PUTRAJAYA, Nov 22 (Bernama) -- China, which lacks a bond market and has an underdeveloped capital market, presents opportunities for Malaysian companies, says B.K. Basu, chief economist of government investment arm Khazanah Nasional Bhd.

Malaysia, he said, has a well-developed bond market and should take the opportunity to be involved in China's insurance and bond market as the country's population aged.

He was speaking at the one-day Regional Economic Forum 2005 on the topic of "Leveraging on the Emerging Economies of China and India", here Tuesday.

Going forward, Basu said with the success of its banks' initial public offerings (IPOs), China near-term economic outlook was robust but new problems of overcapacity and a renewed surge in non-performing loans (NPLs) would emerge in the 2007 to 2008 period, and a post-Olympic deceleration appeared likely in 2009.

A proper clean-up of China's banking system was needed over the next three to five years, especially as the financial system has to be opened to foreign investment by 2007, Basu said.

Despite being touted as emerging economic giants, both China and India have their weaknesses, which presented opportunities for Malaysian companies to consult, exploit, collaborate or otherwise create mutual benefit, Basu said.

Among the weaknesses he pointed out are that both China and India have 60 percent and two-third rural population respectively, China is relatively inefficient producer of most farm products and India of oilseeds, and India's physical infrastructure remains woeful while China is weak in creativity.

Malaysia, according to him, is much better than India at hardware, including infrastructure, and is much better than China at software, especially creative development.

"All of Asean suffered, especially Singapore and the Philippines, whose shares of US imports have more than halved since 1998 but Malaysia was able to retain two percent share of the US market," he said.

The country, he pointed out, was also doing better in agriculture, tourism, education and health tourism compared to its neighbouring countries.

As for opportunities in India, Basu said Malaysian industries should explore collaborations with India in intermediate technologies due to the strong potential in pharmaceuticals, automobiles and consumer electronics, and transfer labour-intensive industries to India in order to compete.

This is cache, read story here