mode. This investment also appears to be the province’s response to the call for mixed-ownership reform of China’s state enterprises.119 The professional operation of this steel project is handled by GSM. Steve Hu of GSM was selected to head this overseas joint-venture enterprise. That GSM was tasked to head Alliance Steel was

Download

Copyright Disclaimer:
This site does not store any files on its server. We only index and link to content provided by other sites. Please contact the content providers to delete copyright contents if any and email us, we'll remove relevant links or contents immediately.