Malaysia's electrical and electronics (E&E) sector stands to benefit from China's 14th Five-Year Plan (2021-2025), where the world's second largest economy is expected to emphasise on technological innovation amid the unresolved trade spat with the United States (US).
China has kicked off its four-day fifth plenary session in Beijing on Monday.
The fifth plenary session is one of the most important political meetings where the 19th Communist Party of China Central Committee would map out the direction for the 14th Five-Year Plan, focusing on China's economic and social development.
Although full details of the plan will only be unveiled in 2021 at the National People's Congress, or the country’s annual parliament meeting typically held in March, economists believe that aside from technological innovation, the 14th Five-Year Plan would focus on economic self-reliance and a cleaner environment.
RHB Investment Bank Bhd ASEAN economics research head Peck Boon Soon said the focus of the Five-Year Plan could potentially benefit Malaysia, given that E&E exports to China formed a big proportion of Malaysia’s exports.
“More importantly, China is likely to lead the global growth in this new cycle, which would benefit Malaysia’s E&E sector,” he told Bernama.
According to Peck, Malaysia’s exports to China have now risen substantially to 15.5% from only 3% 20 years ago, making China the largest export destination for Malaysia.
Based on the latest statistics released by the Ministry of International Trade and Industry (MITI), exports to China surged 41.9% year-on-year (y-o-y) to RM15.56 billion in September 2020, mainly on higher exports of E&E products, iron and steel products as well as palm oil and palm oil-based agriculture products. This marked the fourth consecutive month of double-digit growth.
For the first nine months of this year, MITI said exports to China also recorded double-digit expansion of 13.3% y-o-y to RM114.54 billion, boosted by higher exports of iron and steel products, other manufactures (solid-state storage devices), manufactures of metal, as well as palm oil and palm oil-based agriculture products.
Meanwhile, MIDF Amanah Investment Bank Bhd Research (MIDF Research) economist Mazlina Abdul Rahman noted that supply chain security is highly anticipated to be addressed in China’s 14th Five-Year Plan, as the US has been pressuring China for the past few years on trade-related issues.
“The US has also been obstructing China’s technological advancement with restrictions on Chinese companies,” she said.
Regardless of who wins in the upcoming US presidential election on Nov 3, Mazlina said, risk to China’s economy remains.
“Hence, China is likely to accelerate measures at least to ensure future technological prowess, which will continue to increase its demand for semiconductor,” she said, adding that the economic giant has now emerged as the world’s largest semiconductor importer, with its spending on this segment growing by more than double over the past decade.
"This is expected to continue in the near future, as the economy is still heavily reliant on imports for the materials, which could possibly benefit Malaysia’s semiconductor industry," she said.
Apart from the E&E sector, Mazlina believed China’s rise post-Covid-19 would continue to boost demand for other products from Malaysia, such as palm oil and palm oil-based agriculture products, refined petroleum, rubber products, as well as iron and steel.
"Malaysia’s total export to China has been trending upwards since April this year, while exports of the products mentioned above to China have also managed to record strong year-to-date expansion.
"Such solid export growth to China has helped mitigate the impact of low demand from ASEAN and the European countries," she said.