Malaysia and China signed a defence deal and pledged closer cooperation in the South China Sea Tuesday, signalling a potential strategic shift by Premier Najib Razak as his ties with the United States fray over a corruption scandal.

Najib's week-long trip marks another potential setback for Washington's "pivot" toward Asia, two weeks after President Rodrigo Duterte of longtime US ally the Philippines visited China with olive branch in hand.

Meeting at Beijing's Great Hall of the People, Najib and his Chinese counterpart Li Keqiang witnessed the signing of nine agreements spanning defence, business and other spheres.

"I believe this visit will bring our bilateral ties to a new high... a historic high," Najib said prior to meeting with Li.

Asked for details of the defence arrangement, Chinese vice foreign minister Liu Zhenmin said that the two countries were "focusing on naval cooperation," adding that the deal "marks a big event in our bilateral ties."

China and Malaysia have an outstanding territorial dispute in the South China Sea, which is claimed almost in its entirety by Beijing.

Parts of the vast maritime region are also claimed by the Philippines and Vietnam, among others, who have found themselves caught in an increasingly tense dispute between the US and China over Beijing's construction of military-capable artificial islands in the region.

"China and Malaysia are littoral states of the South China Sea so we need to enhance our cooperation to ensure peace and stability in the South China Sea and enhance our mutual trust," Liu said.

-- Separation anxiety --

Last month in Beijing, Duterte stunned observers by announcing his country's "separation" from longstanding partner the United States.

Though he subsequently backed off, saying their alliance remained intact, the episode underlined China's increasing diplomatic and economic gravitational pull at the expense of the United States.

Najib's visit provides fresh evidence, said Southeast Asia politics analyst Bridget Welsh.

"This is the new regional norm. Now China is implementing the power and the US is in retreat," she said, adding Washington's Asia "pivot" was "dead in the water".

Taking office in 2009, Najib reached out to Washington, and relations warmed following decades of periodic distrust.

But he has increasingly leaned toward China as it became Malaysia's biggest trading partner, and especially after the eruption last year of a massive corruption scandal implicating Najib and a state investment fund he founded.

Billions are alleged to have been syphoned from the fund, 1MDB, in a stunning international campaign of embezzlement and money-laundering that has sparked investigations in several countries.

Najib's ties with Washington became strained when the US Justice Department moved in July to seize more than $1 billion in assets it says were purchased by Najib relatives and associates using stolen 1MDB money.

Justice Department filings said a "Malaysian Official 1" took part in the looting. Malaysia has since admitted that official was Najib.

Najib and 1MDB deny wrongdoing and have railed at foreign forces they say concocted the scandal.

1MDB launched a fire sale of assets to stay solvent, and China's biggest nuclear energy producer China General Nuclear Power Corporation came to the rescue last year, purchasing its power assets for $2.3 billion.

Depressed oil prices have slashed government revenue in energy-exporting Malaysia, which also faces rising public-sector debt.

"This trip reflects not only Malaysia's geostrategic re-alignment to China as the 'regional banker' but also the reality that Najib is desperate for alternative financial sources," Welsh said.

China has increasingly won major infrastructure and other projects in Malaysia.

Among the agreements was one to build a new rail line on Malaysia's east coast.

Later this week Najib will meet President Xi Jinping, as well as Jack Ma, founder of e-commerce giant Alibaba.

Malaysia PM rapped over disgraced stepson's China trip
Kuala Lumpur (AFP) Nov 1, 2016 - Malaysia's opposition and Twitterati have lashed Prime Minister Najib Razak after images showed he was accompanied on an official trip to China by his stepson, who US authorities have fingered in a massive embezzlement scam.

In images on Twitter, Riza Aziz is seen emerging along with Najib from his delegation's official plane after it arrived in Beijing on Monday.

The US Justice Department said in lawsuits filed in July that more than $200 million was funnelled to Riza from a state investment fund that Najib founded called 1MDB.

1MDB is now the subject of investigations in several countries across the globe amid allegations that Najib, his relatives, and associates plundered billions from it.

The Justice Department, which seeks to recover more than $1 billion in property and assets it says were purchased using stolen 1MDB money, said Riza used the syphoned millions to buy luxury real estate and fund his film production company, Red Granite Pictures.

The diverted funds were used specifically to bankroll the Hollywood film "The Wolf of Wall Street," directed by Martin Scorsese and starring Leonardo DiCaprio.

"Not only do we have to bear (the cost) of the expensive jet, but now he (Najib) is bringing his stepson, whom the whole world is looking for in relation to 1MDB monies," opposition lawmaker Rafizi Ramli was quoted as saying in parliament.

"Riza shouldn't be given special treatment using the people's funds. He should be arrested and questioned."

Malaysian media quoted a spokesman for Rosmah Mansor, Najib's wife and Riza's mother, as defending his presence, saying China had invited Najib's whole family.

But Twitter users pounced.

"FBI, hurry! Go capture him!" said one posting in the Malay language.

Another read: "Scandalous and outrageous. Aren't the Najibs ashamed of themselves?"

The Justice Department filings repeatedly mentioned a "Malaysian Official 1" as taking part in the 1MDB looting. Malaysia has since admitted that official was Najib, while stressing that he was not a target in the US legal action.

Najib and 1MDB deny wrongdoing.

No arrest warrants are known to have been issued by US authorities in the case.