In Depth: Visa-Free Travel, U.S. Tariffs Drive Chinese Companies to Malaysia

[para. 1] The Malaysia Airlines business class cabin is at full capacity, highlighting flourishing business activity between China and Malaysia. This surge is not a coincidence but reflects a robust, growing partnership in trade and investment—evident in the regularity of busy premium cabins filled with business travelers bridging the two countries.

[para. 2][para. 3] Demand for business-class seats on routes between China and Malaysia has increased notably, corresponding with more Chinese companies turning their investment focus to Malaysia. This trend accelerates as Chinese firms look to reposition amidst global trade shifts, sparked largely by newly implemented tariffs from U.S. President Donald Trump earlier in the year. Traditionally, Chinese companies would route goods through Malaysia to sidestep U.S. tariffs, but the new economic climate has prompted direct investments, particularly in high-growth sectors such as semiconductors, electric vehicles (EVs), and infrastructure.

[para. 4] The comprehensive partnership now covers high-level diplomacy as well as operational collaboration across trade, investment, and travel, underpinning the deepening ties between China and Malaysia.

[para. 5] In the first half of 2025, Malaysia recorded 106.8 billion ringgit ($25.3 billion) in approved foreign investment. China’s share was 23.4 billion ringgit—an increase of 139% over the previous year—second only to Singapore, which contributed 43.4 billion ringgit. U.S. investment lagged behind at 10.4 billion ringgit. This significant Chinese inflow underscores the expanding bilateral economic relationship and Malaysia’s growing role as a regional investment hub.

[para. 6][para. 7][para. 8] One critical accelerant in this relationship is the mutual visa-free policy enacted in December 2023, allowing citizens of both countries to travel without visas. As a result, Chinese tourism and business visits to Malaysia have surged: over 3.7 million Chinese visitors arrived in 2024, a 131% year-on-year increase. Tour and business service providers report triple-digit growth in business-related bookings from China, far outpacing those for tourism.

[para. 9] The trial arrangement became permanent in July 2025, sustaining heightened numbers of business travelers; estimates indicate that business visits comprised 20%-30% of Chinese guests in Malaysia during the summer. Efforts to accommodate Chinese travelers include hiring Mandarin- and Cantonese-speaking flight attendants.

[para. 10][para. 11][para. 12][para. 13] Malaysia’s geographic advantage—a central location in Southeast Asia—positions it as a key shipping and commercial hub. Previously, Malaysia primarily served as a transit point for Chinese goods, but Trump-era tariffs (including a 40% duty on transshipped goods) have diminished that role. Instead, Chinese manufacturers are increasingly relocating production to Malaysia, with some factories now producing up to 80% of their output locally.

[para. 14][para. 15][para. 16] Malaysia’s strategic ambition is highlighted by its National Semiconductor Strategy, launched in May 2024, which will invest more than 25 billion ringgit over the next decade to transform Malaysia from a leader in testing and assembly into a global hub for advanced semiconductor packaging and IC design. This initiative has drawn interest and investments from major Chinese, U.S., and European semiconductor firms. Concurrently, efforts to attract investment in the auto, medical device, and data center sectors are underway, exemplified by Chinese EV leader BYD’s new assembly plant slated for 2026.

[para. 17][para. 18][para. 19][para. 20][para. 21][para. 22] Among the marquee Chinese-backed developments is the East Coast Rail Link (ECRL)—a 665-kilometer railway constructed by China Communications Construction Co. Ltd. as part of the Belt and Road Initiative. This project, the largest overseas undertaking by a Chinese contractor, is pivotal for linking Malaysian ports with neighboring countries and boosting regional infrastructure. The ECRL’s progress directly affects Chinese investment flows; when the project was stalled in 2018, investment dropped sharply, but rebounded after work resumed. The ECRL is expected to create 17.6 billion ringgit in job opportunities, employs about 13,000 workers (70% local), and sources over 90% of its inputs domestically. Partial openings are scheduled for late 2026, with full operation set for early 2028.

[para. 23] Overall, the constellation of trade, travel, and collaborative mega-projects is driving a dramatic deepening of the China-Malaysia economic partnership, positioning Malaysia as a vital pivot in regional commerce and technology supply chains.