MALAYSIA ATTRACTS US$3.4 BLN FDI FROM CHINA, HK IN 2023 -- OCBC ECONOMIST

Malaysia has seen foreign direct investment (FDI) inflows from Mainland of China and Hong Kong Special Administrative Region increase to US$3.4 billion (US$1= RM4.696) in 2023 from US$3.3 billion in 2022 and tripling from 2013 levels, says OCBC global markets research and strategy.

Its senior Asean economist, Lavanya Venkateswaran, said Malaysia, as one of the ASEAN-6 economies alongside Indonesia, the Philippines, Thailand, Singapore, and Vietnam, has benefited from the diversification of global and regional supply chains, as well as the adoption of 'China+1' strategies.

She said the net FDI inflows into Malaysia were highest in the services and manufacturing sectors, implying that these sectors have been major recipients of inflows.

“Data compiled by the American Enterprise Institute and the Heritage Foundation shows that the bulk of investment from China has been directed towards the energy, technology and transportation sectors,” she said in OCBC's latest report on Asean-China FDI released.

To recap, Lavanya said Chinese firms pledged around RM170 billion in investments into Malaysia in April 2023, with 19 memoranda of understanding (MoUs) signed, followed by commitments of RM19.84 billion in September 2023. 

“These suggest that there is a strong pipeline of FDI commitments from China into Malaysia. 

“Further commitments are likely to be made at the Malaysia-China Summit 2024, which runs from 17th to 19th December, 2024,” she said.

Lavanya noted that foreign capital investment approvals, a proxy for approved FDI, have been picking up flowing into Malaysia.

“The source of the inflows has become more diverse in recent years, underscoring the broadening role of Malaysia in regional and global supply chains.

“Inflows from the European Union, other ASEAN countries, the United States, Japan and China have improved in recent years. ,” she said.

Regionally, Lavanya said FDI inflows into the ASEAN-6 economies have been gaining traction, rising to US$236 billion in 2023 versus the annual average of US$190 billion in 2020- 2022.