Go East!

The Malaysian model and China's influence in developing countries

The role of the Chinese Malays in the economic development of the Asian country and possible implications for African countries

1 July 2024

4' min read

There is a lot of talk about Chinese investment in developing countries around the world, particularly in mineral-rich African economies. And one wonders how all this investment, and influence, will shape the future of these nations.

For those who want to take a look into the crystal ball, perhaps a surprising comparison emerges from observing the recent history of Malaysia. In this article, we want to explore a unique theory, examining the role of the Chinese Malays in Malaysia's recent economic development, the echoes of a possible similar influence in today's African countries, and also the questions of this development model for their future.

Let us start with Malaysia. Its recent economic evolution is that of an extraordinary transformation story. An economy that until the 1970s was essentially primary, based on tin and rubber mining, in those years the government launched a mix of interventionist policies, infrastructure and export development, and above all tried to replicate the bet on education of neighbouring Singapore.

The results were not long in coming, leading to an exponential industrialisation and growth of the country: in the two decades between 1970 and 1990, the Malaysian economy multiplied by five, becoming one of the so-called Asian tigers along with Taiwan, South Korea and Singapore.

The Role of the Chinese Malays in Malaysia's Development

In this development, a key role in the creation of the entrepreneurial middle class was played by the so-called 'Chinese Malays': second or third generation immigrants who arrived from southern China after the end of World War II. They worked in the mines or plantations, but soon began to set up small trades and businesses, which were further developed by later generations.

Many cultural factors contributed to the emergence of the Chinese Malays: a great entrepreneurial nature (as opposed to the Malays, who are more conservative in their work), a very strong work ethic with great capacity for effort and perseverance, the support of a strong local Chinese community, and a great focus on education to ensure that the next generation was equipped with the skills needed to succeed in an economy that was modernising at great speed.

Today, the Chinese Malays, for all intents and purposes Malaysians but definitely of Chinese ethnicity and character, make up 22.8% of the country's very young population, are in charge of the private sector, and are credited with making a major contribution to the recent success of the economy. Many key industries such as manufacturing, retail and the financial sector have a very strong presence of Malaysian-Chinese entrepreneurs and leaders. Visiting Malaysia on business was this strange feeling every time. My distributor, the management of the very large shopping centres, the financial sector: I was dealing with people with clearly Chinese names and features, who thought like Chinese, but who were and felt to all intents and purposes Malaysian.

A parallel with Africa

Can the recent economic trajectory of the Southeast Asian country offer a potential glimpse into what awaits some of the Chinese-influenced developing economies, such as those in Africa?

The current African economic landscape presents fascinating parallels with Malaysia's past.

Firstly, in the continuing and increasing influx of Chinese investment in various sectors, much greater than in Malaysia in the 1970s and 1980s.

A second similarity is the opportunity represented by the availability of natural resources which, as it was in Malaysia, offer the potential for Chinese capital interest and investment.

There is also a demographic parallel. Like Africa, Malaysia has always been a very young country: today of its 34 million inhabitants (more than trebled since 1970), the South-East Asian country boasts 75% under the age of 50 and as many as 50% under the age of 25.

There are also the first signs of Chinese immigration into some of Africa's most promising economies. While the scale of this immigration is nowhere near as large as in Malaysia, Africa's lack of a trained workforce is leading to an influx of Chinese workers with skills for specific projects and management for the management of Chinese investments, an echo of the first migratory arrivals of Chinese in Malaysia.

The differences and the demographic factor

While the parallel is fascinating, the future trajectory of Chinese influence in Africa is not yet mapped out from a demographic perspective, the factor that could potentially unlock parallel development between countries on such different continents.

In fact, the magnitude and quality of Chinese immigration to Africa seems to be very different for the time being: numerically reduced and higher level with specific skills, unlike in Malaysia where Chinese immigrants were less trained and had created an entrepreneurial fabric of small trades and companies.

A final factor of uncertainty will be the policy of African governments towards Chinese immigration: it is not certain that all countries will be as open to immigration as Malaysia has been.

The parallel is fascinating, and the Malaysian experience could offer a model for all developing countries, particularly those in Africa. The feeling is that the furrow in Africa's economic history is yet to be drawn, but if it does happen, a start of sustained Chinese immigration in these countries could unlock the Malaysian scenario by contributing to an exponential development similar to that observed in the Southeast Asian country.

* Alfonso Emanuele de León is a partner at FA Hong Kong Consulting.