Push and pull for S-E Asia as China counters Malaysia’s US trade deal with own pact

How KL balances demands from both sides will be closely watched by its neighbours

- Shannon Teoh Malaysia Bureau Chief

Malaysia is seeking to pacify China by exploring a new memorandum of understanding (MOU) that the latter proposed in the wake of a controversial trade treaty Malaysia signed in October with the United States.

Just days after Beijing raised “grave concerns” over Kuala Lumpur’s agreement with Washington, Malaysia’s Investment, Trade and Industry Minister Tengku Zafrul Aziz said on Dec 2 that the proposed deal with China would cover “strategic sectors” between the two trading partners.

But the conundrum lies in how this could be reconciled with the demands of the earlier deal with Washington, signed during President Donald Trump's visit to Malaysia, which requires the Southeast Asian nation to align with the US on sensitive national security.

How Malaysia navigates this will be closely watched by regional neighbours, with China applying similar pressure on Cambodia. Meanwhile, Indonesia continues to resist US demands that could significantly increase shipping costs, and Vietnam and Thailand weigh their options after signing their own deals with the US.

Beijing made public on Nov 28 that it had expressed unease about the US-Malaysia Agreement on Reciprocal Trade (ART) during a Nov 25 bilateral meeting, even as Datuk Seri Zafrul cast ongoing discussions as “a statement that they want to work closer with us, and they want it to be more tangible”.

He told reporters during a press conference on his final day as minister that by proposing the MOU, “they are saying that they want to strengthen the collaboration on trade and investment with Malaysia”.