This article is intended to quantify the phenomenon of Chinese foreign direct investment in Malaysia, whether industrial or related to transport infrastructure. These investments have remained in modest proportions, but their sectoral and spatial distribution was very unique compared to the traditional investor countries in Malaysia, testifying to very specific industrial logics. As a result, and although they have remained relatively limited during the recent period, they have played a structuring role both on the territory and in the industrial sectors affected by these flows. The recent acceleration, evidenced by the fact that in 2015 China was at the forefront of investors in Malaysia, leaves no room for doubt.
The main features of industrial investment in Malaysia
Throughout the country’s history, foreign industrial investment has concentrated on the western facade of the Malaysian peninsula. MIDA data since 1987 show the extent to which 5 states (out of 13) concentrate the bulk of industrial investment amounts in Malaysia (70%). The first three polarize half of it: they are the States of Johore, bordering Singapore, to the south, from the Selangor within the Klang Valley connecting Kuala Lumpur to the sea, and, further north, Penang, the electronics of which were the strongest driver of industrialization. Sarawak in Borneo and Kedah, where the Malaysian auto industry has been located in partnership with Japan, follows.
Broaching the Chinese presence in Malaysia from an investment perspective is a difficult exercise, particularly given the nature of the data available, the number and complexity of the actors involved. We will rely here on foreign direct investment data from the Department of Statistics and the Central Bank on the one hand (which are those which are transmitted to UNCTAD for international comparisons) to determine the orders of magnitude of foreign direct investment or FDI and China’s place in these investments (flows and stocks).
Apart from that, to qualify the investments, we will rely on other series, not homogeneous with those of the previous services, which are those of the administration in charge of investments in Malaysia, the MIDA: we can then specify the Malaysian sectors and states that have polarized Chinese industrial investment projects in Malaysia in recent years.
On the other hand, to complete the description of the structuring nature, in other words in certain specific sectors of investments, we will take stock of their presence in infrastructure and transport.
Foreign direct investment still limited
We will first present Foreign Direct Investment or FDI flows, as well as stocks, from Malaysia to China, because they are larger and older.
Admittedly increasing in huge size, on the other hand, Malaysian investments in China showed a downward trend in relative share between 2010 and 2014, thus not illustrating the idea of increased Malaysian involvement in China. On the contrary, it should be emphasized that China is only a marginal investor in the amounts of foreign investment received by Malaysia, but that this subordinate place could tend to transform very quickly.
A recent surge in Chinese direct investment in Malaysia
The flows of Chinese Foreign Direct Investment or FDI to Malaysia, as recorded by Bank Negara are, for mainland China, 0.7 billion MYR, and for Hong Kong, 3.5 billion MYR, or a total of MYR 4.2 billion in 2014.
There is a logic according to which, within the developing world, Foreign Direct Investment or FDI interchanges widely from the richest countries to those who are the least wealthy, in opposite of the gradients of the level of living and wages, but we observe that the flows of FDI between Malaysia and China, after having respected this logic for a long time, have presented the opposite direction since 2013.
Without doubt, Chinese Foreign Direct Investment or FDI flows to Malaysia were three times greater in 2014 than reverse flows: they were twice as large in 2013, but it was the opposite in 2012 and, except in 2009, the year of the global financial crisis, Malaysian investments in China far exceeded symmetrical flows.