The Malaysia–China economic relationship at 40: broadening ties and meeting the challenges for future success

This chapter discusses China’s growing impact on Malaysia’s economy through bilateral trade and foreign direct investment between the two nations, including the contributions of the Malaysian–Chinese business community in facilitating bilateral economic ties. We will also discuss the burgeoning tourist link between the two countries and how the MH370 tragedy might impact on this relationship. Chinese tourists are one of the major sources of inbound tourism for Malaysia. Malaysia is expected to attract two million Chinese tourist arrivals in conjunction with Visit Malaysia Year 2014. At the same time, China is one of the most popular destinations for outbound Malaysian tourists, especially among the Malaysian–Chinese community. As the economic relationship between the two countries enters its fifth decade, some challenges are emerging. Perhaps chief among these for Malaysia is the growing importance of the Chinese economy, which threatens to shift the bilateral economic relationship in China’s favour. As China moves up the value-added chain, there is the potential that Malaysia will lose its comparative advantage in the regional production network. We will conclude by discussing these economic challenges and how these challenges might be addressed in the future.