Malaysia’s troubled state investment fund 1MDB is preparing to repay Abu Dhabi’s sovereign wealth fund – with China's help, according to media reports.

The move to begin repaying what the Malaysian fund owes, confirmed by two people familiar with the matter, marks a step forward in efforts to resolve the financial position of the heavily-indebted state fund, writes the «Financial Times» (article behind paywall). 1MDB seeks to settle a dispute in which the Emirates' fund is claiming about $6.5 billion.

The two funds reached an impasse earlier this year, with 1MDB insisting it had fulfilled its obligations and the Abu Dhabi fund taking the dispute to arbitration in London. The relationship between the two funds — once hailed as a «strategic partnership» between Abu Dhabi and Malaysia — has gone sour amid allegations that Emirate officials were involved in a plot to siphon more than $1 billion from 1MDB, as finews.asia reported earlier.

Khadem al-Qubaisi, former head of the Abu Dhabi fund, has been detained over his suspected role in the affair. He has not been charged with any offence.

Probed By Regulators

According to the «Financial Times,» China has been approached as a source of funds for 1MDB, according to three people with knowledge of the matter, one of whom said Malaysia would swap assets for financing.

Chinese state-owned enterprises have led a bailout of 1MDB acquiring assets including a power generation business – that has relieved pressure on Malaysian Prime Minister Najib Razak’s government at a time when financial flows linked to the state fund are being probed by regulators in the U.S., Singapore and Switzerland.