As Malaysia seeks to boost economic growth, Prime Minister Anwar Ibrahim is building closer ties with China.
This comes amid rising trade and geopolitical tensions between Beijing and the US – also a close economic and strategic partner for Malaysia.
In June, Chinese Premier Li Qiang visited Malaysia and signed several deals, including the renewal of a five-year economic and trade cooperation agreement.
Lee and Anwar also attended the groundbreaking ceremony of a train station along the East Coast Rail Link (ECRL), a major project in Malaysia.
Malaysia is one of the top recipients of BRI funds in Southeast Asia, which is part of Beijing’s global foreign policy. Li’s visit also marked the 50th anniversary of diplomatic ties between China and Malaysia.
Both countries included commitments to promote investment in the digital economy, accelerate housing and urban development and combat transnational crime, improve higher education, tourism and cultural cooperation. China has been Malaysia’s top trading partner since 2009.
Malaysia is also among the more recent emerging market economies, with China being one of the key members of the bloc that also includes Brazil, Russia, India and South Africa.
“Today, the main aspect of the relationship seems to be economic. The Anwar administration sees China as a huge market opportunity and source of investment,” Singaporean political scientist Ian Chong told DW.
Tampering tensions in the South China Sea
As Anwar strengthens economic ties with China, Malaysia too.
China claims almost the entire sea despite an international tribunal ruling in 2016 that such claims have no legal basis.
The Philippines, which launched the legal case at The Hague, is at loggerheads with China over maritime claims.
Chinese coast guard vessels, some of which are the size of navy destroyers, and several smaller Philippine vessels near the disputed shoals.
Vietnam, Brunei and Taiwan also dispute Beijing’s sweeping claims. And so does Malaysia. In 2019, under the previous government, Malaysia’s foreign ministry called Beijing’s claims “ridiculous”. However, the current government is making less noise on the South China Sea.
“Perhaps the Anwar administration sees China as a tool to propel Malaysia’s economy, or perhaps it is wary of possible punishment from Beijing if it offends Malaysia,” said analyst Chong.
Despite reports of Chinese coast guard and navy vessels moving in the exclusive economic zone (EEZ) near Malaysia’s Luconia Shoal, also called Batu Patinggi Ali, located 100 kilometers (60 mi) off the coast of Malaysia’s Sarawak state.
Malaysia has also “taken a calm approach to its dispute with Beijing,” Chong said, adding that Anwar had asked Malaysians to “keep calm” in response to the presence of Chinese vessels.
Zachary Abuza, a professor at the National War College in Washington who focuses on Southeast Asia, said he expects more Chinese investment in Malaysia.
“While there was a brief lull in bilateral relations with Govt [former PM] After Mahathir Mohamad ousted Prime Minister Najib Razak in the 2018 general election, they have returned to their traditional close ties under Anwar Ibrahim,” he told DW.
“I expect significant Chinese investment in Malaysia’s semiconductor industry, mainly to avoid Western sanctions,” he added.
US-China tensions in the background
In 2022, the US imposed export restrictions on advanced semiconductor chips from US manufacturers to China, to hamper Beijing’s ability to produce high-tech military systems.
This raises questions about whether semiconductor exports from Malaysia to China could dampen US-Malaysia relations.
The US It is also one of Malaysia’s top trading partners and the two countries have long enjoyed security and economic ties since diplomatic ties were established 67 years ago.
But Abuza says Anwar fears no retaliation from Washington.
“Anwar has actually faced US pressure and the threat of sanctions on Malaysia if they evade US sanctions and sell semiconductors to Russia, Iran and other sanctioned countries. Malaysia has made it clear that they want to sell to anyone,” he said.
The US and China present competing visions for order and stability in Asia, with the region’s smaller countries performing a balancing act.
Countries like Thailand are examples of how to keep relations positive without publicly taking sides.
“Like other Southeast Asian governments, the Anwar administration can bet that it can have its cake and eat it too, maintaining positive relations with both the US and China,” Chong said.
“However, it assumes that one or both of the major powers continue to accept this position and not punish Malaysia for being too close to their rival, either in reality or in perception. That is a condition that is beyond Malaysia’s control.”
Edited by: Wesley Rahn
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