US-China tech war will reduce trade and investment diversion benefits — Miti

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PETALING JAYA (June 17): A technological warfare between China and the United States would reduce the short-term benefits of trade and investment diversion to Malaysia arising from the trade war between both economic powerhouses, Deputy International Trade and Industry Minister Dr Ong Kian Ming said.

He said following the trade war between the US and China, Malaysia could benefit in the short run in terms of trade and investment diversion from sources that were originally going to China or from sources that were coming out from China.

"However, when it goes into technological warfare, this actually threatens to reduce aggregate demand in total.

There is not much that a trade and investment diversion can do when aggregate demand is reduced and this would have severe economic consequences in both the short and long run," he said at the Malaysian Economic Convention 2019 dinner here today.

Therefore, he said, Malaysia needed to formulate a strategic engagement plan with China to properly coordinate the country's response whether from the perspective of the government, government-linked companies or private sector.

He said such a plan could also answer questions such as how to attract high-quality investment from China and not just investment that was being forced out of China, because of environmental reasons.

He added that the plan could also include how to increase Malaysia's value of exports to China, so that the country could move up the value chain and how to encourage local firms, both small and large, to invest and to venture into strategic markets in China. — Bernama