Changes and Constants in Malaysia-China Two-Way Investment

China ASEAN Business | Thematic Report of the 50th Anniversary of China-Malaysia Diplomatic Relations

Numerous entrepreneurs have thrived, and diverse investment areas have been explored. Despite changes in investment roles and areas, the commitment to a win-win outcome remains unchanged. Thriving investment has been a powerful witness and an engine for the growing Malaysia-China relationship, and it will continue to empower the growth of the two economies.

Changes in investment roles and areas

Investment has long been a major component of Malaysia-China bilateral trade. The investment roles of China and Malaysia have evolved along with the gradual development of Malaysia-China two-way investment. Initially, China, as a capital-importing country, absorbed one-way investment from Malaysia. Later, with China’s rapid economic growth, substantial Chinese capital began to flow into Malaysia. Two-way capital flow on a mutually beneficial base drives Malaysia-China economic and trade cooperation and continues to aid in a strengthening relationship.

Malaysia began investing in China in 1984, with Malaysian Chinese merchants leading the way and bringing Malaysian capital into the Chinese market. By the 1990s, the Malaysian government had lifted restrictions on Malaysian Chinese visiting China. Additionally, it introduced policies to encourage Malaysian companies to invest in China, even acting as a bridge for them. The political support significantly boosted Malaysian investment in China, with substantial capital growth. By 1996, Malaysia’s investment in China had reached US$460 million, representing an astonishing 807 times the original amount.

Since China’s reform and opening up, a surge of investment from the Malaysian business community has swept across China. Malaysian investments have spanned China and diversified into sectors such as manufacturing, processing, energy, communications, real estate, entertainment, retail, services, and finance. 

Meanwhile, Chinese investors began exploring overseas markets, with Malaysia becoming a key destination. In 2003, China’s foreign direct investment flow into Malaysia surpassed US$100 million and has continued to grow since then. In addition, driven by international production capacity cooperation and China’s Belt and Road Initiative, China has been a leading investor in Malaysia for several consecutive years. From 2008 to 2017, Chinese investors were behind about 50 M&A deals totaling nearly $10 billion in Malaysia. Most of these key transactions occurred in the financial services, power and utilities, and consumer goods sectors. Additionally, infrastructure contracting has been a major investment focus for Chinese companies in Malaysia, with railway construction projects becoming particularly competitive.

As Chinese investment in Malaysia has accelerated, the investment sectors have become wider and more diversified to meet the development needs of Malaysia. Currently, Chinese investment in Malaysia is expanding into areas such as the Internet of Things, digital economy, new energy, green development, automobiles and technical equipment, and biotechnology, shifting from traditional sectors like energy and minerals, construction and real estate, infrastructure construction, and machinery manufacturing.

Malaysia-China two-way investment has been robust over the past 50 years. From 2016 to 2020, China was Malaysia’s largest source of foreign investment in the manufacturing sector for five consecutive years, and in 2021, Malaysia ranked top three ASEAN countries investing in China. Furthermore, flagship programs have yielded fruitful results, including “Two Countries, Twin Parks”, Edra Power Holdings Sdn. Bhd., China Railway Rolling Stock Corporation Rolling Stock Center, D&Y Textile (Malaysia) Sdn. Bhd., and GDS IDC Services (Malaysia) Sdn. Bhd. These investments and cooperation vividly demonstrate the mutually beneficial outcomes between Malaysia and China.

Constants in extensive consultation, joint contribution, and mutual development

In March 2023, Malaysian Prime Minister YAB Dato’ Seri Anwar Bin Ibrahim highlighted China’s role as a key engine driving economic growth and a key economic partner for Malaysia during his address at “INVEST MALAYSIA 2023”.

Chinese enterprises have invested in various sectors of Malaysia for years, rapidly upgrading infrastructure and directly benefiting the livelihood of its people. These investments have introduced advanced technology, managerial experience, and platforms that help to cultivate talents and technological integration. For instance, in 2017, Zhejiang Geely Holding Group acquired a 49.9% stake in Proton Cars, taking responsibility for its overall operation and management. Thanks to Geely’s products, technology, and human resources management, Proton’s revenue tripled and turned losses into profits. Malaysia currently has significant infrastructure investment needs, and Chinese capital is well-positioned to address these funding gaps.

From the perspective of enterprise cooperation, a growing number of Chinese enterprises are establishing key operations in Malaysia, such as manufacturing bases and regional headquarters. This trend not only creates jobs for local Malaysians but also facilitates technological transfer. For example, Huawei has invested substantial manpower and resources to localize its Malaysian business, promote technology, and develop social services. Furthermore, it regards Malaysia as its regional hub, with its Kuala Lumpur office overseeing sales and management operations across Malaysia, Singapore, Brunei, Indonesia, the Philippines, Australia, Papua New Guinea, and New Zealand.

Initially, capital from Malaysia flowed into China, creating significant job opportunities and promoting China’s economic growth. Malaysian businesspeople who invested in China served as a bridge for trade and economic cooperation between the two countries. They encouraged other foreign businesses to invest in China and helped Chinese companies explore overseas markets. 

All in all, over the past half-century of two-way investment and cooperation, Malaysian and Chinese enterprises have acted as both investors and beneficiaries. They have co-built and shared in the success, collaborating in pursuit of higher levels of development.

Investing in new areas and releasing new potential

Malaysia is currently at a vital juncture of economic and industrial transformation. The Malaysian government has introduced several key initiatives, including “Industry 4.0”, the “New Industrial Master Plan 2030”, and “MyDigital”, aiming to promote influential projects and areas such as electric vehicles and renewable energy, halal food, semiconductor and advanced electronics, aerospace, specialty chemicals and advanced materials, and pharmaceuticals and medical devices. 

Simultaneously, China is gearing up for comprehensive, high-quality modernization with Chinese characteristics. The Policies outlined in the 14th Five-Year Plan and the Digital Silk Road place greater emphasis on scientific research, and China leads in artificial intelligence, digitalization, and automation. These advancements offer valuable insights and references for Malaysia. Malaysia and China are geographically close neighbors, sharing similar development stages and strong economic complementarities. There are broad prospects for cooperation in production capacity and investment, with immense potential for collaboration in capital, market, technology, and human resources in emerging areas.

Currently, Malaysia and China are working on signing a Memorandum of Understanding on the digital economy, which would favor investment in the sector. In December 2023, Malaysia and China announced a mutual visa exemption policy, significantly facilitating two-way talent flows. This policy benefits business professionals in their work, study, and communication, while also promoting exchanges for technical experts and high-end talents. It opens up new opportunities for two-way investment in high-tech areas.

The Malaysian Investment Development Authority currently operates three offices in China, providing comprehensive support to Chinese enterprises in investment procedures, production site selection, land use, infrastructure, preferential policies, and human resources in Malaysia. In January 2020, Invest Kuala Lumpur inked a memorandum of agreement on the China Special Channel with the China Enterprises Chamber of Commerce in Malaysia, the Malaysia-China Business Council, Associated Chinese Chambers of Commerce and Industry of Malaysia, and the Malaysia-China Chamber of Commerce. This agreement mainly aims to attract investment from Chinese enterprises in sectors including consumer technology, smart technology, renewable resources, medical technology and equipment, electronics and electrical, and mechanical engineering. In the foreseeable future, more Chinese investment is expected to flow into Malaysia, further empowering its growth.

China and Malaysia have been partners for half a century, cooperating and sharing in prosperity with joined hands. The growth trajectories of Malaysia and China align with each other, and investment and cooperation remain powerful engines driving the development of a strong bilateral relationship. Strengthening Malaysia-China two-way investment and cooperation is not only essential given the international circumstances, but also necessary for the two countries’ growth, economic collaboration, and enhanced international competitiveness.

来源：《中国东盟商界》杂志

文：李红婷

翻译：文夏清       

审定：林   涵