The official visit of Chinese President Xi Jinping to Malaysia in April 2025 brings new hope to the country’s economic landscape, particularly for Small and Medium Enterprises (SMEs). Amid the United States imposing new tariffs – estimated at US$18 billion – on Chinese technology products, China is actively seeking alternative trade partners and new supply chain routes across Asia.

Malaysia, strategically located in the heart of ASEAN and maintaining strong diplomatic ties with China, is emerging as an important economic ally in this evolving global trade landscape.

China-Malaysia Trade Relations on the Rise

China has maintained its position as Malaysia’s largest trading partner for 15 consecutive years as of 2023, with bilateral trade valued at RM450.84 billion (approximately US$100 billion), representing over 17 per cent of Malaysia’s total trade.

In conjunction with this historic visit, both countries signed 17 memoranda of understanding (MoUs) covering cooperation in infrastructure, renewable energy, digital economy, and smart manufacturing. These MoUs are projected to generate over RM50 billion in investments over the next five years.

New Opportunities for Malaysian SMEs

Malaysian SMEs – which make up 97.4 per cent of all registered businesses and contribute nearly 38 per cent to the national GDP – stand to benefit directly from this cooperation.

The shift in Chinese manufacturing operations to Malaysia, aimed at circumventing US tariffs, has created new demand for local suppliers, logistics firms, and technology partners. SMEs in precision engineering, electronics, halal food, and green technology sectors are particularly well-positioned to join these emerging supply chains.

For instance, Malaysia’s electrical and electronics (E&E) exports, which reached RM575 billion in 2023, are expected to grow further with increased sourcing from Chinese firms establishing regional operations here, especially in hubs like Penang and Johor.

Technology Transfer and R&D Collaboration

This visit also opens major opportunities in research and innovation. Several Chinese tech giants – including Huawei and BYD – have expressed interest in forming R&D collaborations with Malaysian companies. This presents a golden opportunity for local SMEs to participate in technology transfer, workforce upskilling, and joint innovation.

For example, Huawei’s RM2.2 billion investment to develop a regional cloud and AI hub in Malaysia is expected to generate more than 10,000 high-skilled jobs over the next decade, offering ample opportunities for local digital SMEs to plug into the ecosystem.

Boosting SME Export Potential

Export-ready SMEs should also explore the vast Chinese consumer market. There is growing demand for halal-certified products, health foods, cosmetics, and sustainable goods. Malaysian SMEs can position themselves as trusted partners with internationally recognised certifications.

According to MATRADE, Malaysia’s halal exports to China reached RM3.8 billion in 2023, an increase of 22 per cent compared to the previous year. This figure is expected to surpass RM5 billion by 2026.

Policy Support and Capacity Building

To ensure these benefits are realised, strong policy support is crucial. Programmes such as SME Go-Global, MIDF’s Automation Loans, and Export Acceleration Missions should be expanded to support SMEs with market intelligence, financial assistance, and international networking.

Collaborations with Chinese business chambers and tech accelerators can also open new avenues for SME innovation and globalisation.

Conclusion

President Xi’s visit to Malaysia is more than just a diplomatic event – it marks a new direction in bilateral economic strategy.

For Malaysian SMEs, this is a golden chance to move forward with confidence. By enhancing internal capabilities, engaging in innovation, and expanding into international markets, Malaysian SMEs can evolve from local champions into competitive global players.

In this era of trade wars, success lies not in isolation, but in adaptability and strategic cooperation.

-- BERNAMA

Dr Zurina Samsudin is Head of Centre of Business Development (CBD), Johor Business School, Universiti Tun Hussein Onn Malaysia (UTHM).