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China and Malaysia: Renewing Economic Ties with a New Pact

Published by Elley
Edited: 1 month ago
Published: June 19, 2024

China and Malaysia: Renewing Economic Ties with a New Pact As the world economy continues to evolve, so too do the relationships between major trading partners. In this context, China and Malaysia have announced plans to strengthen their economic ties through a new bilateral agreement. Background: China and Malaysia have

China and Malaysia: Renewing Economic Ties with a New Pact

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China and Malaysia: Renewing Economic Ties with a New Pact

As the world economy continues to evolve, so too do the relationships between major trading partners. In this context, China and Malaysia have announced plans to strengthen their economic ties through a new bilateral agreement.


China and Malaysia have enjoyed a long-standing economic partnership, with Malaysia being one of China’s largest trading partners in the Association of Southeast Asian Nations (ASEAN) bloc.

Recent Tensions:

However, relations between the two countries have been strained in recent years due to territorial disputes in the South China Sea.

New Agreement:

In an effort to put past tensions behind them and focus on economic cooperation, China and Malaysia have signed a new Comprehensive Strategic Partnership Agreement (CSPA).

Key Areas of Cooperation:

The CSPA covers a wide range of areas, including trade and investment, infrastructure development, people-to-people exchanges, and cultural cooperation.

Trade and Investment:

The agreement is expected to boost trade between the two countries, with China pledging to increase imports from Malaysia.

Infrastructure Development:

Another major area of cooperation is infrastructure development, with China set to invest billions of dollars in Malaysian projects such as high-speed rail and the expansion of ports.

People-to-People Exchanges:

The CSPA also emphasizes the importance of people-to-people exchanges, with a focus on increasing educational and cultural ties between the two countries.

Benefits for Both Countries:

The new agreement is expected to bring significant benefits to both China and Malaysia, with increased trade and investment creating new opportunities for growth.


Overall, the signing of the CSPA represents a significant step forward in China-Malaysia relations, with both countries committing to strengthening their economic ties and putting past tensions behind them.

China and Malaysia: Renewing Economic Ties with a New Pact

Historical Economic Relationship Between China and Malaysia: Renewed Partnership in the Current Global Economy

Since ancient times, China and Malaysia have maintained a significant economic relationship. From the early trading of spices, silks, and porcelains during the

Tang Dynasty (618-907 AD)

to the establishment of Chinese settlements in Malaysia during the

Ming Dynasty (1368-1644)

, this relationship has played a crucial role in shaping the economic and cultural fabric of both nations. With Malaysia’s rich natural resources, including oil, gas, timber, and minerals, and China’s manufacturing prowess and vast consumer market, the partnership has continued to evolve over centuries.

Post-Colonial Era

In the

post-colonial era

, China’s economic engagement with Malaysia intensified. Between 1974 and 1983, under the Look East Policy, Malaysia sought to learn from Japan’s industrialization experience. However, China’s rapid economic growth during this period also provided new opportunities for cooperation. The establishment of the

Free Trade Area

in 2010 further strengthened bilateral economic ties, with Malaysia becoming China’s seventh-largest trading partner and China being Malaysia’s third-largest.

Current Global Economy

In the

current global economy

, marked by increasing protectionism and economic uncertainty, the renewed partnership between China and Malaysia assumes greater importance. Both countries can benefit from each other’s comparative advantages – Malaysia’s resources and China’s manufacturing capabilities, technology transfer, and market access. Moreover, as part of the

Belt and Road Initiative

, China is investing heavily in Malaysia’s infrastructure development, which can contribute to regional connectivity and economic growth.

China and Malaysia: Renewing Economic Ties with a New Pact


Overview of Malaysia’s Economic Situation: Challenges and Opportunities

Malaysia, a Southeast Asian country with a population of approximately 32 million, has made significant strides in its economic development since gaining independence in 1957. However, the Malaysian economy faces several challenges, including a heavy reliance on commodities exports, a large trade deficit, and rising debt levels. These issues have been exacerbated by the global economic downturn caused by the COVID-19 pandemic. Nevertheless, Malaysia‘s strategic location and rich natural resources provide ample opportunities for growth in sectors such as manufacturing, tourism, and services.

China’s Role as a Major Trading Partner for Malaysia

China, the world’s second-largest economy, has emerged as a major trading partner for Malaysia since the establishment of diplomatic relations in 197In 2018, China was Malaysia’s largest trading partner, accounting for 18.6% of its total trade. The bilateral trade volume reached RMB 220 billion (approximately USD 33.5 billion). This economic relationship is primarily driven by Malaysia’s export of raw materials, including palm oil and liquefied natural gas, to China and China’s exports of manufactured goods to Malaysia.

Previous Economic Cooperation between the Two Countries

China-Malaysia Free Trade Agreement (2010)

To further strengthen economic ties, Malaysia and China signed the China-Malaysia Free Trade Agreement (CMFTA) in 2010. The agreement aimed to reduce tariffs on goods traded between the two countries, increase investment flows, and enhance cooperation in areas such as services, intellectual property rights, and competition policy. The CMFTA has contributed to an increase in bilateral trade, with the total trade volume between China and Malaysia growing from USD 49.3 billion in 2009 to USD 68.5 billion in 2013.

Beijing-Kuala Lumpur Economic Corridor (BKEC)

Another significant economic initiative is the Beijing-Kuala Lumpur Economic Corridor (BKEC), which was agreed upon during Chinese President Xi Jinping’s visit to Malaysia in 201The BKEC aims to promote economic cooperation and development along the Beijing-Kuala Lumpur railway route, which will connect China’s Guangdong Province with Malaysia’s southern states. This initiative is expected to increase trade and investment flows between the two countries, as well as create new economic opportunities in areas such as manufacturing, logistics, and tourism.
China and Malaysia: Renewing Economic Ties with a New Pact

I The New Economic Pact

The New Economic Pact (NEP), also known as the Agreement on Trade, Investment, and Cooperation between CountryA and CountryB, is a groundbreaking accord aimed at strengthening bilateral economic ties and enhancing mutual trade and investment. Signed in the year 20XX, this pact is a testament to the


of both nations towards fostering

economic growth

, increasing


, and promoting



Some of the key features of the NEP include the elimination or reduction of tariffs and non-tariff barriers, recognition and protection of each other’s intellectual property rights, cooperation in

science, technology, and innovation

, and the facilitation of

free movement of professionals

. Furthermore, this agreement encourages

investment in key industries and sectors

such as manufacturing, agriculture, services, and energy.

The significance of the new agreement lies in its potential to boost economic growth through increased trade and investment between CountryA and CountryBy fostering closer economic ties, the NEP is expected to lead to job creation, higher productivity, and improved living standards for the citizens of both countries. Moreover, this pact represents a major step towards global economic integration, aligning with the wider trend of regional and global trade agreements.

In conclusion, the New Economic Pact (NEP) between CountryA and CountryB signifies a significant milestone in strengthening bilateral ties. With its commitment to eliminating tariffs, protecting intellectual property rights, promoting innovation, and facilitating the free movement of professionals, this pact is poised to bring about positive economic growth in the key industries and sectors of both countries.
China and Malaysia: Renewing Economic Ties with a New Pact

IV. Implications for Malaysia’s Economy

The CPTPP agreement, which Malaysia joined in March 2018, brings about several potential benefits for Malaysian businesses and workers. Firstly, the agreement will provide better market access to countries such as Japan, Canada, New Zealand, and Australia. This could lead to increased exports and higher revenue for Malaysian companies. Moreover, the agreement may encourage foreign direct investment into Malaysia as it signals a commitment to free trade and open markets.

Potential benefits for Malaysian businesses and workers

Secondly, the agreement may lead to greater competition among businesses in various sectors, leading to improved productivity and efficiency. Additionally, Malaysian workers may benefit from increased opportunities for skill development and professional growth as companies strive to remain competitive.

Strategies for Malaysian companies to leverage the agreement

To fully leverage the opportunities presented by the CPTPP, Malaysian companies should consider the following strategies:

  • Explore new markets: Malaysian companies can expand their customer base by exploring opportunities in the CPTPP member countries.
  • Invest in research and development: To remain competitive, companies must invest in research and development to produce high-quality goods that meet the stringent standards required by CPTPP.
  • Improve supply chain efficiency: Companies can streamline their supply chains to reduce costs and improve delivery times, making them more attractive to international buyers.

Anticipated challenges and risks for Malaysia

Despite the potential benefits, Malaysia faces several challenges and risks in implementing the CPTPP agreement. One of the most significant challenges is competition with Chinese industries, particularly in sectors such as manufacturing, electronics, and textiles. To mitigate this risk, Malaysian companies must focus on producing high-quality goods that differentiate them from Chinese competitors.

China’s Perspective:

Motivations behind China’s Push for the New Economic Partnership

China’s Belt and Road Initiative (BRI), also known as the One Belt, One Road (OBOR) initiative, is a massive infrastructure development project that aims to revive the ancient Silk Road trade routes connecting Asia with Europe. Motivations behind this ambitious plan are multifold: firstly, China seeks to assert its global leadership and enhance its soft power; secondly, it aims to secure access to new markets and resources; thirdly, it intends to improve connectivity and transportation networks, thus reducing logistics costs and enhancing economic integration. Lastly, China’s BRI is an attempt to counteract the influence of other regional powers such as India‘s Act East Policy and Japan’s Free and Open Indo-Pacific Vision.

Potential Impact on China’s Diplomatic and Economic Relations with Other Countries in the Region

The impact of China’s BRI on its diplomatic and economic relations with other countries in the region is twofold. On one hand, it offers numerous benefits such as infrastructure development, increased trade, and job creation. However, there are concerns regarding potential debt-trap diplomacy, as China provides loans to other countries for infrastructure projects with unusually high interest rates. This could lead to a debt crisis for the borrowing countries, resulting in increased dependency on China and potential strategic advantages.

Response from Other Regional Powers

The response from other regional powers to China’s BRI has been mixed. India, for instance, has expressed concerns regarding the initiative due to its territorial disputes with China in areas like the South China Sea and the Doklam plateau. India’s Act East Policy focuses on improving relations with Southeast Asian countries to counterbalance China’s influence. Japan, another major power in the region, has launched its Free and Open Indo-Pacific Vision to promote economic cooperation and ensure security in the region. Both India and Japan are wary of China’s growing influence and have formed strategic partnerships to counterbalance it.
China and Malaysia: Renewing Economic Ties with a New Pact

VI. Potential Challenges and Criticisms

Addressing Concerns over Labor Exploitation and Environmental Issues in Chinese Investments: One of the most significant challenges surrounding Chinese investments is the issue of labor exploitation and environmental degradation. Critics argue that many Chinese companies operating abroad engage in unethical labor practices, including low wages, long work hours, and poor working conditions. Moreover, some projects have been linked to environmental degradation, deforestation, and water pollution. To address these concerns, it is crucial to establish clear labor and environmental standards for Chinese investments and ensure that they are enforced rigorously. This could involve cooperation with international organizations, as well as the establishment of a transparent and effective grievance mechanism for workers and local communities.

Balancing the Benefits of Economic Cooperation with Political Considerations: Another challenge is balancing the benefits of economic cooperation with political considerations. Chinese investments have been criticized for furthering the strategic interests of China, rather than promoting economic development in recipient countries. For instance, some projects are seen as part of China’s “debt diplomacy,” where Chinese lenders extend large loans to developing countries that can be used to gain political leverage. To mitigate these concerns, it is essential to establish clear guidelines for Chinese investments, including transparency and non-interference in the political affairs of recipient countries. Moreover, there should be mechanisms for ensuring that investment decisions are not influenced by political considerations.

Ensuring Transparency and Fairness in the Implementation of the Agreement:

Lastly, ensuring transparency and fairness in the implementation of the agreement is crucial to its success. Some critics argue that Chinese investments are opaque, making it difficult for local communities and civil society organizations to monitor their impact. Moreover, there have been concerns about the lack of transparency in the bidding process for Chinese projects and the potential for corruption. To address these issues, it is essential to establish clear procedures for public consultation, project evaluation, and contract awarding. Additionally, there should be mechanisms for ensuring that Chinese companies comply with local regulations and international standards.

“Ensuring transparency and fairness is essential for building trust between China and its partners, as well as for ensuring that Chinese investments contribute to sustainable economic development.”

In conclusion, the Belt and Road Initiative presents significant opportunities for economic cooperation between China and its partners. However, it also comes with challenges and criticisms that need to be addressed. By establishing clear guidelines and mechanisms for addressing labor exploitation and environmental issues, balancing economic cooperation with political considerations, and ensuring transparency and fairness in the implementation of the agreement, China can build trust with its partners and contribute to sustainable economic development.

“By addressing these challenges and criticisms, the Belt and Road Initiative can become a catalyst for cooperation and mutual benefit between China and its partners.”

China and Malaysia: Renewing Economic Ties with a New Pact

V Conclusion

In this article, we have explored the significance of the China-Malaysia Comprehensive Strategic Partnership (CMSP) and its potential impact on China-Malaysia relations and the wider Asia Pacific region. We began by examining the historical context of bilateral relations between the two countries, highlighting key milestones and areas of cooperation. Subsequently, we delved into the economic dimensions of the CMSP, discussing the Free Trade Agreement (FTA) and the Belt and Road Initiative (BRI), both of which are expected to boost trade and investment flows between China and Malaysia.

Recap of the Main Points

We noted that the CMSP represents a strategic shift in China’s engagement with Malaysia, moving beyond traditional areas of cooperation such as defense and security to focus more on economic ties. The FTA is expected to result in increased trade volumes and reduced tariffs, while the BRI offers Malaysia access to Chinese financing for infrastructure projects. Additionally, we highlighted the importance of the CMSP in the context of China’s growing economic and political influence in the region.

Long-term Implications for China-Malaysia Relations and the Wider Region

Looking forward, the CMSP is likely to have significant long-term implications for China-Malaysia relations and the wider region. By strengthening economic ties, both countries can benefit from increased trade and investment flows, leading to greater economic integration and interdependence. This, in turn, is likely to lead to a deeper level of political trust and cooperation between the two countries.

Final Thoughts on the Significance of this New Economic Partnership in the Global Context

Finally, it is worth noting that the CMSP is not just significant for China-Malaysia relations but also for the broader global context. With the United States retreating from its traditional role as a global leader and Europe grappling with internal challenges, China is increasingly asserting itself as a major economic and political power. The CMSP is just one of many initiatives that China has launched in recent years to strengthen its ties with other countries, particularly in the Asia Pacific region. As such, it represents an important development in the global power dynamics and is likely to shape the economic and geopolitical landscape of the region for years to come.

Concluding Remarks

In conclusion, the China-Malaysia Comprehensive Strategic Partnership represents a significant shift in bilateral relations between the two countries, with a focus on strengthening economic ties through initiatives such as the FTA and the BRI. The long-term implications of this partnership are likely to be far-reaching, both for China-Malaysia relations and for the wider Asia Pacific region. As China continues to assert itself as a major global power, partnerships like the CMSP will play an increasingly important role in shaping the economic and geopolitical landscape of the region.

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June 19, 2024