Malaysia - Caught Between The US-China Rivalry?

Malaysia’s relations with China and the United States (US) have remained cordial, and Malaysia has taken an equidistant approach in dealing with their rivalry. It comes as no surprise that both countries continue to establish their influence in Indo-Pacific and Southeast Asia. At certain instances, frictions arose, but Malaysia was successful in mitigating those challenges by redirecting the focus on the prospects of pursuing shared interests and cooperation. Interestingly, China is Malaysia’s largest trading partner, with an annual trade reaching US$124 billion in 2019. The US-China growing antagonism matters to Malaysia and two reasons explain its relevance, according to Shankaran Nambiar of the Malaysian Institute of Economic Research. Firstly, the rivalry has an effect on global markets which results in influencing the demand for Malaysian exports. Secondly, China is an important trade partner, and any turbulence in trade policies impacts the trading position of Malaysia as its intermediate exports to China are significantly high. Also, the interconnectedness of Malaysia in the global economy makes it more susceptible and vulnerable to external shocks and disruptions.

In the recent spat between China and the US, Malaysia is cautiously pursuing a hedging strategy.

In the recent spat between China and the US, Malaysia is cautiously pursuing a hedging strategy. Given the economic interests at play, Malaysia’s tactic tends to acquiesce toward China, despite the initial concern that Mahathir Mohammad would defy China and shift Malaysia’s policy by cancelling several projects undertaken under the Belt and Road Initiative (BRI). Notably, all BRI ventures were skillfully renegotiated by his Pakatan Harapan coalition government, Huawei’s 5G network was welcomed, and additional trade and investment were pursued.

Moreover, Mahathir endorsed Huawei at a time when the US was forcing its allies to abstain from contracting with the telecommunications company to provide 5G technology. Mahathir explicitly asserted that Huawei technology would be used “as much as possible” and criticized the US efforts of blocking the company. Moreover, he dismissed the national security concerns highlighted by the US, stating, “At the moment we have not found [this technology] a threat to our security. Not yet, maybe later. But we cannot just follow actions taken by other countries because Chinese technology seems to be ahead of Western technology.” In October 2019, Huawei’s nationwide 5G coverage was launched in Malaysia. The example demonstrates the positioning of the country. The bandwagoning with China, however, is unlikely to be altered under the current coalition government headed by Prime Minister Muhyiddin Yassin.

Malaysia continues to tacitly cooperate with the US in areas of defence and security, while maintaining its autonomy.

On the contrary, the importance of the US is critical for Malaysia’s small economy, with their bilateral trade estimating around US$59.2 billion. The US companies account for approximately 25% of Malaysia’s foreign investment, which appears to be higher on the development ladder than Chinese investment that focuses on real estate and infrastructure. Many analysts are of the opinion that the US has performed poorly in highlighting the potential benefits that can be reaped from stronger ties between the two countries, particularly under the Trump administration. Nevertheless, Malaysia continues to tacitly cooperate with the US in areas of defence and security, while maintaining its autonomy. The apprehension with regards to the on-going US-China trade war appears valid as it affects greatly the countries that are vital hubs in the global supply chain and raises fears of a global recession.

But the overall impact of the rivalry is destabilizing, and Malaysia remains highly ambivalent toward such animosity.

The US is trying to broaden its partnership across the region to resist China’s growing influence; however, Malaysia remains highly indifferent. Thus, the prospect of Malaysia switching sides is gradually diminishing. Interestingly, Malaysia does not appear critical of China’s de-facto leadership in the region. The relations between the two countries are likely to continue in the same trajectory due to the underlying economic interdependence. With the US tilt in the region mainly focused on ‘freedom of navigation” and “military instruments”, the policy of hedging between the great powers is a realistic stance. The current economic trends restrict Malaysia in exclusively aligning itself with one country.

The rivalry provides some immediate benefits to Malaysia as the US and China are closely intertwined in a competition. But the overall impact of the rivalry is destabilizing, and Malaysia remains highly ambivalent toward such animosity. Also, the harsh economic measures taken by Washington against Beijing directly undermine Southeast Asia’s economic growth. Conceivably, under the Biden administration, the involvement of the US with the region might be more stable and predictable compared to the previous administration that was going by its wits. As stated by the Malaysian Ambassador to China, Raja Nushirwan Zainal Abidin, Malaysia is not a “pawn” in the great power rivalry between China and the US.

Saman Rizwan

Saman Rizwan is a Research Assistant at the Centre for Strategic and Contemporary Research.

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