China’s Investments in Malaysia: Choosing the ‘Right’ Partners

Abstract

This paper examines China’s outward foreign direct investment into Malaysia by analysing the major coalition partners of mainland Chinese firms that have invested into the country, a relatively underexplored topic. Based on personal interviews with parties familiar with the investment of mainland Chinese firms in Malaysia as well as published reports, this paper argues that a large portion of the mainland Chinese firms have cooperated with the governmentlinked companies (GLCs) in their cross-border investments, while a smaller percentage have cooperated with the ethnic Chinese firms, and other entities i.e. neither the GLCs nor the ethnic Chinese firms. The mainland Chinese firms’ strong preference of the GLCs is attributed to the dominance of the GLCs in the Malaysian economy, a direct result of the country’s ethnocentric economic redistribution model. However, the preference of mainland Chinese firms for the GLCs, ethnic Chinese firms, and other entities is not uniform across the economic sectors. The preference for the GLCs decreases from the construction, to the manufacturing, and to the other services, agriculture, finance, and information and communication sectors. The preference for the ethnic Chinese firms and the other entities illustrates an opposite trend as it increases from the construction sector, to the manufacturing, and the other services, agriculture, finance, and information and communication sectors respectively. The mainland Chinese firms’ choice of coalition partners reflects the capitalist development and state-society relations of Malaysia, outcomes of the country’s decades-old political economic mantra of wealth redistribution along ethnic lines.