Malaysia–China Economic Relations: Riding the Dragon’s Tail for Structural Transformation

Picture: SPH Media

In an article by Fulcrum, Chansambath Bong analyzes Malaysia’s trade and investment activities with China with regards to its structural transformation in re-industrialization and green economy.

China is one of Malaysia’s most important trading partners. China accounts for around 15% and 21% of Malaysia’s exports and imports respectively.

Even as Malaysia’s trade ratio declines, China’s share of the country’s goods export has increased consistently until the outbreak of the Covid-19 pandemic in 2020 (Figure 6). Subsequently, the pandemic in China caused a slowdown in Malaysia’s export of goods to China, resulting in a decline in China’s share of Malaysia’s goods exports after 2020.

There is additional evidence that the supply chain linkages between these two countries in the electrical machinery and equipment industry have deepened over time.

Historical data from OECD’s Trade in Value Added (TiVA) dataset show that the share of value-added originating from China (via imports) in Malaysia’s exports of computer, electronic and optical products has increased, especially since 2010 (Figure 8). In the opposite direction, the share of value originating from Malaysia in China’s exports of computer, electronic and optical products has remained relatively stable at slightly more than 1% during the same period (Figure 9).