Navigating the Dragon: Malaysia's Path to Prosperity with China
As Malaysia and China mark 50 years of diplomatic ties, this milestone prompts deep reflection on the relationship's depth and future. In April 2024, Malaysia's trade recorded a double-digit growth of 12.1% year-on-year, highlighting the country's strong economic performance amidst global recovery. Given this, Malaysia's role as a middle power on the global stage has become nuanced and increasingly critical. While China has been Malaysia's largest trading partner for decades, this dependency raises questions about Malaysia's economic sovereignty and strategic autonomy, especially amid escalating US-China tensions.
Malaysia's economic interdependence with China is undeniable. The robust trade relationship has bolstered Malaysia's economy, with exports rebounding by 9.1% year-on-year in April 2024 to RM114.72? billion (USD 24.09 billion), reflecting a stronger recovery in global trade. Mega projects like the much debated Belt and Road Initiative (BRI) has significantly shaped China-Malaysia relations over the years, epitomised by projects like the East Coast Rail Link (ECRL), an ambitious and pivotal infrastructure endeavour spanning Malaysia's east-west connectivity. Despite initial challenges and renegotiations under different Malaysian administrations, the ECRL still stands as a testament to continued bilateral cooperation and strategic infrastructure development. Beyond physical connectivity, clustered initiatives such as the Malaysia-China Kuantan Industrial Park promise broader economic ambitions of the BRI, facilitating industrial cooperation and trade integration within the region. As both countries navigate geopolitical shifts and economic considerations, the BRI remains a focal point for enhancing mutual development and connectivity beyond Malaysia, and across Southeast Asia.
However, this economic reliance poses risks. Should geopolitical tides shift, Malaysia's ability to navigate these waters without jeopardising its economy may be severely tested. As the global landscape becomes increasingly polarised, Malaysia must weigh its economic benefits against potential political costs.
Beyond economics, Prime Minister Anwar Ibrahim’s ambition to leverage the ASEAN forum to address longstanding geopolitical and border tensions with China is a bold but precarious strategy. ASEAN's consensus-driven approach has been said to sometimes result in diplomatic inertia, and Malaysia's push during its ASEAN Chairmanship in 2025 could disrupt regional harmony. Anwar’s stance highlights a crucial dilemma: balancing assertive diplomacy with the need to maintain a vital economic partnership.
Balancing Assertive Diplomacy with Economic Partnerships
Assertive Diplomacy: Navigating Geopolitical Tensions
Assertive diplomacy involves taking a firm stand on national interests and advocating for Malaysia’s position on the global stage. This could mean addressing issues such as territorial disputes in the South China Sea, advocating for fair trade practices, and ensuring that Malaysia’s sovereignty is respected. Prime Minister Anwar Ibrahim’s strategy to leverage ASEAN to address these tensions does reflect an assertive diplomatic approach, however, could it backfire?
Assertiveness must be carefully calibrated to avoid unnecessary provocation. Malaysia should look to examples from other ASEAN countries with greater military power that have successfully balanced assertive diplomacy with economic cooperation. For instance, despite differences, Vietnam has managed to assert its territorial claims while maintaining robust trade relations with China, through a combination of strategic diplomacy, economic pragmatism, and military readiness. Malaysia could leverage this case study and tailor suit an approach that works for Malaysia, one which clearly articulates the national interests and stands firm on critical issues through constructive dialogue to avoid unnecessary escalation.
Maintaining Vital Economic Partnerships: Ensuring Stability and Growth
As mentioned, assertive diplomacy must not come at the expense of Malaysia’s economic partnership with China. China’s role as Malaysia’s largest trading partner cannot be overlooked, as it provides significant economic benefits, including trade, investment, and tourism. Maintaining a stable and positive economic relationship with China is a no-brainer for Malaysia’s continued growth and development.
Strategic partnerships resulting from economic diversification enhance bargaining power. By expanding trade partnerships beyond China, Malaysia can reduce its economic dependency and mitigate risks associated with geopolitical tensions. Strengthening economic ties with other major economies, such as the US, Japan, and the European Union, can provide Malaysia with a more balanced and resilient economic portfolio. As seen in the first quarter of 2024, a 7.1% year-on-year growth to RM690.59 billion (USD 145.02 billion) with notable increases in exports to ASEAN, the United States, and Japan is commendable and should be maintained. This diversification strategy can also be extended to sectors such as technology, education, and cultural exchanges, which can further enhance Malaysia’s global standing while checking the boxes of the sustainable Madani vision.
Come 2025, Malaysia must also leverage its ASEAN Chairmanship to invest in multilateral diplomacy and form regional alliances. Strengthening ties with ASEAN neighbours and other middle powers can provide a buffer against over-reliance on any single nation. By taking an active role in ASEAN, Malaysia can help shape the regional agenda and ensure that its interests are represented, thus strengthening the nation’s influence in the region.?
Grass is Greener Where You Water It: Balancing FDI and local MSMEs?
Foreign direct investment (FDI) boosts investor confidence and reflects the lucrative prospects of a nation, but this is just the surface. Local micro, small, and medium enterprises (MSMEs), which are the backbone of Malaysia's GDP, must not be overlooked. To increase competitiveness on the global scale, we must first upgrade ourselves. Current incentives and support for MSMEs, though ever expanding, need to be evaluated to ensure they are sufficient and effective. Helping more MSMEs expand to international markets like China is a crucial step in ensuring their growth and sustainability. China, being one of the largest consumer markets in the world, offers immense opportunities for Malaysian MSMEs to tap into.
A Balanced Path Forward
Malaysia’s future hinges on strategic balance: fortifying regional alliances, diversifying its economic base, and engaging in smart diplomacy. The consistent trade surpluses, including a notable RM10.87 billion (USD 2.28 billion) surplus in February 2024, is a wishful sight demonstrating economic resilience amid global headwinds. Malaysia has proven time and again that we are able to navigate the complexities of its middle-power status. Looking forward, the path to high-income nation is fraught with challenges, but with astute leadership and a clear vision, Malaysia can and should be able to maintain its sovereignty and continue to thrive amidst global uncertainties.
Finally, as both Malaysian and Chinese by heritage, I have a strong affinity for both nations. Beyond the numbers, this dual perspective represents the harmonious blend of personal identity. I see the potential for Malaysia to thrive, not just as a middle power, but as a beacon of how cultural and economic synergy can lead to sustainable growth.