Deepening economic ties with China
Malaysia needs a more coherent and strategic approach on investment from China.
PRIME Minister Datuk Seri Najib Tun Razak will soon embark on his sixth visit to China against the backdrop of strong and healthy MalaysiaSino relations.
Regular visits to China have been the practice of all successive Malaysian Prime Ministers since the visit of the late Tun Abdul Razak Hussein in 1974.
These visits signify the importance Malaysia attaches to its relations with China, particularly in enriching the economic component of bilateral relations.
Because of this, there is considerable attention and interest on both sides. China’s huge investment flows in the real estate and construction sectors have generated the strongest attention. In the past, investment from China in these areas was either negligible or non-existent.
The total estimated value of Chinese investment committed since 2012 in the non-manufacturing sector is as high as RM123bil, stretched over many years.
As for direct investment flows in the manufacturing sector, Chinese investment, which was a mere RM164mil in 2009, jumped to RM13.6bil in 2015, mainly in metallic products.
The trade and tourism sectors continue to show positive growth with China as Malaysia’s largest trading partner. Total trade at the end of 2015 was US$60bil (RM230.80bil). Malaysia has gradually recovered from the twin aviation tragedies of 2014 and in 2015, recording some 1.7 million Chinese visitors.
The principal catalyst is the continued commitment of the leadership of both Malaysia and China to further deepen and broaden the bilateral partnership.
These relations are based on mutual political trust, comfort and friendship. Najib has consistently reaffirmed Malaysia’s commitment to further broaden Malaysia-China partnership as a national goal, whilst strengthening the legacy of his late father, Tun Razak.
He has introduced several significant and strategic policies and initiatives.
On economy and trade, Najib has provided strong support to the implementation of the Asean-China Free Trade Agreement, boosting the volume and value of total trade. Incentives now exist for Chinese investors and companies to explore and invest in Malaysia.
The availability of the e-visa to Chinese tourists has contributed much to the inflow of Chinese visitors into Malaysia and enhanced people-to-people contact.
The Prime Minister also paid close attention to development and exchanges in the education and cultural sectors between the two countries. He secured the establishment of a Xiamen University in Malaysia, the first Chinese university to set up a branch campus overseas.
The soon-to-be established China Cultural Centre in Kuala Lumpur is yet another demonstration of Malaysia’s policy of encouraging stronger cultural interactions between the two countries.
The signing of the comprehensive and strategic partnership between Malaysia and China provided yet another platform for the two countries.
Malaysia’s handling of the South China Sea issue also demonstrates Najib’s pragmatic, composed and non-confrontational approach in managing the complex issue so as to ensure continued peace, stability and development in the region.
An equally significant factor to note on the reasons for the high and sizeable entry of Chinese investment into Malaysia is the push factor emanating from China itself. President Xi Jinping, unlike his previous predecessors, has placed a much stronger emphasis on China to play a bigger and more active role in regional and global affairs.
In pursuit of this, Xi initiated several platforms and specific architectures such as the “Belt and Road” Initiative to encourage and facilitate deeper and wider Chinese engagement with the world.
The “go global” policy encouraging Chinese companies to invest abroad was put in high gear, with priority given to the neighbouring countries. China’s economic slowdown, coupled with its “excess capacity/production” issue, also pushed Chinese enterprises to seek opportunities overseas.
These push factors benefited Malaysia, which has enthusiastically welcomed Chinese investment in several sectors in which the Chinese are viewed as being competent and competitive enough to participate. We can agree that the pursuit of the two countries’ leadership policies and their mutual commitment towards a deeper, comprehensive, strategic bilateral partnership, have brought about a new dynamic in the economic interaction between Malaysia and China.
Going forward, it is important for Malaysia to consider charting a more coherent and strategic approach on the makeup of investment from China so as to meet the optimal balance relevant to Malaysia’s interests and needs.
There is a need to attract sectors such as high-tech, ICT, capital market and relevant services. These sectors could contribute much to the upgrading of Malaysia’s value chain.
It is also pertinent that Malaysia be more conscious of the types of investments so as to ensure that those falling under the “excess capacity/production” categories of industries do not land themselves freely in Malaysia, as it could have an adverse effect on the health of existing Malaysian companies.
While investments from China are indeed welcomed, we also need to ensure that such partnership results in a win-win situation, the very principle which China herself has consistently stated.
There is much that China can contribute to Malaysia’s economic transformation and capacity building. Malaysia has benefited from the investment of developed countries such as the United States, Japan, South Korea, Taiwan and Singapore. As a relative newcomer in the investment play in Malaysia, there is no doubt that China too, could make a significant and impactful footprint on Malaysia’s future growth and prosperity.
We are confident that the Prime Minister’s visit to China will be another significant as well as a successful journey to further cement the existing close ties, particularly in the economic partnership for mutual benefit and prosperity of the two countries.
There is considerable attention and interest on both sides.