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Malaysian PM talks trade during China visit marking 40 years of diplomatic ties

Malaysian Prime Minister Najib Razak's four-day trip to China comes under the shadow of the still-missing Malaysia Airlines plane, MH370 but the push is to focus the trip on growing the momentum of trade.

Beijing: Malaysian Prime Minister Najib Razak who is visiting China to mark 40 years of diplomatic ties is set to meet Chinese leaders, including President Xi Jinping.

The four-day trip comes under the shadow of the still-missing Malaysia Airlines plane, MH370 which disappeared on March 8 enroute to Beijing. Most passengers on board were Chinese.

While both sides have pledged during the Malaysian leader's visit, to continue the search for MH370, nearly three months after the aircraft disappeared, Prime Minister Najib has also pushed to focus the trip on growing the momentum of trade.

Mr Najib said on Thursday after a meeting with Chinese Prime Minister Li Keqiang that his counterpart had given a commitment to encourage investment from China to Malaysia to balance out the difference in the current inflow of Malaysian investments into China.

He said last year, the amount of investments from Malaysia in China reached US$6.3 billion while the amount of investments by Chinese companies in Malaysia was only recorded at US$1 billion.

Mr Najib told reporters that at his meeting with Mr Li, he'd also raised various issues like the ban on the import of milk products and of cows raised for milk, which had been implemented since May 1.

"I have requested the Chinese government to reconsider the ban," he said.

The prime minister said he also raised the issue of the import of raw unclean bird's nest involving small producers.   

China is Malaysia's single largest trade partner.

Since 2009 Malaysia has been China's biggest trade partner within ASEAN with bilateral trade last year, hitting US$106 billion.

Still, both countries aim to raise the bar, with a targeted rise by 60 percent by 2017.

But as the search for missing Malaysian Airlines plane MH370 drags on, frustrations over how Malaysia has handled the crisis threatens to undermine trade and investment with China.

"I think those things, if they get out of hand actually, disrupt the economic relations" said Michael Spence, Professor of Economics at the NYU Stern School of Business.

"I think it's right to be quite worried about these things. I think if they get sufficiently serious they trump the economic relationship. I think that responsible leadership on multiple sides can stop this."

The sector worst-hit by the airline disaster continues to be tourism. 

More than 1.6 million Chinese tourists flocked to Malaysia in 2013 - the third-largest group after visitors from Singapore and Indonesia. 

In the wake of MH370, tens of thousands of Chinese cancelled their plans to visit Malaysia.

As Krystal Tan, Asia Economist of Capital Economics observed, the economic impact from MH370 is so far largely confined to the tourism sector.

"In terms of trade, because a lot of what Malaysia exports to China are intermediate goods, a boycott of component imports does seem less likely because that's going to negatively impact Chinese businesses and their supply chains."

Trade between China and Malaysia has grown at an average rate of 20 percent annually between 2000 and 2013.

With growing numbers of Chinese companies investing overseas, and the government easing FDI restrictions in China, analysts say the Malaysian Prime Minister's visit could open doors to more two-way foreign direct investment.

It gives Malaysia the opportunity to export more value-added products to China, in addition to the stable flow of component parts - from medical equipment to cars and IT, to exploring China's booming halal sector. 

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