Foreign Policy Research Institute A Nation Must Think Before it Acts A Faint Breeze of Change: Malaysia’s Relations with China
A Faint Breeze of Change: Malaysia’s Relations with China

A Faint Breeze of Change: Malaysia’s Relations with China

The relationship between Malaysia and China is not without conflict, though an outside observer could be forgiven for not realizing it. That is because Malaysia has long kept its differences with China discreet. One point of contention has been their overlapping maritime claims in the South China Sea. There, despite repeated Chinese provocations—from large-scale fishing off Malaysian-claimed Luconia Shoals to harassing Malaysian energy exploration ships—Malaysia’s response to China has been muted.

Thus, it was not all that surprising that, in the late 2010s, then-Malaysian Prime Minister Najib Razak came to the defense of China’s Belt and Road Initiative (BRI) infrastructure projects in Malaysia, after they were criticized for their high costs and poor execution. In fact, he urged even closer ties with China and purchased warships for the Malaysian navy from it. While Najib managed to smooth over most problems dealing with China, he could not avoid them altogether, especially after an investigation of Malaysia’s sovereign-wealth fund, 1Malaysia Development Berhad (1MDB), revealed that he had siphoned off money from BRI projects funded by Chinese loans. Tarred by the far-reaching scandal, Najib and his political party, the United Malays National Organisation (UMNO), which had won every national election in the last six decades, were swept from office in 2018.

More broadly, the 1MDB scandal raised questions about the motivations behind Malaysia’s policy of accommodation towards China. Such questions have lingered in the background, given that foreign policy decision-making in Malaysia has never been truly transparent. Decisions are generally made within a small coterie of senior officials. Little debate or discussion of policy options occurs in public view. That was certainly the case during the tenures of the last three prime ministers, including Mahathir Mohamad from 1981-2003, Abdullah Ahmad Badawi from 2003-2009, and Najib Razak from 2009-2018. And, by most indications so far, it seems not much will change during Mahathir’s second stint as prime minster today.

Bargaining with a Giant

That may prove disappointing to many Malaysians who voted for Mahathir. After all, his successful bid to oust Najib rode, in large part, on a wave of popular concern over the growth of Chinese influence in Malaysia and fury at Najib’s shading dealings with China through 1MDB. Mahathir had pledged to get to the bottom of those deals. Among them included a project for two pipelines (for which Malaysia had paid a Chinese company nearly 90 percent of the cost, though it had performed less than 15 percent of the work) and another to build the very costly East Coast Rail Link (ECRL) to connect the two coasts of Peninsular Malaysia.

In the months following his return to power, it appeared as though Mahathir might take a harder line with China. He cancelled the Chinese pipeline project. He also warned against falling into a Chinese “debt trap” and being ensnared in “a new version of colonialism” when discussing China’s BRI. But then Mahathir began to backtrack. After his economic affairs minister publicly stated that Malaysia might also cancel the ECRL—a key BRI project for China—Mahathir issued a “gag order” on government officials from any further comment on it. So, when he announced that Malaysia had renegotiated the price of the ECRL and would allow it to proceed at China’s Belt and Road Forum in Beijing in April 2019, the news came as something of a surprise.

Naturally, cynical Chinese observers concluded from the squabble over the ECRL that Mahathir’s earlier protestations were merely a gambit to strike a better deal. They might be correct. With the ECRL issue settled, Mahathir settled back into Malaysia’s traditional accommodative posture with China. Domestically, he argued that the renegotiated terms for the ECRL were a win for Malaysia. It would benefit from not only a completed (albeit slightly shorter) railway, but also a railway that will cost between 25 and 30 percent less than the originally envisioned one. Moreover, the Chinese company leading the railway’s construction agreed to use mostly Malaysian subcontractors and workers, rather than Chinese ones as most BRI projects do. Of course, China could claim the deal as a win, too. The ERCL, which had become a high-profile test for the international appeal of China’s BRI, would move ahead.

When explaining the rationale for his approach to China, Mahathir frequently points to Malaysia’s close economic relationship with its giant neighbor. In 2018, about 17 percent of Malaysia’s exports went to China and 20 percent of its imports came from it. In the same year, China was Malaysia’s largest source of foreign direct investment; and that investment was halved a year later in the wake of the uncertainty caused by the ECRL row.

Even so, Mahathir’s economically driven logic has its limits. For example, palm oil is by far Malaysia’s most important agricultural export; and India, not China, is the largest importer of it. Yet, Mahathir has been far more accommodative towards China than India. In October, Mahathir defiantly declared that he would stand by his criticism of India’s treatment of Muslims in Kashmir even if that meant an Indian boycott of Malaysian palm oil. But at the same time, he repeatedly demurred from clear-cut criticism of China’s internment of over a million Muslim Uyghurs (or Uighurs) in Xinjiang. And notably, throughout the negotiations over the ECRL, Mahathir refrained from putting pressure on China by pushing back on its encroachment in the South China Sea.

Devil’s Bargain

Malaysian leaders have long bet that they could make more headway with China through accommodation than confrontation. For years, they claimed that they were right. Overt Vietnamese and Philippine resistance to China in the late 2000s and early 2010s, respectively, brought them few gains. But accommodation has yielded little, too. When it comes to Malaysian-claimed waters in the South China Sea, China appears to be applying the same tactics it used to push its way into waters claimed by Vietnam and the Philippines.

In 2013, China began to station one of its coast guard vessels off Malaysian-claimed Luconia Shoals, well within Malaysia’s exclusive economic zone. Malaysia tolerated it for two years before Najib raised the issue with Xi Jinping. While the Chinese coast guard eventually removed the vessel, it dispatched another and has maintained a regular presence near Luconia Shoals ever since. Still, Mahathir has chosen to largely handle Malaysia’s maritime dispute with China in its traditional way. In September 2019, his foreign minister announced that Malaysia would launch a bilateral dialogue with China—something Beijing has long sought—in the hopes that more discussion might lead to a resolution. Yet, Malaysia gave China something of a jolt three months later, when it filed a submission with the United Nations to better delineate its continental shelf claims in the South China Sea, a move that no doubt irked Beijing.

Agents of Change

When he resumed his post as prime minister in 2018, Mahathir said he would remain in office for two years, after which he would allow Anwar Ibrahim, his electoral ally and former rival, to succeed him. A year later, Mahathir suggested that it may be three years before he steps aside and surely not before November 2020. But Anwar Ibrahim has stated that he still expects to succeed Mahathir in May 2020. Whatever the case, Mahathir, at 94 years of age, will eventually leave Malaysia’s political stage for good. And that could bring real change.

Even if Malaysian foreign policy decision-making continues to be tightly managed, change could come should politicians with fresh views occupy Malaysia’s top government posts. Already, Anwar has commented that the Malaysian government should take a more assertive role in international affairs. Malaysia’s polity is also changing. Fewer of its citizens are wedded to Malaysia’s long-ruling UMNO. (Indeed, Mahathir, its one-time leader, switched sides.) Over the last two decades, UMNO’s strength has steadily eroded. That could mean more public discussion about Malaysia’s foreign relations, including those with China.

Hence, the clock may be ticking on Malaysia’s placid relations with China. While change could come in many ways, few of them are likely to appeal to Beijing. Malaysians are just as tetchy about their national sovereignty as Filipinos and Vietnamese are. Should Malaysians become more vocal about their concerns and transmit them through their elected leaders, Malaysia’s foreign relations with China could very well veer in a different direction.