Malaysia lauds 'historic' deals in Beijing but shadow of South China Sea row remains
Malaysia's Prime Minister Anwar Ibrahim made a big splash of his maiden bilateral visit to top trading partner China last week, when he oversaw the signing of 170 billion ringgit (US$38.6 billion) worth of investment commitments by Chinese firms in various sectors.
It was a record figure spread across 19 separate deals signed between Chinese and Malaysian businesses. Anwar described it as a "historic" achievement, on the back of his meeting with Chinese President Xi Jinping in Beijing where they held broad talks on the two nations' continued partnership.
But beyond the headline figures, Anwar's visit was as much about securing fresh investments and trade deals as it was about managing Malaysia's ties with China, and how those ties are being projected to the rest of the world.
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The Malaysian government's official position on the outcome of the visit was one of mutual respect and friendship. Anwar and Xi exchanged views on areas including economic cooperation and education, while also agreeing on the need for dialogue and multilateralism in dealing with regional and international issues.
In his introductory remarks before closed-door talks, Anwar said Xi was a "visionary" who had "not only changed the course of China but also given a ray of hope to the world and mankind, with the visions that extend beyond China, into the region and the world".
"Anwar was thoroughly effusive about Malaysia-China relations," said Shahriman Lockman, a director in the chief executive's office of the Institute of Strategic and International Studies (ISIS) Malaysia. "But, of course, that's just what one does in Beijing."
However, all the talk of friendship between the two nations - Malaysia was among the first in Southeast Asia to establish diplomatic ties with China nearly 50 years ago - belie some long-standing issues that could drive a wedge between them.
Malaysia, along with several other Asean members, is contesting overlapping claims made by Beijing over the South China Sea.
Anwar on Tuesday told parliament that Malaysia was open to negotiations with China about its concerns over energy activities carried out by Malaysian energy giant Petronas in the contested area, but stressed that Petronas would continue with its exploration activities as "Malaysia sees the area as Malaysian territory".
Collins Chong Yew Keat, a foreign-policy analyst with Malaya University, said that such remarks were a necessary display of Malaysia's sovereignty, but added that such posturing may end up harder than expected to maintain.
Malaysia, like the neighbouring Philippines, was keen on separating issues related to the South China Sea from its broader bilateral ties with China, with the hope that it would not get in the way of the need to deepen their economic ties, he said.
"However, Malaysia does not share Manila's strategic wisdom in opening up to more US security assurances, and this is the area where Beijing is exploiting the most," Chong told This Week in Asia.
He said Malaysia should avoid bilateral negotiations with China when it came to the contested waterway - through which at least US$3 trillion in goods passes annually - as China would use all its leverage to dictate more favourable terms for itself.
China's foreign ministry said on Tuesday it would like to work with Malaysia to handle differences in the South China Sea through dialogue and consultation in an appropriate manner.
"China safeguards legitimate rights and interests in the South China Sea," Chinese foreign ministry spokeswoman Mao Ning said, responding to a question about Malaysia's warning of a protest note if there were "collisions" between Malaysian and Chinese vessels in the area.
One thing working in Malaysia's favour is that does have the benefit of a diversified source of foreign investments and trading partners, according to ISIS Malaysia's Shahriman.
China has remained Malaysia's largest trading partner for the past 14 years, and in 2022 led in total investments with US$12.5 billion brought to Malaysia by Chinese firms.
But it was only last year that Chinese investment inflows outperformed the United States and Singapore as Malaysia's traditional foreign investment sources, and Shahriman does not expect China to stay at the top for too long.
"That's because US companies are gradually shifting their supply chains out of China, and Malaysia is one of their options," he said, adding that many multinational firms tended to invest in Malaysia via Singapore.
"So I don't think Malaysia risks overexposure to China for investments yet. It is Malaysia's massive trade with China that counts as over-dependence. But for now, there aren't many recovering major economies out there, so it's not as if we have many choices."
Malaysia's Trade Minister Tengku Zafrul Aziz, in Hong Kong for a two-day visit, told business executives on Tuesday at an event organised by the Malaysian Chamber of Commerce for Hong Kong and Macau that the deals signed in Beijing "created momentum" for more such two-way investments.
Malaysia "will continue to undertake significant trade and investment with both China and the US amidst rising geopolitical tensions between the two countries", Zafrul said, adding that the Southeast Asian nation's semiconductor, telecommunications and technology industries would be "key beneficiaries" of any potential investment diversion.
China and the US are Malaysia's top two foreign direct investment contributors, accounting for 55.4 billion ringgit and 29.2 billion ringgit in approved investments in 2022, according to official data.
Additional reporting by Reuters
This article originally appeared on the South China Morning Post (SCMP).
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