Far Eastern Economic Review
March 2006
Last month, Jeremy Hurewitz met with the grand old man of Malaysian politics, Dr. Mahathir Mohamad. Wearing a pin proclaiming his desire for peace, Malaysia’s former prime minister spoke from his office in Putrajaya, the seat of the Malaysian government.
Jeremy Hurewitz: What are your thoughts on China’s rise? Do you see any threats from a powerful China?
Dr. Mahathir Mohamad: I think that China is bound to play a very important role in both East Asia and all the world. You cannot stop China. It is the sleeping lion who has now woken up. And his appetite is enormous. We have Chinese in this country [Malaysia], and we know that the Chinese are very dynamic, very intelligent, very skillful people, and when you consider that there are 1.3 billion Chinese in China, their ability to compete with the rest of the world is tremendous. Looking back, of course, China was industrialized long before Europe. They used to produce many goods, even if they didn’t then have the mass production techniques that they use today. They worked so fast that they could produce a lot of products which were used all over the world. They used to trade with us—textiles, stoneware, paper. Now they have adopted the techniques of the West: mass production, quality and innovation. That is the China of the future. And there is always the fear that this huge lion might gobble up the rest of the world. But we in Malaysia have had relations with China for over two thousand years. We have traded with China, but the Chinese have never colonized us. Even when they thought that we were not treating their people well we never had any of their warships come here in response. On the other hand, when the Europeans came here, specifically the Portuguese, some were arrested and detained by the Malacca government in 1509. Two years later a flotilla of ships came here and conquered Malacca. So the approach is quite different. We have been trading with China, India, the Arabs, the Persians and the Japanese for centuries. But the moment the Europeans came they think in terms of securing supply and monopolies. And basically they ended up conquering all their trading partners: Malaysia, Indonesia, Burma, Vietnam. They tried with China but it was too big. So we are familiar with the West.
JH: But is Malaysia threatened at all economically by China’s rise? For example, electronic components that were once sourced from Southeast Asia for assembly into consumer electronics in China, will likely—sooner or later—be made by China, and Malaysia will need to look elsewhere for its economic growth. How should Malaysia manage its relationship with China?
MM: A country’s development initially depends on their low-cost position: how willing the people are to accept low wages. As they develop their costs begin to rise as their people want to be more highly paid. Sometimes they become steadily less competitive. In the case of China this process will take a bit longer, much longer in fact. But even now we see on the eastern coast of China the costs and the wages of engineers are higher than Malaysia. They are actually beginning to invest in other countries. Maybe it’s in order to soft-pedal things, but if you look at the trade treaties between Malaysia and China, we are actually exporting electronic goods to China. Now supposing the Chinese become very rich, per capita income over a half century reaches that of the United States, they are going to be a very big market for us and we are sure to find something that they want which they cannot produce themselves. And certainly the number of tourists will increase tremendously. So there will be a change in terms of the character of our industry. But a rich China can be a useful market for us.