Opportunities and Challenges of China’s Economic and Political Development Under the Third Term of Xi Leadership: A Viewpoint of Malaysia

In the face of severe internal economic challenges and rising hostile geopolitical landscape, Xi Jinping's unprecedented third term has garnered much attention as the way in which these challenges are addressed will not only impact China's internal governance on development issues but also its foreign policy and strategy. The paper attempts to examine the implications of Xi's strategy and policy—from its stated goals to actions and outcomes—for Malaysia with respect to opportunities and challenges and its strategic response. The analysis benefits from the insights from the international political economy, which explores how the apparent weak unity government under Anwar Ibrahim's administration amid tough domestic challenges and rising hostile geopolitical environment strives to reconcile the imperative of its domestic legitimation to prioritize immediate economic benefits over potential security concerns. Despite the reinvigorating Malaysia-China relations has brought tangible results, paving the way for more mutually beneficial trade and investment opportunities and partnerships, the external pressure caused Malaysia under Anwar's administration to maintain Malaysia's hedging under uncertainties in structural conditions rather than balancing or bandwagoning. Malaysia's inclination to hedge is against the various risks associated with the uncertainty inherent in US-China rivalry—e.g. uncertainty in the future of Sino-American relations, uncertainty in Xi Jinping's long-term strategic goals, uncertainty surrounding China's slowing economy, diffuse threats, and uncertain reliable and sustainable allied supports. The recent rapid expansion of China's investment in the country to avoid tariffs imposed by the US on certain products of China could be a double-edged sword. While smaller power like Malaysia with heavy economic dependence on China and the US will confront greater external constraints to maintain strategic ambiguity and keep its strategic options open, managing tradeoffs in foreign policy choices continues to be driven and constrained by the imperative of elite's domestic legitimation embedded in the state-market-society interactions.