MayCham: Malaysia not spared from China-US trade war

It has been just over three months since Malaysia saw a change in government after being ruled by the same previous administration for 61 years.

Observers will be keen to see how the country will iron out its economic relations, as Malaysia’s 93-year old Prime Minister Mahathir Mohamad is due to arrive in China for a state visit – his first since being re-elected in May – on Friday.

This comes on the heels of the suspension of Malaysian projects amounting to some 23 billion US dollars backed by Chinese state-owned firms.

While the Malaysian Chamber of Commerce and Industry in China is elated with this change in administration, its chairman, Will Fung, said it is still too soon to tell of any meaningful outcome – when asked about the impact towards Malaysian businesses in China.

“Generally, we are confident and positive that right now Malaysia needs some time to do some internal housekeeping. But going forward, I believe that we’ve got better more room to collaborate [together],” Fung told CGTN.

“From the chamber level, we are spreading the word that… we can’t do without working and collaborating together with China. It is the second largest economy in the world,” Fung said. 

The interaction of people-to-people exchanges at a grassroots level, Fung said, is particularly important. Fung, who is a practicing lawyer advising foreign clients on corporate mergers and acquisitions, has been living in China for the past 12 years.

Will Fung, chairman of the Malaysian Chamber of Commerce and Industry in China. [Photo: CGTN]

“We have the advantage – right now we have close to 8 million Chinese in Malaysia who can be used as a bridge. Many of our fellow Malaysians are going ‘over and beyond’ to learn the Chinese language, and we are also learning the cultural aspects and differences.”

China has been Malaysia’s largest trading partner for the past nine years. It has also remained as Malaysia’s biggest source of imports, accounting for one fifth of its total imports last year.

In 2017, bilateral trade between the two nations rose 10.5 percent year-on-year to 96 billion US dollars. According to China’s Ministry of Commerce, this made up 18.7 percent of all trade between China and ASEAN.

Amid an escalation of sorts in the trade war between China and the United States, Fung said Malaysian businesses in China have been impacted to some extent. 

“You have to bear in mind that quite a few companies are manufacturing semiconductors here, they use it (China) as a hub, but their final destination is not just within China, it is to the US and Europe,” he said. 

As such, these Malaysian intermediary products made in China have also been slapped with tariffs, Fung quipped. “I don't think a trade war benefits anyone, everyone tends to lose.”

Meanwhile, some companies have made plans to relocate their production bases from China to other parts of the world, such as Southeast Asia, because of this trade war. But for Fung, he said this has been something that’s already been happening gradually. 

“As far as foreign direct investments are concerned, the cost of investment in China is getting very high. There has been a lot of discussion whether is it still viable to continue to have their base here or would a third world developing country a preferred destination,” Fung added.