China is backing out of a deal to help shore up embattled Malaysian fund 1MDB, according to a report. The move is a setback for Malaysian leader Najib Razak.
Malaysia is grappling with the fallout from an international corruption probe into its state fund 1MDB. It thought it was getting a helping hand from powerful neighbor China.
But China's government won't greenlight the move, which entailed a state-owned railway firm jointly with a local partner buying a stake in Bandar Malaysia, a real estate project originally developed by 1MDB, «The Wall Street Journal» (behind paywall) and several local media outlets reported on Thursday.
The foundering of the 7.4 billion ringgit ($1.7 billion) deal is a setback for Malaysian leader Najib Razak, who has faced little criticism at home over a U.S.-led international investigation into the billion-dollar graft scandal.
Abu Dhabi Connection
1MDB hasn't published financial statements for last year or 2015, so little is known of its current financial status. Several media reported last month that Malaysia had reached an agreement over a soured financial deal with Abu Dhabi.
The emirate has manifold ties to the fund, but isn't part of a global investigation into alleged graft at 1MDB. Two former executives at Abu Dhabi's sovereign wealth fund and former board members at Falcon Private Bank have reportedly been imprisoned in relation to the scandal.
Bandar Development
The Bandar development was planned to be the destination of a high-speed rail link between Singapore and Malaysia as well as a shopping, residential and entertainment complex.
The Chinese ditching the deal leaves Razak, who is also finance minister, with the task of finding other ways to repay 1MDB's debt. He included news of Bandar's sale in his New Year's message in 2015, underscoring how politically dicey 1MDB had become.
