PETALING JAYA: Trade colonialism as a result of increased investment by Chinese companies is a bigger worry for Malaysia than possible falls in exports to China, according to an economist.
Barjoyai Bardai, of Universiti Tun Abdul Razak, believes that any decrease in Malaysian exports to China would not be of much concern as Malaysia could export its products to other countries.
However, the amount of investment by Chinese companies in the country could pose problems.
“We are located strategically, so naturally China wants to have a presence here. So they invest, give us favourable terms and Chinese firms set up shop here in a big way,” he said, even though the Chinese government had restricted the outflow of capital in recent times.
“Trade colonialism” could arise if Chinese firms shifted production and distribution to Malaysia in order to strengthen China’s presence in the region.
While jobs would be created, with multiplier effects, Chinese firms could also end up “outmuscling” local producers by producing goods and services at cheaper prices and eventually replacing Malaysian firms as primary producers.
“This would allow the Chinese firms to control prices and quality of the goods and services,” Bardai said.
However, Malaysian companies would still have the edge through tariff protection.
Earlier, the Institute of Democracy and Economic Affairs noted that Malaysian exports to China had started to decline as the flow of Chinese foreign direct investment grew from US$251 million in 2003 to over US$400 million in 2009.
By 2013, Malaysian investment in China was US$280 million while Chinese investment in Malaysia reached US$616 million and increased to almost US$4 billion by the end of 2017. The terms of trade had tilted against Malaysia’s favour by 2012, the institute said.
Last year Malaysia became the fourth largest recipient of China’s overseas direct investment from 20th place in 2015. In that time, Chinese investment skyrocketed from RM1.5 billion in the first quarter of 2015 to almost RM15 billion in the fourth quarter of 2017, according to the Statistics Department.