SINGAPORE, Sept 14 — Malaysia’s combination of fortune in the form of natural resources and its own efforts through policies and diplomacy has positioned the country to emerge as a consequential middle power, said political analyst James Chai.
In a commentary titled 'Malaysia has something great powers want', published on Friday (September 12) by CNA, he argues that the ball is now in Malaysia’s court to make the most of it.
“Leverage, in international politics, is determined by who needs whom more. It is unusual for a middle state like Malaysia to hold assets that great powers want,” Chai said.
He highlighted that Chinese President Xi Jinping’s first visit to Malaysia since 2013, which took place in April, came less than a fortnight after United States (US) President Donald Trump unveiled the 'Liberation Day' reciprocal tariffs.
Malaysia, notably, held the Asean chair and served as Country Coordinator for Asean-China Dialogue Relations.
“In a time of geopolitical uncertainty, it was clear Mr Xi wanted to position China as Malaysia’s most dependable trade partner — one that acts on win-win outcomes and mutual trust,” Chai said.
He noted that not only did China and Malaysia ink 31 memorandums of understanding across several areas, but, most importantly, it was revealed later that Xi had offered to help Malaysia develop its rare earth processing capabilities.
This is significant, as Malaysia’s discovery of 16.2 million metric tonnes of rare earth deposits worth an estimated US$175 billion (RM736 billion) and potential access to Chinese technology for the complex, multi-stage separation process, is akin to holding the master key to the vault.
“If its cooperation with China materialises, Malaysia might create a two-track rare earth ecosystem — one with Chinese technology and another with Australian firm Lynas, which has a rare earth processing plant in Pahang,” Chai said.
This means that, in the coming years, Malaysia could become a battleground in the global race for rare earths — courted by great powers, but beholden to none.
He said that rare earths have skyrocketed in importance due to their ubiquity in core technologies, including data centres, mobile phones, electric vehicles, robotics, and semiconductor equipment.
They also carry significant geopolitical weight. China, which holds a near-monopoly on rare earth refining and processing, has used this as leverage in tariff talks with the US.
Chai added that Malaysia will remain a critical hub for semiconductors, particularly because of its role in backend assembly, testing, and packaging.
“The world felt, for the first time, Malaysia’s centrality in backend assembly, testing, and packaging during Covid-19, when the country’s lockdown halted production at Toyota, Ford, Nissan, and General Motors,” he said.
Malaysia accounts for 13 per cent of global backend chip production and seven per cent of the global market, and supplies around 20 per cent of US semiconductor imports.
Geographically, Malaysia holds further advantages. The Malacca Strait is a global trade chokepoint, with 25 per cent of the world’s traded goods and 60,000 annual vessels passing through.
Chai said that compared to its regional peers, Malaysia is well-positioned to benefit from shifting global trade dynamics.
“The Economist recently argued that Malaysia is likely to emerge as one of the winners in Trump’s tariff offensive. Key reasons include more favourable tariff differentials, lower transshipments, and lower reliance on American demand,” he said.
