Malaysia–China relations in the time of COVID-19

Asia Uncategorized World

Author: Johan Saravanamuttu, RSIS

For the countries of Southeast Asia, addressing the ascendancy of China has been de rigueur for some time now. While it is still not clear how the outbreak of COVID-19 in early 2020 will impact China in the long term, Malaysia–China relations will remain largely unchanged.

A woman wearing a protective face mask crosses a bridge, following the outbreak of the coronavirus in China, in Kuala Lumpur, Malaysia, 19 February 2020 (Photo: Reuters/Lim Huey Teng).

A woman wearing a protective face mask crosses a bridge, following the outbreak of the coronavirus in China, in Kuala Lumpur, Malaysia, 19 February 2020 (Photo: Reuters/Lim Huey Teng).

Muhyiddin Yassin became Malaysia’s 8th prime minister on 1 March 2020 after a week of intense politicking. The Muhyiddin government will stick with the ‘Foreign Policy Framework of the New Malaysia’ crafted by the former foreign minister Saifuddin Abdullah, himself part of the Muhyiddin breakaway group. Malaysia’s first Defence White Paper was approved by Parliament in December 2019 and will remain a guide for policy as well.

But with the current state of internal politics in Malaysia, foreign policy will likely take a back seat. The COVID-19 outbreak means that domestic policies to address the pressing social and economic situation will be prioritised, with the country already in partial lockdown until mid-April. A RM20 billion (US$4.6 billion) economic stimulus package has already been allocated by the Prime Minister’s predecessor to handle the impact of COVID-19.

The United States has always loomed large in Malaysian foreign policy as the major power to hedge against a rising China and as a natural political and economic ally. This equation has shifted since 2016 with the Trump presidency precipitating a palpable decline of US prestige in the region despite its continued political and military presence.

Under the leadership of Najib Razak (2009–2018), Malaysia was quick to embrace China’s Belt and Road Initiative (BRI), committing to a slew of projects including the multibillion-dollar East Coast Rail Link (ECRL), which stretches across the Malay Peninsula and creates a land bridge from the Straits of Malacca to the South China Sea.

Former prime minister Mahathir Mohamad took power under Pakatan Harapan (PH) in May 2018 and maintained a strong relationship with China despite his earlier critical stance on Chinese projects. The ECRL was revived by April 2019 but with the costs significantly reduced by RM21.5 billion (US$5 billion). Several other BRI projects, including Bandar Malaysia and the Malaysia-China Kuantan Industrial Park, were also reinstated.

China rose to become Malaysia’s top foreign direct investor in 2018 but fell behind the United States in 2019 possibly due to scuttled 1MDB projects. With China’s Geely investing a major stake in Proton since 2017, Malaysia’s national car manufacturer saw sales rocket by 46 per cent and its market share rise to 18 per cent in 2019. Malaysia appears to be on track to launch Huawei’s 5G technology by next year, having set up a task force for its full adoption by 2023.

But times have changed. The problems associated with China’s ambitious BRI will be blunted by the COVID-19 pandemic. Prior to this turn of events, the Trump administration’s Free and Open Indo-Pacific (FOIP) strategy provided a counterpoint to China’s increased penetration into the region through the BRI.

Malaysia did not specifically react to FOIP except to go along with the ASEAN Outlook announced on 23 June 2019. The document stated that the Asia Pacific and the Indian Ocean were closely integrated, emphasising the importance of evolving norms and the security and economic structures for a rules-based order that were put in place by ASEAN. Malaysia’s Defence White Paper refers to the Peninsula as a ‘bridging linchpin’ straddling the Indian and Pacific oceans. This accords well with the ASEAN Outlook.

If Malaysia and its ASEAN neighbours are now in a more fluid and disrupted multipolar world, it would be logical to continue to engage earnestly with China, albeit with a cautious eye on its ambitions in the South China Sea. ASEAN’s push in 2018 to realise a Code of Conduct within three years should be the primary avenue for negotiation with China in this area of continuous friction.

For Malaysia, a measured approach to China requires maintaining strong ties with major US allies in Asia. Mahathir previously announced a foreign policy that was ‘neutral and friendly’ to all countries, noting that ‘whether they are communist or non-communist, it is of no concern to us’. He subsequently added that Malaysia would implement a ‘no warships’ policy — a warship-free zone in Malaysia’s adjoining seas of the Straits of Malacca and the South China Sea, seemingly targeted at appeasing both China and the United States.

But Mahathir’s penchant for Japan and his purported use of Japan to hedge against China may see some change under Muhyiddin, who has shown no particular preference for Japan. Until August 2019, Malaysia explored the possibility of Yen credit and collaboration in education, including setting up a branch of the University of Tsukuba. Engaging Japan, a US ally, to hedge against China also indirectly implies a subtle policy of balancing with respect to the two superpowers.

This renewed ‘Look East’ policy will lose its priority with the urgent need to stabilise the economy and deal with the fortunes of local industries.

For Malaysia and Southeast Asia, geopolitical developments have favoured a renewal of new regional economic trade agreements and will become increasingly significant because of new economic conditions. RCEP will harmonise existing ASEAN free trade agreements and build new ones in an arrangement made up of some 2.3 billion people with a GDP of US$24.8 trillion.

In this more fluid and disrupted world order, Malaysia is still well-poised to craft policies that capitalise on the long-term ascendance of China, while at the same time hedging against its rise by maintaining strong ties with ASEAN and other major Asia Pacific states.

Johan Saravanamuttu is Adjunct Senior Fellow with the Malaysia Programme at the S Rajaratnam School of International Studies (RSIS), Nanyang Technological University, Singapore. He is also Professor Emeritus at the University of Science Malaysia (USM) and Adjunct Professor at the Asia-Europe Institute, University of Malaya.

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