Chinese Investment in Malaysia: (De)Industrialization amidst Greater Financial and Trade Connectivity

Guanie Lim () and Andrew Jia-Yi Kam ()
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Guanie Lim: National Graduate Institute for Policy Studies
Andrew Jia-Yi Kam: National University of Malaysia

The European Journal of Development Research, 2024, vol. 36, issue 3, No 3, 600 pages

Abstract: Abstract China–Malaysia economic engagement has deepened since the 1990s. The scale and scope of this relationship has also expanded significantly following the 2013 announcement of the Belt and Road Initiative. Offering a context-rich, historically-nuanced perspective, this paper analyses how Malaysian policymakers have engaged with economic opportunities opened up by the burgeoning Chinese market. In particular, it examines how Chinese foreign direct investment has contributed to industrial upgrading trajectories in Malaysia. The paper makes two inter-related arguments. First, it uncovers a correlation between closer Chinese–Malaysian economic integration and services liberalization, which results in Malaysia’s lower emphasis on manufacturing and ‘proper’ industrialization. In other words, structural transformation has occurred, but it is geared towards the services sector. Relatedly, Chinese investment entering Malaysia, notwithstanding its relatively recent status, is composed primarily of service industries. The services-heavy nature of Chinese investment results in a relatively modest economic multiplier effect, potentially exacerbating some societal tensions and inequality.

Keywords: Foreign direct investment; Deindustrialization; Structural transformation; Industrial upgrading; ASEAN; Malaysia; Belt and road initiative; China; L80; O25; F21 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1057/s41287-024-00645-w

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