PETALING JAYA: Economists are greeting China president Xi Jinping’s three-day working visit to Malaysia with optimism, generally feeling that the Chinese leader’s presence in the country at this critical period in the global context will provide a timely boost in trade relations.
Senior economist at UOB Julia Goh said Xi’s visit – he arrived in Malaysia yesterday and will be leaving the country tomorrow – signifies Malaysia’s diversification policy as it adopts a multilateral approach with key economic partners, while maintaining its neutral stance.
“Xi’s visit is a mark of strong continuity of the bilateral relations with China, and the support for Malaysia’s economic ambitions through strategic opportunities in the fields of technology, sustainability, industrial development, transportation, logistics and education,” she told StarBiz.
The goodwill appears to be mutual, as China and Hong Kong strategist at CGS International Edith Qian highlighted that China is taking this opportunity to foster closer ties with other nations and position itself as a stabilising force amid a fragmenting global order.
In a note to clients yesterday, Qian and CGS International analyst Jeremy Goh said they view Xi’s visit as well timed given that Asean was one of the worst hit regions from the sweeping tariffs imposed by the United States earlier this month.
“Although Malaysia has had a longstanding position of neutrality, we reckon that the onslaught of US tariffs – though now paused for 90 days – will compel the former, alongside the rest of Asean, to accelerate trade diversification efforts.
“In our view, this could involve forging stronger economic ties within Asean – where Malaysia is the current chair – as well as reinvigorating cooperative initiatives such as Asean+3 which includes China, Japan and South Korea,” said Qian and Jeremy.
The CGS International duo further said pathways have been laid for a move in this direction, aided by several free trade agreements already in place involving Asean, observing that in 2024, Asean+3 accounted for 52.5% Malaysia’s trade and 50.6% of the country’s exports.
Apart from trade, Qian and Jeremy reckon that Xi’s arrival in Malaysia could see developments in several other areas, pointing out that Chinese participation may help with funding for the speculated revival of the High-Speed Rail between Kuala Lumpur and Singapore, a project said to be implemented via a design-finance-build-operate-transfer model.
In addition, they said there could be announcements of investments in the Malaysia-China-Kuantan Industrial Park as well as for the Forest City development in Johor.
“Last but not least, we think there is a chance of China committing to purchase more palm oil from Malaysia – the former was the second largest buyer of Malaysian palm oil in 2024 at 8% of exports,” they added.
Professor of economics at Sunway University Yeah Kim Leng said it is necessary for countries to set up multilateral trade arrangements or through trade blocs to offset any potential decline in exports to the United States, and as such Xi’s visit to Malaysia provides an opportunity to shoreup trade and investments between the two countries.
More notably, he said of interest to Malaysia and other Asean nations is China’s response to boost domestic consumption as the latter pivots from export-led to consumption-led growth which will provide a fillip to Asean’s trade with China.
Yeah further explained: “Malaysia’s pursuit of trade expansion and market access not only with China and Asean countries but also with the European Union and other regions is an appropriate policy response to the protectionist policies being considered by the United States, while maintaining a non-retaliatory and readiness for negotiation stance with the Trump administration.
“Hence, a boost to China’s domestic demand will be positive for Malaysian exports in view of potential trade diversion from the United States.”
Of interest, he pointed out that Malaysia’s neutral stance is not conditioned by the need to ensure equal trade with the two competing superpowers, but by the development benefits derived from the strengthening of trade and investment with its trade partners.
Yeah observed that trade and foreign investment flows into Malaysia from the United States dominated in the 1970s until 1990s, although that dominance has declined in recent decades with China emerging as among the top trading partners along with rising trade with its Asean member states.
“President Xi’s visit will reinforce the current trend of China’s growing economic integration with Malaysia and more than a hundred countries through its Belt and Road Initiative (BRI),” he told StarBiz.
For context, the BRI, launched by China in 2013 under Xi, is a global infrastructure and economic development strategy aimed at enhancing trade, connectivity, and investment across Asia, Europe, Africa and beyond.
The BRI comprises two main components, namely the Silk Road Economic Belt which is a network of land-based infrastructure projects connecting China to Central Asia, the Middle East, and Europe; as well as the 21st Century Maritime Silk Road which are sea-based routes linking Chinese ports to South-East Asia, South Asia, Africa, and Europe through port development and maritime cooperation.
Echoing Yeah’s sentiments, MIDF Research opined that President Xi’s presence underscores China’s commitment to fostering closer ties with Asean and advancing regional cooperation.
The research house said his visit is expected to bolster initiatives such as the BRI projects in Malaysia, including the East Coast Rail Link, and enhance connectivity and economic integration between Malaysia and China.
It is also expecting Xi to address concerns about the impact of US-China trade tariffs on Malaysia’s economy and explore ways to strengthen economic ties between the two nations.
Crucially, MIDF Research said the impact of a potential trade slowdown on China’s economic growth is expected to be mitigated by its reduced reliance on external demand, as post-lockdown expansion has been primarily fuelled by robust domestic spending.
“In pursuit of its official growth target of approximately 5% for 2025, the Chinese government has committed to increased fiscal expenditure aimed at stimulating the economy and bolstering consumer spending.
“This strategic shift towards a more domestically driven growth model is intended to insulate China’s economy from external uncertainties and the volatility of the global trade outlook,” the research house added.
Meanwhile, OCBC senior Asean economist Lavanya Venkateswaran believes that Xi’s visit to Malaysia highlights the importance of Malaysia to China, before highlighting that the ties between the two nations are deep in terms of not just trade and investment as mentioned above, but also people-to-people ties.
“Developing these areas of natural synergy has proved beneficial to Malaysia’s economy in the past and there are still some synergies to be gained through greater cooperation on high quality manufacturing, catalysing the growth of small-medium enterprises and infrastructure development,” she said.
Venkateswaran said that there is an emphatic push to broaden trading and investment ties across newer trading partners, and the conclusion of negotiations on an economic partnership agreement with the European Free Trade Association states, namely Iceland, Liechtenstein, Norway and Switzerland on April 11 is a good case in point for Malaysia.
“There is also room to deepen intra-Asean trade and investment relations,” she said.
On a broader perspective, she feels Malaysia will continue to have deep trading and investment relationships with China and the United States, to the best of its abilities.
Quoting Prime Minister Datuk Seri Anwar Ibrahim, she said Malaysia’s “paramount goal of sustainable, inclusive and equitable growth” necessitates that the country engage “with rival power blocs” to allow “middle powers like Malaysia” to “pave the way for lasting peace and prosperity.”
