The (Trade but Not Exclusively Trade) Relationship Between China and Malaysia


Despite there not being a border between the two countries, China and Malaysia share deep ties, anything from ethnicity-related ones (with a quarter of Malaysia’s population consisting of Malaysian Chinese after a migration phenomenon that occurred several centuries ago, although sociological data tends to indicate that they don’t necessarily identify as Chinese) to the economic dimension, with Malaysia consistently being one of the top 10 trading partners of China.

Are China and Malaysia friends?

In several respects, most definitely!

Are China and Malaysia adversaries?

In some cases such as the South China Sea disputes, the answer is unfortunately once again affirmative. Business as usual in the world of geopolitics, some might say, and there is ample sociological evidence which makes this state of affairs crystal-clear. For example, Pew Research Center data indicates that roughly two of three Malaysians are worried about territorial disputes that revolve around China somehow degenerating into an actual armed conflict. This does not however mean that they are somehow opposed to Malaysia having a strong economic relationship with China, with survey data telling us that 7 of 10 Malaysians appreciate the presence and especially investments of China in their country.

Moving on from sociology to economics, it is worth noting that since the Great Recession, Malaysia has been China’s top ASEAN trading partner. As is the case with China’s modus operandi, Chinese presence is Malaysia cannot help but be felt at all levels of the economy due to the heavily infrastructure-oriented investments of China in Malaysia. Now, of course, it is not all sunshine and rainbows, as case studies such as a recent 2018 one involving a $2.8 billion oil industry contract cancellation make clear, a cancellation that revolved around funding misappropriation concerns surrounding the Exim Bank of China (the infamous 1MDB case study).

All things considered, however, the economic facts speak for themselves and the economic cooperation between China and Malaysia is here to stay. From commodities to tourism, China is more than serious about establishing a firm economic grip on the region and it is highly unlikely that players such as the United States can step in aggressively enough to curb this trend. On the contrary, the situation on the ground seems to indicate a reality that revolves around the US taking its foot off the proverbial pedal when it comes to gaining geopolitical influence in China’s vicinity, with China of course embarking on the exact opposite journey.

Challenges, however, do exist.

For example, the current diplomatic narrative tends to highlight the fact that Malaysia doesn’t manifest explicit concern with respect to China’s territorial ambitions in the South China Sea and elsewhere. On the contrary, Malaysian authorities have actually criticized the proverbial West in general and the United States in particular for trying to turn the countries that are geographically close to China against it.

Beneath the surface, concerns do pop up every now and then. For example, the Malaysian authorities are indeed worried about the nation becoming increasingly dependent on Chinese investments and occasionally display skepticism rather than unconditionally embracing the increasing economic presence of China in the country. The same way, leaving more or less appeasing diplomatic rhetoric aside, the fact remains that Malaysia and China can be considered opponents in many respects as far as the South China Sea situation is concerned and the list could go on and on.

As a conclusion, it is vital to find the right balance between acknowledging China’s (at the very least economic but also more and more so geopolitical) domination in countries such as Malaysia and making it clear that even the most seemingly robust relationships should not be seen with rose-colored glasses exclusively. Yes, the trend seems strong as far as China’s geopolitical ambitions are concerned and Malaysia can be considered an important piece in this puzzle.

However, Machiavelli himself would be envious of today’s remarkably complex geopolitical landscape. As such, as strong as a trend may seem, there is no such thing as an irreversible one. China might be just one economic calamity away from a major geopolitical setback, for example. On the other hand, the current trend may very well accelerate. For these reasons and many others, keeping your finger on the geopolitical pulse of the region is a must and if you need any kind of assistance in this respect, simply reach out to the team by visiting the Consulting or Contact section of our website.

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