Friendship, Renegotiated: China-Malaysia Relations
Friendship, Renegotiated: China-Malaysia Relations
China and Malaysia are long-time friends who need to review their relationship. China, the bigger, older friend has asserted its power over Malaysia, the smaller, younger friend for decades. Maybe it’s time to say no more. Topics up for review: trade relations, territorial claims, and public perceptions. This negotiation may foster a sustainable, resilient and more balanced relationship in the future.
Trade Relations
Bilateral trade between China and Malaysia reached an all-time high in 2022 - USD203.6bn. This uptick was due to two reasons: China reopening their borders and economy in 2022 and trade diversions away from the United States. Malaysia has been a significant beneficiary of the U.S.-China trade war because Chinese companies were encouraged to diversify their geographic exposure due to trade restrictions. Nonetheless, a trade imbalance persists because Malaysia imports more than it exports to China. To renegotiate this aspect of the relationship, both countries should look beyond commodity trading to balance out trade. This may include Chinese investment in Malaysia’s burgeoning technology ecosystem and sustainable energy infrastructure. Malaysia is the world’s sixth largest exporter of semiconductors but it is on the lower end of the value chain: assembly and packaging. Technological exchange from China to Malaysia may allow Malaysian or Malaysia-based semiconductor companies to move up the value chain. Additionally, China’s Asian Infrastructure Investment Bank should collaborate with Malaysia’s newly established USD430mil green energy fund and leverage resource-rich Eastern Malaysia via the Sarawak Corridor of Renewable Energy.
Territorial Claims
The South China Sea has been hotly debated for decades as countries try to chop up the region to access strategic military bases and underwater resources, such as gas and oil. The Beijing government has claimed sovereignty over more than 90% of the strategic waterway despite territorial claims by several Southeast Asian countries, including Malaysia. Although Anwar Ibrahim has recently stated that he is not worried that China will act on these claims, his lack of concern for territorial integrity is misplaced. Chinese Coast Guard ships have frequently sailed into Malaysian territory where Petroleum Nasional (Petronas), Malaysia’s state-owned gas and oil company, were drilling for hydrocarbons. In 2021, sixteen Chinese military aircrafts came within 60 nautical miles of Sarawak state, causing Malaysia to call it a “serious threat to national sovereignty and flight safety.” Hence, in renegotiating this relationship, Malaysia has to assert its sovereignty over its borders and China should not impose physical threats to other nation-states.
Public Perceptions
China’s recent antagonism has caused many Malaysians to believe that China can no longer be a trusted friend. This suspicion is not new because most Malaysians fear communism and its legacy in Malaysia. The Malayan Emergency (1948-1960) killed thousands of people and put almost a million people into internment camps. The scars from the British anti-communist campaign are deep, which has caused many to be suspicious of the Chinese Communist Party. Moreover, the Malay majority is cautious of an economic “Chinese takeover,” another lingering sentiment since the Overseas Chinese community has dominated the local economy for almost 200 years. The new wave of military and economic pressure has not improved this perception of China in Malaysia. Unsurprisingly, a recent poll found that 67% of ethnic Chinese in Malaysia had a strongly “favourable” view of China; only a minority of all the other ethnic groups felt the same. If China aims to forward its foreign policy narrative (common interests, neighbourhood harmony, shared destiny), the rhetoric must match reality.
The China-Malaysia friendship has a precarious future if China doesn’t renegotiate the terms of the relationship. It would be a great loss for China to sever its allyship with the “heartland of ASEAN” and for Malaysia to lose its most important trading partner. It’s time for this friendship to be renegotiated.