Malaysia's 1MDB, embroiled in debt payment disputes and a major money laundering scandal, has a potential saviour in the form of China, a report says.

1MDB, the Malaysian state-run fund at the centre of a storm over illicit transactions that have seen a number of banks punished by Singapore regulators, is preparing to repay Abu Dhabi’s International Petroleum Investment Company with aid from China, the Financial Times has reported. 

The state-owned IPIC in Abu Dhabi is said to be claiming around $6.5 billion. The FT cited two unnamed persons as sources.

Earlier this year, the two funds were at odds over the repayment. There has been controversy over the fact that Khadem al-Qubaisi, former head of IPIC, has been detained over his suspected role in the affair.

He has not been charged with any offence. 

The report said China has been approached as a source of funds for 1MDB. One source told the publication that Malaysia would swap assets for financing, it said.

The dispute between the Abu Dhabi fund and its Malaysian counterpart arose from a bailout deal last year in which IPIC agreed to lend $1 billion to 1MDB and assume payments on $3.5 billion of the Malaysian fund’s debt. It also forgave some debt that 1MDB owed IPIC. The Malaysian fund was to transfer assets to cover the amount of the loan, the assumed debt and the forgiven debt. 

During 2016, BSI’s Singapore-based bank and Falcon Private Bank were ordered by the Monetary Authority of Singapore to leave the city-state because of breaches of AML regulations and other transgressions. A number of other banks have been punished for shortcomings by the MAS. The transactions were linked to 1MDB. The US, Switzerland and Luxembourg have also launched investigations surrounding transactions linked to the Malaysian fund.

1MDB has denied wrongdoing.