Opportunities for Growth in Food Trade between Malaysia and China

July 18, 2022

Loh Wee Keng, Chairman of Malaysian Chamber of Commerce and Industry in China

Mr. Loh Wee Keng currently serves as the Chairman of the Malaysia Chamber of Commerce and Industry in China. Mr. Loh spearheads Regal Plus, a nationwide food distribution company based in Beijing. He also runs a consultancy firm that provides business consultancy services to enterprises that focus on Malaysia-China bilateral trade. Other business ventures of Loh include automotive spare parts and animal feeds.

If the world thought China’s dual circulation policy was a sign of retreat from globalization, China’s recent ratification of RCEP proves otherwise. Malaysia has witnessed China’s consistent emphasis on international trade. Now, China has been Malaysia’s largest trading partner for 13 years in a row.

Malaysia ratified the Regional Comprehensive Economic Partnership (RCEP) on March 18th this year and China ratified the agreement shortly after on March 22. China’s readiness has expedited trade with Malaysia. Fresh food exports, in particular, have benefited from the shortened time of customs clearance. In many cases, the timeframe has been reduced to 48 hours following the ratification of RCEP.

When I first came to China in 1996, trade in food between Malaysia and China was still limited. It wasn’t until 2010 when Malaysia started to trade a wider range of products, such as food and light manufactured products, with China under the ASEAN +3 framework. During this period Malaysian SMEs secured opportunities to sell food, such as white coffee, durians, pineapples and coconuts, to the Chinese market in large volumes. Although it only accounts for a small percentage of all exports to China, Malaysian food exports have grown over the years. In 2020, Malaysia’s food export to China grew by more than 20 times to USD $1.06 billion1, up from the USD $46.6 million in 1996 when I first arrived. As business collaborations deepen, innovative new business models have emerged. Besides receiving wholesale food orders, Malaysian companies are also taking advantage of China’s e-commerce platforms, which has provided Malaysian food businesses ready access to a growing body of Chinese consumers. Now that RCEP has expedited the length of custom clearance, e-commerce could be a promising channel for international trade once the cost of logistics becomes cheaper and efficiency becomes higher. Leveraging cross-border e-commerce platforms, small-and-medium-sized enterprises (SMEs) in Malaysia and other RCEP signatory countries can seize new business opportunities to further expand into the Chinese market. This will consequently develop the e-commerce ecosystem, which will help RCEP signatory countries further integrate into China’s massive market.

When it comes to multilateral trade, Malaysia has an advantageous position, being part of ASEAN +3 and having previously signed free trade agreements with Japan and Australia. This time, to meet the terms of RCEP, Malaysian government worked closely with its customs department and businesses to establish transnational trade infrastructures, despite facing some disruptions caused by the COVID-19 pandemic. For example, Malaysia accelerated its exporting procedures and sped up its issuance of the ‘Place of Origin’ certificates.

RCEP’s low tariff and non-tariff barriers coupled with enhanced transparency in transaction costs and paperwork will offer Malaysian SMEs easier access to the Chinese market. Over half of the Malaysian Chamber of Commerce and Industry in China (MAYCHAM) members are small-tomedium-sized companies, most of whom trade with RCEP signatory countries. We are seeing a positive growth in their exports and investments since RCEP came into force.

To better leverage the RCEP agreement, we are seeing that logistics, including warehousing, transportation and deliveries, have improved. As upstream and downstream businesses no longer need to cluster together, some of our MNC members who own production or investment businesses are considering relocating their production units now that RCEP facilitates the free movement of products and materials among countries.

Once products can flow freely within RCEP countries, overall export and import costs will decrease significantly and more resources can be allocated to improve product quality. This is a win-win situation for producers, industries and consumers. This virtuous cycle will help to strengthen a country’s competitiveness.

Besides logistics, the inspection process of import and exports can also be a lucrative business due to RCEP’s requirements for faster customs clearance. As international trade volumes grow, there will be a greater demand for reliable and speedy inspection and testing for quality assurance. What’s more, the fees for inspection are expected to decrease once they improve their efficiency, so that it contributes to the competitiveness of the exported products. In the foreseeable future, the need for air transportation will rise exponentially. Leading Chinese logistics companies such as SF Express and JD.com are already entering into Southeast Asian countries. By working with local logistics companies like Pos Malaysia, Chinese companies are bringing in their more advanced business models and technologies to Malaysia. vThe Malaysian Chamber of Commerce and Industry in China (MAYCHAM) aims to facilitate market entry for its members. We offer our members knowledge about local business opportunities and policies, trainings on ways to market products and on how to file documents to certain authorities, consultancy on investment and operational practices and government outreach opportunities. We also provide support to our members who are Chinese companies looking to enter the Malaysian market.