As Kuala Lumpur prepares to lead a national delegation to the 5th Global Digital Trade Expo in Hangzhou next week, running from September 23 to 27, where Malaysia is participating as a Guest-of-Honour country alongside Hungary, a far more delicate story is unfolding behind the scenes. Prime Minister Anwar Ibrahim’s government is simultaneously negotiating the purchase of Chinese Huawei Ascend 910C processors for a sovereign AI build-out and working to reassure Washington, which recently placed Malaysia in a “Tier 2” transshipment-risk category over concerns about restricted technology flowing onward to China. It is a strategy analysts describe as dynamic hedging — an attempt to extract maximum benefit from both Beijing and Washington without fully committing to either.
To unpack how Malaysian officials are weighing the future of these two relationships, we spoke with Irina Tsukerman, a New York–based national security lawyer and geopolitical analyst, and President of Scarab Rising, Inc, a media and security strategic advisory firm. She is also Editor-in-Chief of The Washington Outsider, and her analysis on great-power competition and regional security has appeared across international media.
Exclusive interview with Irina Tsukerman National Security Lawyer, Geopolitical Analyst, and President of Scarab Rising, Inc.
Journalist: How do senior Malaysian officials envision the future of Malaysia’s relations with China, particularly in trade, investment, and digital economy cooperation?
Irina Tsukerman: “They see China remaining one of Malaysia’s most important economic partners and expect commercial ties to keep expanding as Malaysian companies become more closely connected to Chinese manufacturing, consumer markets, logistics networks, technology companies, and regional supply chains. Anwar Ibrahim’s government has actively courted Chinese investment because it wants Malaysia to capture manufacturing and technology activity moving across Asia, particularly in semiconductors, electric vehicles, renewable energy, advanced manufacturing, data centers, cloud services, artificial intelligence, e-commerce, and digital payments. Malaysia offers Chinese companies good infrastructure, an established electronics industry, a multilingual workforce, close economic links with Singapore, and access to the wider ASEAN market.
Kuala Lumpur increasingly wants better Chinese investment rather than simply bigger investment announcements. When Malaysia provides tax incentives, infrastructure, land, or political support, officials want Chinese companies to employ and train Malaysians, buy from Malaysian suppliers, establish engineering and research operations, and develop local technical skills. Earlier experience with large infrastructure and industrial projects taught Malaysian governments that impressive investment figures can deliver relatively limited domestic benefits when equipment, contractors, skilled workers, and procurement come primarily from China. Anwar’s industrial policy therefore gives officials a strong reason to negotiate over local employment, procurement, training, and technology sharing.
The digital economy offers particularly large opportunities because Malaysia wants to become a major Southeast Asian location for data centers, AI infrastructure, cloud computing, semiconductor services, digital commerce, and related industries. Chinese companies can bring capital, equipment, engineering expertise, and connections to large Asian commercial networks. Malaysia wants those investments because they can help build the infrastructure required for its own technology sector and attract other businesses that need computing capacity.
Officials also have to protect Malaysia’s access to American technology. Advanced data centers and AI operations depend heavily on chips and other technologies subject to US export controls. Kuala Lumpur therefore has strong reasons to make sure Chinese companies operating from Malaysia comply with Malaysian law and do not turn the country into a route around American restrictions. If Washington concluded that restricted chips or equipment were routinely reaching Chinese end users through Malaysia, Malaysian companies could face additional scrutiny and restrictions. That would directly threaten the technology strategy the government is trying to build.
Trade policy will continue to focus on getting more Malaysian products into China. Kuala Lumpur wants greater Chinese purchases of palm oil, agricultural products, halal goods, petrochemicals, electronics, energy products, and manufactured goods, along with better opportunities for Malaysian service companies. Tourism, education, and aviation also have significant economic value, so the government has encouraged easier travel and stronger connections between the two countries.
The South China Sea will remain a recurring source of friction because Malaysia intends to continue offshore energy development and other activities in waters it considers part of its exclusive economic zone. Chinese coast guard and other maritime activity around these areas periodically creates direct pressure on Kuala Lumpur. Malaysian officials have generally responded through diplomatic protests, maritime patrols, direct discussions with Beijing, and ASEAN diplomacy while continuing economic negotiations with China. They expect to manage both relationships at once for years because abandoning major economic opportunities with China would carry enormous costs while conceding Malaysian maritime rights would create economic, security, and domestic political problems.”
Journalist: How do senior Malaysian officials assess the future of Malaysia’s relations with the United States, especially in terms of security, technology, and economic engagement?
Irina Tsukerman: “They see the US as essential to Malaysia’s plans for semiconductors, advanced manufacturing, AI, aerospace, cybersecurity, cloud computing, and other industries that depend heavily on American technology, intellectual property, investment, and access to global corporate networks. American companies have operated in Malaysia’s electronics sector for decades, particularly around Penang, and the government wants them to move more sophisticated operations into the country. Malaysian officials are seeking investment in chip design, advanced packaging, research, engineering, equipment, and other activities that can raise wages and develop local expertise.
Washington’s controls on advanced technology exports to China have created a major issue in the relationship. Malaysia needs access to advanced American chips, manufacturing equipment, software, and computing technology, and officials understand that Washington will restrict that access if it believes Malaysia has become a major route for diversion to China. Kuala Lumpur therefore has its own reasons to strengthen export enforcement, investigate suspicious corporate structures, monitor end users, and demonstrate that companies importing controlled technology are conducting legitimate business.
At the same time, Malaysian officials want Washington to write and enforce these rules carefully. They do not want legitimate Malaysian companies subjected to broad restrictions because American policymakers are worried about Chinese circumvention. Kuala Lumpur wants consultations, predictable rules, and recognition that Malaysia has its own economic interests to protect. The government is likely to cooperate where Washington can provide specific evidence of diversion while resisting arrangements that give American authorities excessive influence over ordinary Malaysian commercial decisions.
Security cooperation will continue through military exercises, maritime surveillance, training, intelligence exchanges, defense education, cybersecurity, equipment, and professional contacts. Chinese coast guard activity near Malaysian offshore energy operations gives this cooperation immediate value. American naval and air capabilities also help prevent China from gaining overwhelming military power in Southeast Asian waters, which gives Malaysia more freedom to defend its interests without having to match Chinese capabilities itself.
Kuala Lumpur wants substantially more economic engagement from Washington because Malaysian officials have repeatedly heard American governments describe Southeast Asia as strategically important without offering the kind of market access that regional governments have requested. The US withdrawal from the Trans-Pacific Partnership remains relevant because Malaysia had undertaken difficult reforms in anticipation of membership. Later American regional economic initiatives failed to replace the commercial advantages Malaysia expected from the agreement.
Malaysian officials will keep pressing American companies to invest while asking Washington for more predictable access to technology and markets. They want American involvement that creates factories, research centers, engineering jobs, supplier opportunities, and long-term investment. That would also make cooperation on security and technology controls easier for any Malaysian government to defend domestically.”
Journalist: What domestic political and economic considerations drive Malaysia’s position amid China–US competition?
Irina Tsukerman: “Anwar has to produce growth, investment, jobs, higher wages, and industrial development while holding together a complicated governing coalition and facing an opposition capable of mobilizing Malay nationalism, Islamic politics, economic grievances, and dissatisfaction over living costs. Foreign policy therefore gets judged through its effect on employment, prices, exports, investment, and sovereignty. Serious commercial problems with China would quickly affect manufacturers, commodity exporters, tourism operators, retailers, logistics companies, and businesses dependent on Chinese inputs. Problems with Washington could threaten semiconductor investment, access to advanced technology, financial relationships, and exports to the American market.
Malaysia’s development plans also require resources from several major economic partners. Chinese companies can provide capital for manufacturing, renewable energy, infrastructure, electric vehicles, and digital facilities. American companies remain especially valuable in semiconductors, software, aerospace, cloud computing, advanced industrial technology, and financial services. Japanese, South Korean, Taiwanese, European, Singaporean, and Gulf investors give Kuala Lumpur additional choices. Maintaining workable relations across this entire group helps the government attract competing investment offers and reduces the economic consequences of dependence on any single country.
Domestic distribution of foreign investment affects the political calculation as well. Malaysian governments have to consider how many local workers a project hires, whether Malaysian suppliers receive contracts, whether Bumiputera companies participate, where factories are located, and whether foreign companies train Malaysians for skilled positions. Large projects can become politically unpopular when voters believe foreign companies receive generous incentives while importing workers, buying equipment abroad, and giving Malaysian businesses little participation. Anwar therefore needs foreign investment to produce benefits that people can see in employment, wages, business opportunities, and regional development.
Chinese pressure in the South China Sea creates another domestic problem because opposition politicians can accuse the government of weakness whenever Chinese vessels operate in areas claimed by Malaysia. Offshore oil and gas make this economically important as well. Petronas has valuable operations in waters affected by Chinese claims, so sovereignty and national revenue become part of the same dispute. Anwar needs good relations with Beijing while showing Malaysians that economic cooperation does not give China control over Malaysian decisions at sea.
The Palestinian cause creates strong political pressure in relations with Washington. Support for Palestinians runs particularly strongly among Malay Muslims, and Anwar faces Islamist opponents who can quickly use US support for Israel against him. He therefore has strong domestic reasons to speak forcefully about Gaza and the Palestinian issue while maintaining extensive economic, technological, and security cooperation with Washington. These positions reflect the political environment in which any Malaysian government has to operate.”
Journalist: How does public opinion and domestic political dynamics influence Malaysia’s foreign policy choices between China and the United States?
Irina Tsukerman: “Malaysians often judge China through their everyday economic experience as well as concerns about sovereignty. Businesses that sell to China, import Chinese products, rely on Chinese components, serve Chinese tourists, or work with Chinese investors have strong reasons to favor stable relations. Chinese investment can also win public support when it produces factories, infrastructure, jobs, tourism, and visible commercial activity. Attitudes become more critical when Chinese vessels operate in waters claimed by Malaysia, when major projects appear overpriced, when local workers receive too few opportunities, or when Chinese companies appear to receive favorable treatment.
Ethnic politics can make those arguments more sensitive. Malaysian Chinese voters have diverse political views and cannot reasonably be treated as supporters of Beijing simply because of ethnicity, language, family connections, or business ties. Malay nationalist politicians can still use concerns about Chinese economic influence by connecting foreign investment with longstanding domestic arguments over wealth, property, employment, and political power. Governments therefore have to make clear that major Chinese projects serve Malaysian national interests and do not give Beijing or Chinese companies privileged political influence.
Public attitudes toward the US are also complicated. American universities, companies, technology, professional opportunities, and investment remain attractive to many Malaysians. The Palestinian issue produces intense anger toward Washington because of American support for Israel, particularly during periods of heavy fighting in Gaza. That anger has direct electoral consequences in a political system where Anwar’s coalition competes with Islamist and Malay nationalist parties for Muslim voters.
Anwar consequently has reasons to maintain a visibly independent position toward Washington even while his government expands practical cooperation with American companies and security institutions. Defense cooperation can proceed quietly through training, exercises, intelligence contacts, and maritime programs. Semiconductor investment can be promoted as Malaysian industrial development. Disagreements over Gaza and the Palestinian cause can be expressed publicly because they respond to genuine domestic opinion and help prevent opposition parties from portraying the government as excessively accommodating toward Washington.
Malaysian voters can simultaneously welcome American technology investment, oppose US policy toward Israel, value Chinese trade, and worry about Chinese behavior in the South China Sea. Political leaders therefore have considerable room to cooperate with both countries as long as they can show that Malaysia retains control over its own decisions. Anwar’s frequent emphasis on Malaysia’s independence reflects this domestic expectation as much as it reflects diplomatic strategy.”
Journalist: What specific political and economic demands does Malaysia hold toward China, and how are these being pursued?
Irina Tsukerman: “Kuala Lumpur wants Beijing to respect Malaysian maritime rights and reduce Chinese pressure on Malaysian economic activity in waters that Malaysia considers part of its exclusive economic zone. Chinese coast guard operations around areas used by Petronas create a particularly serious concern because offshore oil and gas are economically valuable and politically sensitive. Malaysian governments cannot accept an arrangement under which Chinese pressure effectively determines where Malaysian companies can explore or operate.
Officials pursue this through diplomatic protests, direct negotiations with Beijing, continued Malaysian energy activity, maritime patrols, and discussions within ASEAN. Kuala Lumpur generally prefers sustained pressure and negotiation because it wants to protect Malaysian operations without allowing every confrontation at sea to disrupt billions of dollars in trade and investment. Continuing to operate in contested areas also serves an important purpose because Malaysia demonstrates its claims through its own economic and administrative activity rather than relying solely on diplomatic statements.
On trade, Malaysia wants China to buy more Malaysian goods and give Malaysian companies better access to Chinese consumers. Palm oil is especially important, along with agricultural products, halal goods, petrochemicals, energy products, electronics, and manufactured goods. Kuala Lumpur uses visits by senior officials, business delegations, commercial agreements, and ASEAN-China negotiations to press these interests.
Chinese investment also comes with growing Malaysian demands for local participation. When Chinese companies receive incentives or government support, Kuala Lumpur wants Malaysian workers hired and trained, Malaysian suppliers included, and more technical work conducted inside the country. The government has already shown that it is willing to renegotiate major Chinese projects when financing or commercial terms become politically difficult, with the East Coast Rail Link providing the clearest precedent.
Technology investment will face increasingly close attention because Malaysia cannot afford to become a base for companies whose main purpose is avoiding American restrictions. Kuala Lumpur wants genuine production, real Malaysian employment, and legitimate supply chains. Stronger enforcement also gives Malaysian officials an argument in discussions with Washington that Chinese investment in Malaysia should not automatically trigger suspicion of the Malaysian technology sector.
Malaysia also wants China to continue sending tourists, students, and business visitors. Easier travel, additional flights, tourism promotion, and educational exchanges help spread the economic benefits of the relationship beyond large corporations and government-backed projects, giving hotels, restaurants, retailers, universities, and smaller businesses a direct stake in stable relations.”
Journalist: What specific political and economic demands does Malaysia hold toward the United States, and how are these being pursued?
Irina Tsukerman: “Kuala Lumpur wants Washington to put substantially more economic weight behind its interest in Malaysia and Southeast Asia. Malaysian officials have heard successive American administrations describe the Indo-Pacific as strategically important, and they want that attention expressed through investment, technology access, trade opportunities, financing, research partnerships, and better commercial access to the American economy. The memory of Washington’s withdrawal from the Trans-Pacific Partnership still influences these expectations because Malaysia had accepted politically difficult reforms in anticipation of a major trade agreement that the US ultimately abandoned.
Semiconductors give Kuala Lumpur one of its strongest arguments. Malaysia already performs important assembly, testing, packaging, and electronics manufacturing, and the government wants American companies to move more valuable activities into the country. It is seeking investment in advanced packaging, design, engineering, research, manufacturing equipment, AI infrastructure, and workforce development because these activities can help Malaysia escape the middle-income pressures that have constrained wage and productivity growth.
Malaysia also wants reliable access to American technology. Washington’s export controls can directly affect Malaysia’s ability to develop AI infrastructure and advanced semiconductor industries, so Kuala Lumpur wants clear rules and consultation before restrictions affect Malaysian companies. Officials are prepared to strengthen controls against illegal diversion because losing access to American chips and equipment would damage Malaysia itself. They want Washington to recognize those enforcement efforts and avoid treating legitimate Malaysian companies as presumptive channels for Chinese circumvention.
On security, Kuala Lumpur wants the US to remain militarily engaged in Southeast Asia and continue providing training, maritime cooperation, intelligence exchanges, cybersecurity assistance, and access to useful defense capabilities. Malaysian officials also want control over the political terms of that cooperation because a formal anti-China posture would create domestic problems and unnecessarily constrain Malaysia’s diplomacy. Practical cooperation that improves Malaysian maritime awareness and defense capacity is much easier for Kuala Lumpur to sustain.
The Palestinian issue will remain part of political discussions with Washington because no Malaysian government can simply remove it from the bilateral relationship when public concern is so strong. Anwar will continue raising Gaza, Palestinian rights, humanitarian issues, and US support for Israel directly with American officials while Malaysian economic and security agencies continue pursuing their own bilateral work.
Kuala Lumpur is using ministerial visits, meetings with American officials, direct outreach to US corporations, semiconductor initiatives, defense contacts, ASEAN diplomacy, and negotiations over technology controls to pursue these demands. The government wants Washington to provide enough economic and technological value that close cooperation serves obvious Malaysian interests, while leaving Kuala Lumpur free to maintain extensive commercial relations with China and conduct an independent foreign policy.”
