Chinese companies are seeking assurances from Malaysia that they will avoid US tariffs

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Chinese executives are meeting with top government officials in Malaysia to assure them that they can avoid US tariffs if they relocate production to the Southeast Asian country.

Companies have asked Malaysian ministers and senior officials to urge Washington to oppose tariffs on goods manufactured or assembled in Malaysia by Chinese groups, according to three people familiar with the matter.

The demands from battery, medical device and semiconductor companies come after the United States said it would raise tariffs on Chinese goods to protect American manufacturers.

Chinese companies have shifted production to Southeast Asian countries such as Malaysia, Vietnam and Thailand, which are not subject to the same obligations. This has spurred foreign investment from China, but there is uncertainty over whether the Biden administration will introduce new tariffs on Chinese-made goods.

In June, China-based lithium battery maker Eve Energy met with Malaysian ministers and the Malaysian Investment Promotion Authority to seek assurances about avoiding tariffs ahead of a planned expansion in the country, a Malaysian government official said.

„They want assurances, but it is not possible to give them,” the official said. „We can . . . and lobby but there is no way [of knowing] What will America do in the future? We’re still trying to do that. „

Eve, which sends about 20 percent of its exports to the United States, did not respond to a request for comment.

Another Malaysian government official said he had received personal visits from „dozens” of Chinese semiconductor executives staying in Malaysia this year to clarify whether they could legally sell products to the US. They also asked if they could access state-of-the-art American chips.

Malaysia accounts for 20 percent of US semiconductor imports annually, according to US Census Bureau data for 2023, more than Taiwan, Japan or South Korea.

The U.S. export restrictions include a ban on „U.S. persons” — U.S. nationals and companies — providing direct or indirect support to certain advanced chip factories in China.

„Sometimes they fly only for a day,” the official added. “They ask us if they can access or use US chips or GPUs [graphics processing units] In Malaysia if they establish a company or residence here or in Singapore.

The past 18 months have seen an explosion of Chinese companies opening factories in Penang, Malaysia, which has specialized in semiconductor manufacturing since the 1970s.

Johor, a Malaysian state known for its industrial and manufacturing sectors, has seen a surge in inquiries from Chinese companies.

Johor board member Lee Ding Han said he was recently consulted by the head of a Chinese medical device company on whether the company should pay the fees after the company moved production from China to Malaysia, showing an Excel spreadsheet listing its equipment. Lee said the company is also considering Mexico.

The Biden administration has been raising tariffs on syringes, needles, medical and surgical gloves and other medical equipment from China.

„I told them no for now, but it’s hard to say whether it can continue. America can change its policies suddenly. We have no control over that.

Malaysian Prime Minister Anwar Ibrahim has grown closer to China, Malaysia’s biggest trading partner, but sees Washington as an important ally.

Ahead of Chinese Premier Li Keqiang’s visit, Anwar last week announced plans to join the BRICS alliance of Brazil, Russia, India, China and South Africa.