Malaysia Rail Link and China Communications Construction Company have signed a supplementary agreement that will pave the way for the resumption of the East Coast Rail Link (ECRL) project.
Malaysia's government said Friday it has chose to resume a China-backed rail link project, after the Chinese contractor agreed to cut the construction cost by one-third.
"This reduction will surely benefit Malaysia and lighten the burden of the country's financial position."
Tun Daim Zainuddin, special envoy to the prime minister, arrived in Beijing on Friday to finalise the project with China, ahead of Tun Dr Mahathir's visit to the country.
The deal could be a boon for China's Belt and Road Initiative, which has seen Asian governments from Myanmar to Maldives reassessing Chinese investments amid concern over sovereignty and large borrowings.
Malaysia said Friday a major Chinese-backed railway had been revived following a deal to cut costs, lifting a suspension slapped on the project when a corruption-plagued regime lost power past year.
A Chinese Foreign Ministry spokesman, Lu Kang, hailed the agreement.
Daim said the ECRL construction will resume as soon as possible.
Mr Mahathir's government has axed or reviewed large-scale infrastructure projects to rein in surging national debt that it blames mostly on corruption in the previous government. The government was nearly done with its budget review and was ready to look toward state investments to boost economic growth, Finance Minister Lim Guan Eng said in February.
The original prie of RM65.5 billion, would have saddled the government with RM130 billion in debt under the earlier terms and conditions.
The ECRL project was initiated by the previous Barisan Nasional government and was suspended past year by the newly-elected Pakatan Harapan government due to its high cost.
A massive financial scandal at 1MDB led to the election loss of Mr Najib's coalition last May and Mr Najib is now on trial for multiple corruption charges linked to 1MDB.