The Chinese government had refused to authorise a state-owned firm's deal with Johor-based Iskandar Waterfront Holdings (IWH) to acquire a 60 percent stake in Bandar Malaysia, according to the Wall Street Journal.

The publication described the collapse of the RM7.41 billion deal as a blow to Prime Minister Najib Abdul Razak, whom it noted had heralded the deal as “the final major milestone in the 1MDB rationalisation plan” during his New Year message.

“The 1MDB fund hasn't published financial statements for 2015 or 2016, so its current financial situation is unclear. Still, the deal's failure is likely to add to pressure on Najib, who also is finance minister, to find other ways to pay 1MDB’s debts,” said the report.

The WSJ also claimed to have seen an internal document from the Malaysian Finance Ministry, which purportedly stated that a major reason for the deal's failure was that China's government declined to give the green light for China Railway Engineering Corporation (CREC) to make the investment.

The newspaper also claimed that a “person familiar with the matter” had confirmed this.

“The Finance Ministry document says that the consortium of buyers was given 12 extensions, with the last expiring on April 30,” it added.

WSJ said the the prime minister’s office and 1MDB did not respond to requests for comment, while the Chinese government's information office had also not responded.

Malaysiakini is unable to independently verify the claims in this report.

Yesterday, TRX City Sdn Bhd, which is owned by the Ministry of Finance, said in a statement that the share sale agreement (SSA) entered into on Dec 31, 2015 with the consortium had lapsed.

"This is because, despite repeated extensions being granted, IWH-CREC failed to meet the payment obligations outlined in the conditions precedent under the SSA.

"As a result, the share sale agreement between the parties stands null and void with immediate effect," it said.

The Bandar Malaysia deal was previously touted as part of the 1MDB rationalisation plan to pare down its debt.

The 486-acre prime land in Sungai Besi, or Bandar Malaysia, had since been transferred and placed under the Finance Ministry.

TRX City said the government would now shelve its plan to sell the land.

However, IWH CREC Sdn Bhd, a joint venture between Iskandar Waterfront Holdings Sdn Bhd (IWH) and China Railway Engineering (M) Sdn Bhd, has disputed TRX City's claim with regard to the reason behind the lapse.

Describing TRX City's press release on the matter as not entirely accurate, IWH CREC, in a statement, said it is at present reviewing the content of the termination notice and TRX City's press release with its advisors and legal counsel.