KUALA LUMPUR (Dec 1): China has expressed interest in signing a memorandum of understanding (MOU) with Malaysia to strengthen bilateral trade relations, outgoing Investment, Trade and Industry Minister Tengku Datuk Seri Zafrul Abdul Aziz said on Monday.
Zafrul told the Dewan Rakyat during his wrap-up of the Budget 2026 debate that Chinese officials raised the matter in a meeting with Malaysian representatives to clarify issues about the Malaysia-US deal last week.
“Currently, negotiations between Malaysia and China are underway,” Zafrul said, without elaborating on the details. He steps down as the Miti minister on Tuesday.
Last week, Beijing issued a formal rebuke to Malaysia and another Southeast Asian country, Cambodia, lodging complaints over the new trade deals the two countries signed with the US.
According to a government readout, Chinese Ministry of Commerce officials told their Malaysian counterparts that Beijing had “grave concerns” over certain aspects of the deals. China remains Malaysia’s largest trading partner.
At the core of China’s concerns are clauses in both agreements that effectively require Malaysia and Cambodia to align with Washington on sensitive national security issues.
Zafrul in dismissing concerns over Beijing’s statement said it was primarily a record to ensure that anything agreed with the US would not negatively affect trade relations between Malaysia and China.
“This deal, in a way, has brought us closer, as China wants to sign an MOU with us, even though it is not the same agreement,” he noted.
Zafrul said the US has committed to providing Malaysia with special consideration, particularly for the electrical and electronics (E&E) and semiconductor sectors, amid Washington’s consideration of a 100% tariff on foreign chips.
“I had a discussion with the United States Trade Representative this morning. They said we would receive more preferential treatment, particularly in the E&E and semiconductor sectors, because we are a strategic partner,” he said, without elaborating further.
Currently, Zafrul said, Malaysian semiconductor exports to the US are exempt from the proposed 100% tariff, although some products in the broader E&E sector remain subject to the 19% tariff.
US President Donald Trump had previously threatened to impose a 100% tariff on semiconductor imports from countries without US-based manufacturing, pending the outcome of an ongoing investigation by the US Department of Commerce.
In 2024, Malaysia exported nearly RM120 billion worth of E&E products to the US, accounting for about 20% of the country’s total E&E exports. Of that amount, semiconductor products accounted for RM60.6 billion.
Malaysia signed its trade deal with Washington on Oct 26 during US President Donald Trump’s visit to Kuala Lumpur. Under the agreement, the US pledged to maintain tariffs on Malaysian products at 19%, while Malaysia agreed to remove or reduce tariffs on selected US goods.
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