Malaysia in Changing Geopolitical Economy: Navigating Great Power Competition between China and the United States

Abstract The past two years have witnessed escalating geopolitical tensions occurring not only in the political but also economic domains especially technology and global supply chains, infrastructure connectivity, trade and finance. With tensions between the US and China escalating on many fronts, Southeast Asia has become a focal point of strategic rivalry again as Biden’s Indo-Pacific Strategy 2022 attempts to rebuild the US-led order in Asia to blunt China’s growing influence in the region. A series of economic initiatives following his Indo-Pacific strategy focuses on reconfiguring the semiconductor global supply chain. In this context, the paper aims to examine how Malaysia cope with the complex patterns of cooperation, competition and conflict arising from the current shifts in the global geopolitics and geoeconomics. The paper benefits from the insights from the international political economy research which explores how the Malaysian government strives to reconcile domestic and international imperatives in navigating the changing global geopolitical economy, which can be perceived as both a threat as well as an opportunity by the state and non-state actors in the country. The question of whether hedging is tenable is undoubtedly contingent upon the extent of big power rivalry. Given the greater uncertainty over the pernicious effects of rising regional polarization and retreat from economic globalization, Malaysia will continue to maintain strategic ambiguity as long as US-China rivalry has not (yet) escalated into outright military conflict. Nevertheless, the paper concludes that the space to hedge may be squeezed since small power like Malaysia may face harsher realities as it navigates the changing geopolitical economy landscape. Hence, the ASEAN solidarity and cohesion is crucial to ensure a more unified regional response to the escalating Sino-American strategic competition.