A GOOD BALANCE

Malaysia 2019 | ECONOMY | FOCUS: MALAYSIA-CHINA RELATIONS

Malaysia remains on good terms with China, proving that maintaining healthy ties with both the West and China can bring significant benefits.

Over four decades after the reestablishment of diplomatic relations between Beijing and Kuala Lumpur, the two nations continue to maintain robust economic, cultural, and political ties in Southeast Asia, while navigating around problems and setting a model for the rest of the ASEAN region. Sino-Malay relations date back to ancient times, and the two countries have supported one another in dire straits throughout history, an early example of which being China's rebuke of the 1511 capture of Malacca. To this day, ethnic Chinese people remain a part of Malaysian society.

Diplomatic ties between Malaysia and China were revived in 1974 during the then-Prime Minister, Abdul Razak Hussein's historic state visit to China, and things have been on the mend ever since. During Tun Mahathir bin Mohamad's first term as Prime Minister in the 80s-90s, bilateral relations constantly improved. From being regarded as a potential threat, China came to be regarded as if not a strategic ally then at least a trustworthy regional partner.

Bilateral relations reached new heights in 2012 when both sides agreed to honor the 40th anniversary of their renewed diplomatic ties by making 2014 “Malaysia-China Friendship Year." In that year, Malaysia received two Chinese pandas as a sign of goodwill, which now reside in the National Zoo of Malaysia. Pandas were not the only things that the two nations exchanged. In the same year, Beijing and Kuala Lumpur agreed to ramp up their two-way trade volume to USD160 billion by 2017, and China became Malaysia's number-one import and export trade partner in 2017, though the trade volume did not reach the target figure.

The two countries once more expressed their optimism on the future of their bilateral ties during the state visit of reelected Prime Minister Mahathir to China in August 2018.

This is not to say, however, that Beijing and Kuala Lumpur have no unresolved issues. Both countries have claims to the South China Sea which has, at times, resulted in less-than-cordial exchanges. However, both nations have so far opted for the path of diplomacy and dialogue to solve the issue at hand, and therefore Malaysia-China relations have not suffered. Malaysia and China have both agreed that the involvement of third parties in the South China Sea dispute will be highly counter-productive. Mahathir, on more than one occasion, argued that his country does not perceive China as a threat, going so far as to accuse some western powers of stirring conflict in the region.

It is perhaps this commitment to a regional solution that has kept Malaysia-China relations healthy, while Philippines-China relations have been undermined. The friendly, diplomatic approach taken by both sides has by-and-large guaranteed the security of maritime routes in the South China Sea, which is of crucial importance for all ASEAN economies. However, Malaysian authorities and the private sector have had mixed feelings about the widespread presence and investment of Chinese businesses—commonly known as the Bamboo Network—in their country. Admittedly, Chinese businesses are injecting cash into the economy; however, their presence also has an impact on the local business ecosystem, which is not always productive.
The most hyped instance of such frictions was the cancellation of the USD20-billion East Coast Rail Link (ECRL), which was entrusted to a Chinese contractor, Communications Construction Co Ltd (CCCC) in 2018. To make sure China would not get the wrong message, Malaysia announced that the new Cabinet's decision was made solely on economic grounds and without any political considerations.

Nevertheless, 2019 saw a number of breakthroughs in Sino-Malay relations. After some renegotiation and the Chinese party's promise to cut costs, the ECRL project was put back on track in April 2019, and Mahathir was one of the first leaders in the region to announce his country's attendance to the second Belt and Road Initiative Summit.

As a Chinese-sponsored series of megaprojects in over 150 countries, the initiative has been received with some misgivings in certain countries, but the Malaysian government has decided to remain optimistic about the initiative, letting Chinese companies to continue playing an important part in Malaysian infrastructure projects such as ECRL and Bandar Malaysia.