What’s Next for Malaysia-China Relations After the 2018 Elections?

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What’s Next for Malaysia-China Relations After the 2018 Elections?

A closer look at how bilateral ties will likely shape up under the new government in the coming years.

What’s Next for Malaysia-China Relations After the 2018 Elections?

Mahathir Mohamad, center, celebrates at a hotel in Kuala Lumpur, Malaysia, Wednesday, May 9, 2018. Official results from Malaysia’s national election show the opposition alliance led by the country’s former authoritarian ruler Mahathir Mohamad has won a majority in parliament, ending the 60-year rule of the National Front. (AP Photo/Vincent Thian)

Credit: AP Photo/Vincent Thian

Following the opposition’s shock victory in Malaysia’s 2018 elections last week, the speculation has predictably begun swirling about how the demise of Prime Minister Najib Razak could give way to a new foreign policy approach that might affect the country’s approach towards China. Beyond the sensationalist headlines that are likely to continue to dominate the news cycles over the next few weeks, there are several realities to keep in mind that will affect the future trajectory of the Sino-Malaysian relationship.

Despite the scrutiny on Najib’s ties with China over the past few years, the fact is that Malaysia’s dealings with China reflect not just Najib’s own tendencies in this respect, but also part of the country’s longer-term approach to cultivate better ties with Beijing. Indeed, Malaysia was a first mover in this respect decades ago, becoming the first country in ASEAN to normalize relations with Beijing in 1974 under Najib’s father and then Prime Minister Tun Razak.

Since then, Malaysian leaders have sought to balance realizing the opportunities afforded by Beijing’s rise – which help advance the economy and preserve regime legitimacy – with managing the challenges it poses, including its interference in Malaysia’s internal affairs and its threat to security interests including in the South China Sea (See: “Playing it Safe: Malaysia’s South China Sea Policy”). Among those string of leaders was not only Najib, but also Mahathir Mohammad, who governed Malaysia for over two decades and led the opposition to victory during this recent election.

To be sure, there was some change within that broad continuity during the Najib period that just ended. Put simply, Najib doubled down on Malaysia’s hedging approach towards China, vastly expanding the extent of Malaysia’s engagement with Beijing, especially in the economic realm, while also advancing Malaysia’s other relationships such as with the United States and Japan to balance Beijing as well. But to attribute this change under Najib entirely or even predominantly to his personal liabilities with respect to the 1MDB scandal is to give him too much credit while ignoring the broader context: these shifts also had to do with other factors as well, including Beijing’s rising capabilities as well as the ruling Barisan Nasional’s (BN’s) gradually weakening hold on the country that had its roots in issues that predated Najib (See: “Malaysia in 2015: Crises of Confidence”).

How, then, might we expect Malaysia’s ties with China to evolve over the next few years under an opposition government? Any effort to gaze into the future on Sino-Malaysian relations ought to begin with a reality check and a dose of humility. Despite the flood of commentary thus far, it is worth recalling that we are just a week into the first true regime change in Malaysia’s history, with little sense for exactly what the opposition government will even look like and how the post-election political dynamic will shape up, including the prospect of a reformed, post-Najib UMNO and a post-Mahathir opposition that could start to look very different from what it seems like today.

And for all the obsession by outside observers with Malaysia’s ties with China, it bears reminding that there a whole range of domestic priorities – from addressing the country’s fiscal position to investigating scandal-ridden institutions – that need to be addressed by the new government to begin fulfilling at least some of its campaign promises. There are also other foreign alignments that Malaysia will need to work through apart from China, including ties with neighboring states like Singapore and Indonesia which are important in their own right.

That said, a few general things can be said that are worth keeping in mind. First, a change of leadership does not alter the structural realities Malaysia faces or how a Malaysian government calculates the country’s national interests. Malaysia’s decades-long hedging approach against China is rooted in factors such as geography, history, the balance of power, and to a certain extent even its ethnic makeup, and these factors will discipline the tendencies of any new government attempting to change direction. China is also already Malaysia’s top trading and investment partner and a powerful and influential nation in its own right, and such considerations confront any Malaysian government irrespective of its political stripes.

Second, that said, there is also the prospect that we could see some recalibration of Malaysia’s ties with Beijing under the new government. Most obviously, Najib’s ouster does at least remove the variable of his personal vulnerability vis-à-vis China, along with the challenge of declining legitimacy that may have led him to lean more on Beijing for support. Buoyed by its recent mandate, a new government that intends to signal change in its management of Sino-Malaysian relations could seek to make changes in some areas of ties.

If this is indeed the case, the area most likely to be affected is Chinese investments in Malaysia, since that has more resonance among the population and was part of its list of campaign promises. Even here, though, shifts are contingent upon factors such as the Malaysian government’s bargaining position as well as the available options on a project-specific basis – be it securing more favorable terms for renegotiation or outright nixing.

And while projects like the East Coast Rail Link or Forest City may come under greater scrutiny, there is no telling whether new ones could sprout up as well. For all the hyperventilation on specific projects and the inroads of China’s Belt and Road Initiative (BRI) in Malaysia, the reality is that Beijing has been happy to incorporate some flexibility in how these ventures evolve. If you closely examine Chinese government descriptions of BRI in Malaysia over the years, they have in fact folded in several previous projects to make it seem much bigger than it actually is, which is the case in other Asian states as well (See: “The Real Trouble With China’s Belt and Road”).

But where the rubber may really hit the road in Sino-Malaysian relations under the new government could be in how it manages challenges in the relationship, including when ties hit a crisis point. Even though this is dependent on other factors – from Malaysia’s investments in its defense capabilities to the courage shown by its leaders and elites – clear infringements in Malaysian sovereignty or interference in the country’s domestic affairs in particular risk provoking a backlash if seen as a broader litmus test for a new government’s ability to protect the national interest (See: “The Truth About China’s Interference in Malaysia’s Politics”). This is particularly the case if the new government faces a legitimacy crisis of its own or perceives the need to shore up its credentials in the foreign policy realm.

Third and finally, it is important to keep in mind that there are also a number of factors beyond what Malaysia does that could have an even greater impact on Sino-Malaysian relations. One factor is China’s own behavior, since Beijing, for all its assertiveness, has shown an ability to recalibrate its ties with Southeast Asian states to balance charm and coercion where it encounters roadblocks. Another factor is how Malaysia’s other alignments evolve. Sino-Malaysian relations do not operate in a vacuum, and the role of other major powers, like the United States and Japan, and other regional powers like Australia, will be critical in affecting the extent of maneuverability Malaysia has in its hedging approach (See: “The Limits of US-Malaysia Relations Under Trump and Najib”).

It is still early days after historic change in Malaysia, and the shape of the country’s domestic politics and foreign policy will become clearer in the coming months. As this occurs, the relationship between China and Malaysia will be one to watch carefully, bearing in mind these key general considerations amid the continued speculation.