Malaysia seeks to balance ties amid US-China rivalry – DW – 09/04/2024

As Malaysia seeks to boost economic growth, Prime Minister Anwar Ibrahim is building closer ties with China.

This comes at a time of increasing trade and geopolitical tensions between Beijing and the US, which is also a close economic and strategic partner of Malaysia.

In June, Chinese Premier Li Qiang visited Malaysia and signed several deals, including the extension of a five-year economic and trade cooperation agreement.

Li and Anwar also attended the foundation stone laying of a train station along the East Coast Rail Link (ECRL), a key project of China’s Belt and Road Initiative (BRI) in Malaysia.

Malaysia is one of the largest recipients of BRI funding in Southeast Asia, a global infrastructure financing program that is a cornerstone of Beijing’s foreign policy. Li’s visit also marked the 50th anniversary of diplomatic relations between China and Malaysia.

The two countries have other agreements, including promoting investment in the digital economy, boosting housing and urban development, and commitments to tackling transnational crime, improving higher education, tourism and cultural cooperation. China has been Malaysia’s top trading partner since 2009.

Malaysia has also recently expressed interest in joining the BRICS bloc of emerging market economies, of which China is one of the major members. Brazil, Russia, India and South Africa also belong to the bloc.

“Today, an important aspect of the relationship seems to be economic. The Anwar government seems to see China as an important market opportunity and source of investment,” Ian Chong, a political scientist in Singapore, told DW.

Manipulating tensions in the South China Sea

While Anwar is strengthening economic ties with China, Malaysia is also taking a more restrained approach to managing geopolitical tensions in the South China Sea.

China claims almost the entire sea, despite a 2016 ruling by an international tribunal that such claims have no legal basis.

The Philippines, which filed the lawsuit in The Hague, is at the worst of the conflict with China over competing maritime claims.

Chinese coast guard vessels, some as large as destroyers, regularly attack much smaller Philippine vessels near disputed shoals.

Vietnam, Brunei and Taiwan also dispute Beijing’s vast claims. So does Malaysia. In 2019, under a previous administration, Malaysia’s Foreign Ministry called Beijing’s claims “ridiculous.” The current administration, however, has been less vocal about the South China Sea.

“Perhaps Anwar’s government sees China as a means to help Malaysia’s economy, or perhaps it fears potential punishment from Beijing if it gets angry with Malaysia,” analyst Chong said.

This is despite reports that Chinese coast guard and navy vessels are in Malaysia’s Exclusive Economic Zone (EEZ) near Luconia Shoal, also known as Batu Patinggi Ali, 100 kilometres (60 miles) off the coast of the Malaysian state of Sarawak.

Malaysia “has also taken a quieter approach in its own dispute with Beijing,” Chong said, adding that Anwar called on Malaysians to “be calm” in response to the presence of the Chinese vessels.

Zachary Abuza, a professor at the National War College in Washington who specializes in Southeast Asia, said he expects more Chinese investment in Malaysia.

“Although bilateral relations with the government of (former Prime Minister) Mahathir Mohammed briefly deteriorated after the 2018 general election that ousted Prime Minister Najib Razak, the traditionally close ties have since been restored under Anwar Ibrahim,” he told DW.

“I expect China to invest heavily 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 American manufacturers to China, in part to hamper Beijing’s ability to produce advanced military systems.

This raises the question of whether Malaysia’s semiconductor exports to China could disrupt US-Malaysia relations.

The US is also one of Malaysia’s major trading partners and both countries have enjoyed long-standing secure and economic ties since diplomatic relations were established 67 years ago.

But Abuza says Anwar is not deterred by possible retaliation from Washington.

“Anwar is really irritated by the US pressure and the threat of sanctions against Malaysia if they evade US sanctions and sell semiconductors to Russia, Iran and other sanctioned countries. Malaysia has made it clear that they intend to sell to everyone,” he said.

As the US and China compete for order and stability in Asia, smaller countries in the region are trying to pull off a balancing act.

Countries like Thailand and Vietnam are examples of how to keep relations positive without publicly taking sides.

“Like many other governments in Southeast Asia, Anwar’s government is betting that it can maintain positive ties with both the US and China to create the best of both worlds,” Chong said.

“But that assumes that one or both major powers continue to accept this position and do not punish Malaysia for too close ties with its rival, either in reality or in perception. That is a bet that is beyond Malaysia’s control.”

Edited by: Wesley Rahn