Malaysia has seized US$243.25 million (RM1 billion) from a bank account of state-owned China Petroleum Pipeline Engineering Ltd (CPP), the Straits Times newspaper said on Saturday.
The seizure comes nearly a year after Malaysia suspended two pipeline projects, valued at US$2.3 billion, on which CPP was the lead contractor.
The government this month ordered HSBC to transfer the funds held in the Chinese firm's account to Suria Strategic Energy Resources, which is wholly owned by the Malaysian finance ministry, the Singapore-based newspaper said.
CPP was perplexed by the unilateral transfer of funds out of its account without notification, the firm, a unit of state energy giant China National Petroleum Corp, told the newspaper.
Officials of Malaysia's finance ministry, the office of its prime minister and the pipeline firm's Malaysia office did not immediately respond to requests from Reuters for comment.
HSBC declined to comment, citing client confidentiality.
An official of CPP's parent, China National Petroleum, also declined to comment.
In 2016, CPP won a contract from the government of former prime minister Najib Abdul Razak to build a petroleum pipeline stretching 600km along the west coast of Peninsular Malaysia and a 662km gas pipeline in Sabah.
But the projects were suspended last July by Prime Minister Dr Mahathir Mohamad, who unexpectedly defeated Najib in the 2018 election.
Mahathir has vowed to renegotiate or cancel what he calls "unfair" Chinese projects authorised by Najib.
The trade partners agreed this year to resume building a multi-billion-dollar rail project, after having shaved nearly a third of its costs, following months of talks that strained ties.