Friends With The Dragon: Chinese Technology Investments In Malaysia (2015 – 2026) – Analysis

By James Chai

Key Takeaways:

• Chinese tech FDI in Malaysia (semiconductors, solar, EVs/batteries, data centres, AI) is compiled here at 67 deals and RM155.1bn (~US$37.9bn) since 2015, peaking in 2023–24 (RM84.9bn) as China “friendshores” to offset tariffs and stalling growth—the regional “second China shock.”
• Drivers are de-risking (trade-friction language in filings), de-weaponising supply chains after U.S. solar/chip/data-centre rules, and influence via MoUs, RMB swap/clearing, Jack Ma/Alibaba brokerage, Huawei labs, and Xiamen University Malaysia—not a single central plan but a whole-ecosystem “go global” pattern.
• Anwar–Xi closeness and state incentives spread projects from Penang chips to Johor data centres and Kedah batteries; Malaysia’s “stands with China” neutrality pulls capital but now collides with a U.S. Reciprocal Trade “poison pill” and Beijing’s unease about deals that cut against its interests.

Southeast Asia’s ‘surprising’ resilience amidst the tariff war is largely due to its closeness to China (Financial Times, 2026). Many Southeast Asian countries’ foreign direct investment (FDI) has seen historic highs; total direct and portfolio investment from China has reached almost 2 per cent of the region’s GDP.[1] As China starts shifting its exports and outbound investment to developing economies to offset ‘stalling domestic growth’ and tariff effects, Southeast Asia has become the epicentre of the ‘second China shock’.[2] For Southeast Asia, massive Chinese investments, especially in technology, were opportune for industrial upgrading. Affordable technologies that are fast-to-build and quick-to-implement are ‘welcomed enthusiastically’ in the region,[3] be it middle-income hedgers like Malaysia (semiconductor equipment, fabs, design) or Vietnam (manufacturing), high-income Singapore (AI models), or generally US-aligned Philippines (battery, energy storage).[4]

The US’s actions against China under both the Biden and Trump administrations over the past decade have prompted China to turn to Southeast Asia, leveraging the goodwill forged during the Belt and Road Initiative. The latest in China’s approach is to use technology as a product for friendshoring, driven by its imperative to de-risk, and de-weaponise the supply chain, and to maintain extraterritorial influence (defined and elaborated below).

Malaysia offers an interesting case study. It is the most vocal in using its neutrality and non-alignment to attract FDIs.[5] China is the most influential force in Malaysia’s trade, investments, arms deals, and culture, building on its 52-year diplomatic relations and as ‘Malaysia’s largest single trading partner’ since 2009.[6] Before 2012, Malaysia was a small recipient of Chinese investments.[7]

Chart 1: Number of MoUs, seniority of Chinese leaders, and narratives, 2021-2025

As seen in Chart 1, there has been a noticeable uptick in senior-level activities and state-level closeness expressed through document signing and narratives. This is correlated to the increases in MoUs and investment commitments between the two countries. Anwar Ibrahim’s meeting with Xi Jinping in 2023 kick-started a series of senior-level bilaterals, with 2025 as the highest-concentration period, where Anwar met Xi twice, including a rare state visit by Xi to Malaysia.[8] The narrative has also changed from a neutral win-win in 2021, to directional phrases in 2022-2024 such as ‘direction’, ‘building’, and ‘towards’, before reaching ‘High-Level Strategic’ and ‘Golden 50 years’ in 2025.

This recent development has not been sufficiently examined in the same way as China’s Belt and Road Initiative (BRI) of 2013-2018.[9] This paper intends to fill that gap, specifically focusing on Chinese technology investments in Malaysia, arising from the combination of industrialisation opportunities and geopolitical risks. It will start by collating and analysing the largest Chinese technology investments from 2015 to 2025. Then, it will proceed to hypothesise potential drivers using the friendshoring framework of Kalvelage & Tups (2024).  

THE DRAGON ENTERS  

This paper considers ‘critical and emerging technologies’ to include semiconductors, advanced manufacturing, data centres, clean energy, and electric vehicles. [10] The OECD definition of FDI and its academic operationalisation will be used.[11] To narrow this further, only announced FDIs above RM50 million are considered, and high-profile investments with undisclosed value are simply tagged to their investment announcement year. This brings the total to 67 deals, including 17 with undisclosed value, and a total investment value of RM155.1 billion (US$37.9 billion).  

No official source provides a continuous measurement of Chinese technology investments in Malaysia. The Department of Statistics Malaysia reports realised FDI by source country and broad sector, but as separate tables without sector disaggregation. The Malaysian Investment Development Authority (MIDA) reports approved investments quarterly and annually, naming a few source countries, and separately reports sub-sector totals (e.g., semiconductors, data centres, electric vehicles), but never cross-tabulates the two. Deal-level coverage appears in trade mission press releases on MIDA’s website, but this is highly selective. This paper’s manually assembled method, while not exhaustive, contributes to filling an empirical gap.

Chart 2 shows the largest Chinese technology investments since 2015, categorised by four separate waves (See Methodology Note in Appendix A). The first wave (2015-2018) was largely made up of solar investments, with LONGi Green Energy’s RM5.6 billion and Xinyi Solar’s RM2.1 billion as the highest. The largest solar investment since 2015 was Risen Energy’s RM42.2 billion in 2021. Wave 2 (2023-2024) was defined by early semiconductor investments (TF-AMD, Nexperia, StarFive, SilTerra), and data centres (GDS Holdings). Wave 3 (2023-2024) had the highest volume and value of investments, totalling RM84.9 billion, with mega investments from Geely (RM45.6 billion), ByteDance (RM10 billion), and SBH Kibing (RM7.2 billion). The period also had the highest domain diversity, which continued into Wave 4 (2025-2026), which included clean energy, digital platforms, batteries, and semiconductor investments.

Chart 2: Chinese technology investments into Malaysia since 2015

Wave 1: 2015 – 2018: Total disclosed: RM11.1 bn (7 deals)

Wave 2: 2019 – 2022: Total disclosed: RM47.5 bn (6 deals)

Wave 3: 2023 – 2024: Total disclosed: RM84.9 bn (22 deals)

Wave 4: 2025 – 2026: Total disclosed: RM11.6 bn (15 deals)[12]

At the time of writing, solar is the largest investment category, with RM58.1 billion (US$14.2 billion). Importantly, most of this investment value is carried by Risen Energy, accounting for ~72% of the total. Excluding this, the largest categories would be electric vehicles, both in automotive and batteries, and data centres. Even without mega investments above RM10 billion (Geely, Risen Energy, ByteDance), Chinese technology investments have risen dramatically in the past 10 years, reaching their peak in 2023-2024 in both the number and value of deals, which coincided with a high point in China-Malaysia diplomatic relations. 

Map 1: Geographic distribution of the largest Chinese technology investments in Malaysia

Partly due to the variety of domains, Chinese technology investments are spread widely throughout the country. Every state has at least one large-scale Chinese investment except for Kelantan and Perlis. A large part of these investments has been driven by state incentives, and the advantages of proximity have seen investments clustering around existing industrial agglomerations. Unsurprisingly, Penang tends to attract semiconductors and electronics to its Bayan Lepas Free Trade Zone and Batu Kawan Industrial Park (e.g. TF-AMD, StarFive, SuperSiC, AMTE); Johor is the undisputed leader in data centres, primarily through its Sedenak Tech Park; Kedah has emerged as the battery and solar manufacturing hub with Kulim Hi-Tech Park and Gurun concentrations (e.g. EVE, CosMX, Putailai), and; Perak’s Tanjung Malim is the natural choice for electric vehicle and automotive assembly (e.g. Geely, BYD, Zeekr).

As the country’s centre, Kuala Lumpur and Selangor’s investment-attraction capabilities have become more diverse, ranging from data centres (Alibaba, Tencent), digital platforms (China Mobile, Tsing, Inspur), electric vehicles and batteries (Changhong Energy, Jinyang, GAC), to cloud and AI. Investments in Melaka are driven less by agglomeration and more by serendipitous circumstances, including leases of existing plants (e.g., GWM, MG, XPeng), cheap land (Xinyi), Penang overflow (ATX), and opportunistic brokerage (e.g., Huawei, Tianneng). Negeri Sembilan’s story is similar.

Three states—Sabah, Sarawak, Terengganu—attracted one massive Chinese investment each using alluring packages brokered by state-linked companies. Sabah’s Fokasrama Sdn Bhd and Sabah Energy Corporation provided land sublease and natural gas to secure SBH Kibing’s investment; Sarawak Energy offered discounted industrial tariffs under the Sarawak Corridor of Renewable Energy to draw in LONGi’s upstream investment; Terengganu Inc’s decades-old Kenyir-Kertih petrochemical energy corridor allowed Guofu Hydrogen to plug in its investments.[13]

China’s whole-ecosystem investment style, commonly seen in BRI-era infrastructure projects, was observable in the recent technology investments in two ways: one-to-many and many-to-one.[14] The former refers to one firm providing many technology options in the country, and the latter refers to every part of a supply chain having at least one Chinese supplier (Chart 3).

Chart 3: China’s whole-ecosystem technology investments: One-to-many; many-to-one

One-to-many investment styles are typically only offered by Chinese technology conglomerates like Huawei, Alibaba, and Tencent, among others. For instance, Huawei offers data centres in Malaysia, cloud services, chips,[15] telecommunications equipment, and even downstream products like smartphones. Many-to-one investments create the full supply chain effect similar to the one-product, one-town ‘specialised towns’ in China (一镇一品, 专业镇), although certain high-technology or sensitive components still remain in China.[16] 

This investment style is birthed from the tech-industrial ecosystem in China, i.e. a system of interlocking industries that enable it to cater to a wide range of customer demand, and its motivation to be close to its end users through physical supply chain presence (就近配套).[17] In reality, however, this is not a coherent strategy or a centrally coordinated, vertically-integrated play, but a series of activities by many firms with many owners around a broad organising logic.[18] While this provides many options for hosting states in Malaysia, it also crowds out smaller local businesses. 

FRIENDS WITH THE DRAGON

Using Kalvelage & Tups (2024)’s framework of friendshoring, defined as ‘locat[ing] strategic global production networks in geopolitically aligned states’, will help us better understand the imperatives and mechanisms of the Chinese technology investments into Malaysia.  

Imperatives: De-risking, de-weaponising supply chain, maintaining extraterritorial influence 

De-risking is a strategy to shore up production in geopolitically aligned countries to mitigate acute risks, including geopolitical, climate, pandemic, and other bottlenecks. In contrast, de-weaponising the supply chain is more to safeguard its upstream and downstream supply chain from ‘predatory’ interventions by hostile countries or blocks, e.g. tariffs, export controls etc. Maintaining extraterritorial influence is diplomatically focused on creating shared benefits and mutual trust.

Chinese firms locate their technology global production network in Malaysia to de-risk from a variety of structural vulnerabilities. While it cannot be argued that these Chinese technology investments were all state-directed, they were definitely part of a general push for firms to ‘go global’ (走出去).[19] The 14^th Five-Year Plan for Digital Economy Development sets out its intention to deepen the ‘development of the ‘Digital Silk Road’’, and coordinate overseas digital-infrastructure cooperation, besides promoting the ‘globalisation of emerging service capabilities such as data storage and intelligent computing’.[20] The plan on National Informatisation,[21] issued by the Central Cyberspace Affairs Commission, follows the same framework.

At the firm level, it is generally hard to find pure de-risk languages, hence they are valuable for indicating intentions when found in corporate filings and press releases. In their SZSE filings, EVE Energy, Hunan Yuneng, and TF-AMD mentioned that the Malaysian investments were partly motivated by the ‘risk of international trade friction’ (国际贸易摩擦风险).[22] Others, like Victory Giant, went further in explicitly referring to the Malaysian investments as ways to ‘dilute geopolitical risk’ (弱化地缘政治风险).[23] It is fair to say that many of these investments help build an ‘overall risk-resistance capability’ for Chinese firms.[24]

Secondly, Chinese investments were a response to the weaponised supply chain using tariffs and export controls (Table 1).[25] This was most evident for solar and partial for semiconductors and data centres. Electric vehicles and batteries investments were likely driven by domestic overcapacity and market-seeking imperatives.[26]

The initial anti-dumping and countervailing duties imposed by the US Commerce Department in 2012, that continued with multiple iterations, set off the first round of solar investments in Malaysia.[27] Before extending these measures to Malaysian-made output and Malaysian-hosted Chinese firms, the US administration imposed a 24-month waiver on Southeast Asian countries to spur solar manufacturing in the US.[28] This spurred Chinese solar firms to expand their operations to Malaysia. Even though solar firms like Jinko stated that their investment decisions were about ‘diversifying [its] global manufacturing layout’ and ‘explor[ing] new export markets’, the subsequent reversals to halt expansion or exit happened closely after the expiry of the 24-month waiver.[29]

Table 1: US technology regulations with a direct or indirect effect on Chinese technology investments in Malaysia

Chip export controls that started in 2022 restricted high-performing computing assets while having a push effect on many Chinese technology firms to invest in Malaysia.[31] Once again, these firms did not explicitly state this motivation, but firms like TF-AMD did say that they chose Penang as the ‘export outlet’ (出海口) against the backdrop of continuing US-China trade friction in 2022.[32]

Lastly, China couples its technology firms to Malaysia to build or maintain a sphere of influence, i.e. ‘creating’ friends. For the past decade, China has seen AI as a ‘new focus of international competition’ and its neighbouring countries as ‘strategically indispensable in supporting China’s rise to Great Power status’.[33] This has played out in the series of high-profile, high-volume MoUs from the Malaysian prime minister’s 2016 visit (14 documents), to President Xi Jinping’s state visit in 2025 (31 documents).[34] These occasions emphasise deeper integration between the countries, including in their industries and supply chains, the Belt and Road Initiative Cooperation Plan, Malaysia’s 5G network, and as BRICS partners. Additionally, there was also regional deepening via the China-ASEAN Free Trade Area (CAFTA) 3.0.[35] SuperSiC’s Malaysian investment was explicitly framed as implementation of the April 2025 joint statement, as proof that these imperatives lead to tangible outcomes.[36] 

Mechanisms: Extraterritorial de-risking, network brokering, institution-building

Although there were no direct Chinese instructions to invest into Malaysia, the state did use some arrangements to alter the risk profile of investing in the country. One such method is through foreign exchange arrangements. A central bank currency swap between the People’s Bank of China (PBoC) and Central Bank of Malaysia (BNM), renewed in 2021, allowed BNM to borrow renminbi against ringgit whenever Malaysia banks needed to do so, without going through the dollar.[37] An official renminbi clearing bank, i.e. Bank of China, was also established in Malaysia in January 2015, which allowed renminbi payments to be settled directly in Malaysia. Renminbi-ringgit settlements reached 25.6% of bilateral trade as of March 2026 (Malay Mail Online, 2026b). These efforts reduced the transaction costs, and the reliance and currency risks on the dollar for Chinese investors in Malaysia.

Besides that, the Chinese state was also involved in network brokering that effectively bridged Chinese firms to Malaysian institutions. The classic event series is Malaysia’s appointment of Jack Ma as its digital economy advisor in 2016, which led to the establishment of the Digital Free Trade Zone a year later, and Alibaba’s logistics (Cainiao), smart-city (City Brain KL), and cloud investments in Malaysia (Alibaba, 2018; Malay Mail Online, 2016). More recently, state visits by both countries have also been bundled as brokering events. Anwar Ibrahim’s Beijing visit in 2023 signed 19 MoUs totalling RM170 billion, and Xi’s state visit in 2025 resulted in 31 MoUs.[38] In the latter meeting, both state leaders witnessed the signing of a vendor contract between U Mobile and Huawei-ZTE.[39]

Finally, Chinese investments are built upon extraterritorial institution-building work, i.e. organisations, rules, and standards that anchor its firms to Malaysia. On this, Huawei is at the forefront, by establishing the first AI Lab & Innovation Centre outside of China, establishing an ASEAN Academy, collaborating on 5G cybersecurity test lab, and partnering with MCMC for a leadership programme.[40] Malaysia is also host to the first overseas campus of a Chinese public university, Xiamen University Malaysia, whose first B.Eng AI cohort graduated in 2024.[41] Malaysia’s MoU with the BeiDou Navigation Satellite System and Huawei-ZTE’s involvement in building the second national 5G network will likely entail standard-setting by these Chinese firms.[42]

Unlike China’s direct guarantees for its investments, e.g. offtake agreements in Africa,[43] Chinese technology investments used de-risking instruments, network brokering, and institution-building to accelerate its foothold in Malaysia.

CONCLUSION

To be sure, Malaysia has been an active host country in attracting these Chinese technology investments. The main investment promotion agencies, MIDA and InvestKL, continued the China Special Channel established in 2019, and made use of their China teams in Beijing, Shanghai, and Guangzhou to facilitate them (XSR, 2020). Other initiatives such as the Johor-Singapore Special Economic Zone, the New Incentive Framework, and the Digital Ecosystem Acceleration Scheme made Malaysia an attractive and competitive investment destination. In terms of narrative, the Malaysian leader said his country ‘stands with China’ amid the US tariff threat.[44] The country translated the warm relations into high-value commitments at every high-level bilateral meeting.

This active form of neutrality yields productive investment outcomes, but they are also starting to invite complications from both sides. The US signed the Agreement on Reciprocal Trade (ART) with Malaysia, which included a ‘poison pill provision’ that indirectly limits Malaysia’s scope of partnership with other parties that may be against the US’s ‘fundamental interest’.[45] Additionally, the US is continuing its monitoring against Malaysia’s alleged chip transhipments or remote access for Chinese users. China, on the other hand, had expressed ‘grave’ concerns for Malaysia signing deals that may be against its long-term interests.[46] Future research could examine the effects of Chinese technology investments in Malaysia, especially in domains most sensitive to geopolitical competition. However, amid fluidity, China’s post-2022 surge of investments into Malaysia will surely deepen bilateral economic relations and increase China’s technological footprint in the country, and the region.

For appendix, references and endnotes, please refer to the original pdf document.

• About the author: James Chai is Visiting Fellow at ISEAS – Yusof Ishak Institute. He is also a columnist and author with Penguin Random House. The author would like to thank Francis Hutchinson and Hwok-Aun Lee for their comments. All responsibility for errors or omissions lies with the author.
• Source: This article was published by ISEAS – Yusof Ishak Institute.

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