A Slow Malaysian Turn Towards China Could Become a Reality

By Lance Jackson —

Prime Minister Najib Razak of Malaysia traveled to China on October 31, 2016. Source: Firdausjongket's flickr photostream, used under a creative commons license.

Prime Minister Najib Razak of Malaysia traveled to China on October 31, 2016. Source: Firdausjongket’s flickr photostream, used under a creative commons license.

Malaysian prime minister Najib Razak traveled to China October 31 on a six-day visit, his fifth as head of government. Before leaving for China, Najib emphasized that he was “committed to achieving new highs and entering into new areas of cooperation” with China. Najib has lived up to his word, as the two nations in the first two days of his visit signed $34 billion worth of business arrangements. In light of the pivot the Philippines appears to be making away from the United States and its warming of relations with China, these developments may seem somewhat ominous for the U.S. rebalance to Asia.

However, there probably is little need for immediate concern. Malaysia has always taken a pragmatic approach in balancing relations between the United States and China, a balancing act the nation can be expected to maintain in the immediate future. Najib’s comments do not suggest a major policy shift, as China and Malaysia have long maintained a special relationship. In June, in an op-ed by the Chinese ambassador to Malaysia, he noted the “time-honored friendship” between the two nations. It was Najib’s father, former prime minister Abdul Razak Hussein, who was the first Southeast Asian leader to establish relations with China in 1974.

History aside, Chinese influence is growing in Malaysia. China has emerged as Malaysia’s largest trading partner. In 2015, China also became Malaysia’s largest foreign investor after Chinese state-owned-enterprises acquired nearly $4 billion in energy and real estate assets from the heavily indebted 1 Malaysia Development Bhd (1MDB) state investment fund. Chinese investments also included large scale infrastructure projects, like a deep-water port to be constructed in the Strait of Malacca and the east coast rail link, a project awarded to China during Najib’s visit.

Growing Chinese influence is not without its controversies and detractors. Last year, China’s association with Chinese Malaysians led to a short diplomatic spat between the two countries following controversial comments made by the Chinese ambassador to the Chinese community, ahead of a rally planned by a Malay-dominated pro-government group over the lack of a Malay business presence in the Chinatown of Kuala Lumpur. The ambassador reportedly said that China opposes “any form of discrimination against races and any form of extremism.” Amid accusations of Chinese interference in Malaysia’s domestic affairs, he was summoned by Malaysia’s Foreign Ministry to clarify his remarks.

Najib has also been criticized by former Malaysian prime minister Mahathir Mohamad for allowing Chinese firms to acquire Malaysian energy assets from 1MDB, of which Najib originally served as chairman. In his criticism, Mahathir said, “Here are power plants belonging to Malaysians – and you buy it up and sell it to another nation. That is wrong.”

Chinese influence on Malaysia’s South China Sea policies is often overstated. While numerous ties between the two countries prevent disagreements between the two states from taking center-stage, Malaysia is far from complacent in defending its interests. Its tactics are not as confrontational as those of Vietnam or the Philippines under former president Benigno Aquino III, but Kuala Lumpur’s signals come across clearly nonetheless.

For example, Malaysia allowed heavy criticism of China when it chaired the 2015 East Asia Summit. Malaysia’s prominent treatment of the South China Sea issues in its chairmen statement ignored China’s lobbying to keep the issues out of the multilateral discussions. Earlier this month, Najib made it clear that deepening Malaysia-China ties did not mean compromising on the nation’s territorial claims, when he said, “Even though we have strong relations with China in terms of economy, we still hold on to the principle of sovereignty.”

Malaysia has gone about protecting its sovereignty in the South China Sea in a very pragmatic manner. Even though Malaysia and the United States have converging interests in the South China Sea, the U.S. investigation of the 1MDB scandal and Malaysia’s recent scrapping of the development of an amphibious corps backed by the U.S. Marines have dampened some U.S.-Malaysian military cooperation.

However, Malaysia recently deepened ties with Japan and Vietnam, the region’s most vocal China critics. In 2015, Malaysia and Japan entered into a strategic partnership and started talks on transfers of defense equipment and technology. More recently, Malaysia and Vietnam upgraded military ties by establishing a high level committee chaired by the defense ministers of each country. During a press conference on the increased military ties, Malaysia’s defense minister Hishammuddin Hussein explicitly mentioned that he and his Vietnamese counterpart discussed “efforts to safeguard safety and security of our maritime zones, particularly in the South China Sea.”

Recent oscillations in Malaysia’s foreign policy are better understood as a political gambit on Najib’s part rather than an abrupt change in the country’s geostrategic calculations. Najib has been beset by scandal for much of his tenure as prime minister and, according to the Institute for Democracy and Economic Affairs, “Malaysia is in desperate need for investment and the government needs to find new investors.”

China is Najib’s ally on both issues. Chinese investments have helped stabilize the debt-ridden 1MDB fund. Moreover, as SISEAS-Yusof Ishak Institute, a Singaporean think tank, points out, Chinese investment is necessary for achieving the sustainable economic growth that is needed to return Najib’s party to power after the elections due by 2018.

If Malaysia is making a slow turn towards China it is based on a pragmatic calculation. For the time being, China’s economic might is trumping security concerns in the South China Sea, while it is unclear if the United States is a reliable economic counterbalance. The next U.S. administration may not emphasize Asia as much as President Barack Obama and the Trans-Pacific Partnership (TPP), the major U.S. economic initiative in the region, remains in political limbo. Singaporean prime minister Lee Hsien Loong warned recently of “very big setbacks for America” should U.S. lawmakers reject the TPP. A more China oriented Malaysia could be among these setbacks.

Mr. Lance Jackson is a researcher with the Southeast Asia Program at CSIS.

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