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Seminar on “Navigating a Highly Protected Market: China’s Chery in Malaysia”

Tuesday, 10 October 2017 – In recent years, economic ties between Malaysia and China have strengthened considerably through trade and investment linkages. Of particular interest is the role played by China in the development of Malaysia’s automotive sector. Using the case study of Chinese car maker Chery’s localisation efforts in Malaysia, the speaker, Dr Zhang Miao, a Research Fellow at Institute of China Studies (University of Malaya), offered some riveting insights on this topic.

Dr. Zhang Miao during the seminar on “Navigating a Highly Protected Market: China’s Chery in Malaysia” (Source: ISEAS – Yusof Ishak Institute) 

Dr Zhang began by talking about the rapid expansion of the car manufacturing sector in China, mentioning that over 20 million vehicles were produced in 2014 alone. Intense domestic competition and the government’s “Going Out” policy made Chinese companies seek other markets, particularly those in Southeast Asia. Hoping to merge with local partners and develop relations with local suppliers, Chery made its way into Malaysia by introducing the popular Chery QQ model there. By entering into a joint-venture with the Alado Group, Chery became the biggest Chinese car seller in Malaysia in a short span of time. This growth, however, was short-lived. The Malaysian government’s protectionist restrictions against foreign firms, coupled with not-so-smooth interactions with local suppliers resulted in this slowdown. Moreover, Chery largely imported parts and components from China, rendering Malaysia largely as an assembly platform, thereby limiting 1) the development of local supply chains, and 2) the economic gains from spill-over effects, such as knowledge-sharing.

The speaker concluded the session by pointing out that many lessons could be learnt from Chery’s experience in Malaysia. While Chinese multinational companies had to be careful in making strategic decisions to relocate operations abroad, the Malaysian government would simultaneously have to consider easing protectionist restrictions to encourage stronger foreign participation in the automotive sector. This would help in creating a mutually-advantageous relationship between the two countries.

Dr Francis Hutchinson and Dr Zhang Miao during the presentation (Source: ISEAS – Yusof Ishak Institute)

The seminar was 90 minutes long, and was attended by an audience of 50 people, including research scholars, practitioners, students, members of the media and the public. Dr Zhang also answered their questions on an array of topics, including: the factors affecting car sales in Malaysia; reasons behind slow development of R&D facilities; role(s) played by political leaders; and Chery’s experience in other countries.