Once staunchly pro-China, Malaysian Chinese businesses are now distancing themselves from Beijing

Standing in the fruit section of a local supermarket the other day, I found myself staring at two 500g boxes of grapes: Chinese Shine Muscats priced at RM6.99 (S$2.20) and Australian Crimson seedless grapes at RM12.99.

As a consumer, I was delighted that Shine Muscats – originally a prime Japanese variety – had been slashed to budget prices. The Malaysian Chinese business community, however, has been far less enthusiastic about the influx of Chinese goods and China’s ability to turn once-premium goods into cheap commodities.

That anxiety is part of a larger paradox. The Malaysian Chinese business community remains economically and culturally connected to China. Yet, some of the businesses that once saw China as an economic opportunity and an admirable major power now increasingly see Chinese companies as competitors with an unfair advantage eating into their market share. A wariness of China’s overcapacity is taking root.

This is not a wholesale turn away from Beijing but a development far more complicated and nuanced – a growing recognition of China’s economic rise as both an opportunity and a threat.

That tension is visible in public opinion polls. Almost seven in 10 Malaysians polled in the ISEAS – Yusof Ishak Institute’s State of Southeast Asia 2026 survey would choose China if forced to align with either Beijing or Washington.

Yet, among Malaysian residents who believed bilateral relations had deteriorated, 20.1% said China should address trade imbalances and make bilateral trade mutually beneficial, up from 16.7% in 2025.

Even Malaysian Prime Minister Anwar Ibrahim raised these concerns over the impact of hyper-competitive Chinese business practices at the highest level with Premier Li Qiang on Sept 24 during his visit to Shanghai.

The takeaway? The choice for many Malaysians isn’t between China and America, but which external relationship provides better economic opportunities for Malaysian businesses and workers.

A second lesson here is also that any longstanding affinity felt by the Malaysian Chinese community does not necessarily translate into a free pass for Chinese businesses when pocketbooks are hurt.

From pro-Beijing to pro-Trump

For decades, Malaysian Chinese businesses benefited from China’s rise. As Malaysia’s largest trading partner, China was a source of low-cost manufactured goods, machinery and components. Its huge consumer market also offered opportunities for Malaysian exporters – in fuel, palm oil and tropical fruits like durian.

The trade relationship felt almost complementary: China made cheap products at scale and Malaysian businesses sold, distributed or serviced those locally. Yet, that dynamic is shifting.

A November 2025 survey by the Associated Chinese Chambers of Commerce and Industry of Malaysia showed that a third of their 245 respondents said their businesses were impacted by competition from ultra-low-priced Chinese goods.

Apart from price competition, the problem is that Chinese manufacturers increasingly have the technology, platforms and distribution networks to move down the value chain and compete directly with Malaysian businesses that once acted as intermediaries.

Corporate gift bag-maker Liew Bin, 67, has experienced this change first-hand. Sourcing bags from Xiamen in China, based on his own designs since the 1990s, he discovered that one of his former suppliers had entered Malaysia and begun competing directly for his customers in 2023.

“He penetrated my sales network as post-pandemic online sales plummeted after the reopening,” he told me at his two-storey shoplot in Puchong, a light-industrial suburb 22km south-west of Kuala Lumpur.

Liew’s annual sales have dropped to a few million ringgit, and he’s had to cut his workforce to just 10 staff. In the 2000s, just as China entered the World Trade Organization, sales were in the tens of millions of ringgit and he had employed 50 people.

Such economic realities have turned Liew – once a strong supporter of Beijing – into a sceptic who sees value in US President Donald Trump’s protectionist measures.

“I was proud of the rise of China and the great rejuvenation of the Chinese nation, hoping it would replace Western power one day,” he said, adding that he’s even publicly criticised the US bombing of the Chinese Embassy in Belgrade in 1999.

“Now, I back Trump’s tariff policy. Malaysia may have hundreds of billions of ringgit in trade with China, but we run a massive deficit. While we criticise US hegemony and remain pro-China, Washington actually gives us business through a trade surplus,” said Liew, who is also president of the 600-member Malaysia Retail Chain Association.

In 2025, Malaysia recorded a trade deficit of RM163.4 billion with China, compared with a net trade surplus of RM101.5 billion with the US.

While it is unclear how much Liew’s change in outlook is representative of the Malaysian Chinese business community’s views, his mindset nonetheless underscores how economic self-interest can seep into geopolitical attitudes.

No more red carpet

Still, the shift is undoubtedly visible. Another sign: The Malaysia-China Chamber of Commerce’s pushback against the then proposed extension of the visa-free scheme for Chinese visitors – citing fears of unfair local competition.

This made front-page news in Sin Chew Daily in May 2025 and marked a rare note of criticism for Malaysia’s largest Chinese-language newspaper.

It’s a sharp reversal from the positive atmosphere surrounding Chinese President Xi Jinping’s first visit to Malaysia in 2013. At that time, the Malaysia-China Business Council (MCBC) rolled out the red carpet. Kam De Zheng, 45, a staff member of the MCBC at the time, recalled the excitement.

“You could not get a seat at the luncheon, no matter how rich you were. Only selected heavyweight business leaders were invited,” Kam told me.

“China was seen as an economic powerhouse with an insatiable demand for foreign goods. Earning renminbi was the main focus. There was hardly a single negative word spoken about China.”

Today, however, the mood has changed as Malaysian businesses worry about getting squeezed by China’s rise.

Tensions are rising over claims that Chinese visitors are abusing Malaysia’s 30-day visa-free policy to work illegally in photography, diving and construction. The authorities detained 78 Chinese nationals in July for suspected visa violations while holding social visit passes.

“We need to make sure our local businesses can continue to grow and compete,” Kam said.

“We must remain part of the procurement chain.”

Fighting back and competing better

All these do not mean that Malaysian businesses are powerless.

Many successful firms that have beaten back the tide are competing on factors Chinese suppliers operating overseas or selling via platforms like Pinduoduo and Temu cannot easily provide: trust, local knowledge and after-sales service.

Penang-based Chinese prayer materials retailer Lee Chuan Wei, for example, now offers same-day delivery on orders over RM100.

For Malaysian businesses, such services make the sum difference precisely because the cheapest online price does not necessarily offer the lowest total cost. A customer may pay more for a local supplier that can deliver immediately, adhere to local regulations or resolve a defect – factors that stand out in highly regulated sectors.

Halal certification, for example, may provide local food manufacturers a significant advantage in the food manufacturing sector.

“It’s a form of state protection for Malaysian food manufacturers. Without halal certification, mainland competitors can only reach ethnic Chinese consumers – just 22% of the population,” said Hong Chee Meng, president of the Federation of Sundry Goods Merchants Associations of Malaysia. Muslims constitute 63.5% of Malaysia’s population.

Even so, there are no permanently impenetrable barriers. Chinese firms can obtain halal certification too, with many already participating in the global halal market.

Lee Heng Guie, executive director of the Socio-Economic Research Centre, offers a counter-perspective. He argued that Malaysian small and medium-sized enterprises should not see Chinese goods as threats but a source of productivity gains.

Chinese manufacturers produce machinery designed for smaller firms. Such products enable Malaysian companies with smaller balance sheets to modernise affordably without the capital costs associated with equipment from advanced nations.

“China’s automation and machinery equipment generally costs 30% to 50% less than equivalent equipment from Germany or Japan.”

A 30,000kg Chinese crane costs RM600,000 – less than half the price of its Japanese counterpart, which sells for RM1.3 million, a Malaysian machinery dealer who goes by Lim told me.

“Their performance and reliability are nearly catching up,” he said, adding that he sells 10 to 20 units of a particular Chinese model annually, compared with a peer’s two Japanese cranes.

The complexities of the intertwining of China and Malaysia’s economies mean bilateral economic relations are unlikely to become a simple story of Malaysian businesses turning away from China. If anything, trade between both sides is growing, up in the first six months of 2026 by about 30% year-on-year.

Standing in that supermarket, I found myself caught in that same love-hate contradiction.

I may have opted for Australian Crimson grapes over Chinese Shine Muscats that afternoon. But as this haze season worsens, I know I will not hesitate to buy a budget-friendly, reliable Xiaomi air purifier.

Malaysians want the benefits of trade with China – cheaper inputs, products and tourists boosting the Malaysian economy. Yet, they cannot run away from the stiffer competition posed by Chinese companies reaching their consumers directly and must find ways to differentiate themselves.

Yet, the concerns expressed by the Chinese Malaysian business community are also notable for China.

If Beijing hopes to sustain goodwill in South-east Asia, it needs to tackle the domestic overcapacity fuelling these tensions. Failing to do so risks alienating local business communities – traditionally one of China’s friendliest blocs in the region – and pushing them further away from Beijing. THE STRAITS TIMES