KUALA LUMPUR - Malaysia’s pivot to economic diplomacy since Prime Minister Anwar Ibrahim took power four months ago will come into focus when he begins a six-day visit to Beijing on Tuesday.

Amid global headwinds – the protracted Russia-Ukraine conflict, monetary tightening and banking collapses – the reopening of China’s economy as it seeks to return to pre-pandemic growth is the one bright spark for 2023.

Other geopolitical issues, especially the touchy subject of overlapping claims in the South China Sea and incursions into Malaysian waters, will likely take a back seat, with the focus on strengthening economic ties.

“Any discussions on the South China Sea will be very marginal. The overall theme will be very positive. Both sides are open for business,” Universiti Malaya’s Institute of China Studies director Ngeow Chow Bing told The Straits Times.

“China realises it has to make up for all the lost opportunities in the past three years,” he added, referring to the near economic standstill during Beijing’s ultra-strict Covid-19 lockdowns.

Datuk Seri Anwar, who is also Finance Minister, expects Malaysia’s gross domestic product growth to moderate to 4.5 per cent in 2023 after a better-than-expected 8.7 per cent in 2022.

But analysts – and even Treasury officials ahead of Budget 2023’s unveiling in February – projected a figure closer to 4 per cent.

Mr Anwar addressed 106 heads of diplomatic missions at a March 7 retreat, which recommended making it a “priority to enhance economic diplomacy by coordinating this issue with economic-related agencies”, said Foreign Minister Zambry Abdul Kadir.

Signalling the importance of China to Kuala Lumpur’s foreign policy framework, the inaugural meeting of the government’s Consultative Council on Foreign Policy in February saw the attendance of Ambassador Raja Nushirwan Zainal Abidin, who is Malaysia’s top diplomat in Beijing, a member of the panel told ST.

Deputy International Trade and Industry Minister Liew Chin Tong told ST that the shift to economic diplomacy has been a factor in some recent big wins – especially with the likes of electric vehicle (EV) manufacturer Tesla picking Malaysia to establish a market presence and head office – and will continue to be so as the country differentiates itself from others in the region.

“Malaysia has an opportunity to see a second take-off. We used to be in a basket with the rest of South-east Asia, aside from Singapore, which was a distinctive global city.

“But as firms look at diversification, they look at the region in a more detailed manner. Malaysia may not be as efficient as Singapore, but we have strong global links and a decent workforce at a lower cost,” he said.

A key industry for Malaysia will be electrical and electronics (E&E), given how high-technology applications were not just crisis-proof during the Covid-19 pandemic, but also became more crucial in a physically distanced world. The global semiconductor market – where Malaysia is the sixth-largest exporter – is expected to more than double in seven years.

International Trade and Industry Minister Tengku Zafrul Aziz said on March 6: “The most attractive factor about Malaysia is that the ecosystem for E&E can support the EV industry. Tesla said quite a big part of its supply chain is from Malaysia, so why not relocate here?”

China has been Malaysia’s top trading partner for 14 years running and was also the biggest source of foreign direct investment in 2022 at US$12.5 billion (S$16.7 billion), nearly double that of the United States in the second place.

The overall sense is that Malaysia and Asean as a whole can gain more from supply chain diversions and offshoring as businesses adopt a China-plus-one strategy of diversification.

Mr Liew said: “We are entering a new phase for the next few decades. For the last 30 years, business has operated on a ‘just in time’ basis. But now, it is ‘just in case’.”

But geopolitics can often be a zero-sum game, with closeness to one superpower often seen as drifting away from another.

Mr Anwar, in his first news conference after taking office in November 2022, called China a “pivotal” Asian giant with which his government must enhance relations.

But he has consistently taken the position that Malaysia is not interested in being part of a new Cold War between the US and China.

Dr Ngeow said pursuing shared economic ties is “one of the main tools to ensure both superpowers stay engaged and seek common interest and prosperity rather than confrontation.”

“We will want to continue to engage the US on the economic side, it’s just that they are not very interested sometimes,” he added, citing the US pullout from the Trans-Pacific Partnership in 2017 and the progress of the Regional Comprehensive Economic Partnership of which China is a huge proponent.

However, no leader is going to pass up on harvesting low-hanging fruit with the good optics of cordial ties with either Beijing or Washington.

Not least Mr Anwar, having returned last week from Saudi Arabia, where meetings announced by the Foreign Ministry with King Salman bin Abdulaziz and Crown Prince Mohammed bin Salman never materialised.

Both sides of the political divide have clashed over the perceived snub from an important Islamic ally, but it is more than likely that the Prime Minister will bounce back in China.

Dr Ngeow said: “China will be a big contrast. There will be a huge business delegation with about half a dozen ministers.

“He will definitely meet important leaders, have sessions with businesses and speak at a major university because Beijing will be more than happy to provide such conveniences.”

Before heading to China, Mr Anwar made a one-day official visit to Cambodia on Monday to further strengthen bilateral relations and cooperation.

It was his first visit to the country, and it was at the invitation of Cambodian Prime Minister Hun Sen.

Mr Anwar was accompanied by several ministers and senior officials.