China raised stern concerns after Malaysia signed a new reciprocal trade agreement with the United States that aligns Kuala Lumpur’s export control rules and parts of its economic security policy with Washington.
The move placed Malaysia at the center of a growing struggle over who sets the rules for high technology flows and critical mineral supplies in Asia.
The pact followed negotiations that concluded in late October and came at a moment when Washington sought to deepen security-oriented trade ties with key partners while Beijing tried to limit the spread of US-style export control regimes.
Malaysian officials portrayed the agreement as a way to attract investment, secure technology transfers, and move the country up the value chain without sacrificing its broader non-aligned posture.
Why did China protest the Malaysia-US export control pact?
China’s Ministry of Commerce issued a statement noting stern concerns about elements of the agreement, focusing in particular on Malaysia’s commitment to align with unilateral US export controls.
Chinese officials feared that this alignment could restrict Chinese access to sensitive technologies and components that transit through or are produced in Malaysia.
Beijing stressed that while it respected Malaysia’s right to sign trade deals with other countries, such arrangements should not undermine China’s interests or disrupt normal economic cooperation.
The language signaled that China saw the pact as part of a wider web of US-linked controls that could gradually tighten around Chinese firms, especially in sectors like semiconductors, advanced manufacturing equipment, and dual-use technologies.
Did you know?
That Malaysia is estimated to hold over 16 million tonnes of rare earth deposits, yet it has kept a ban on exports of unprocessed rare earth ore to encourage higher value domestic processing.
How does the reciprocal trade deal reshape Malaysia’s export policy?
The agreement requires Malaysia to align its export control framework with US measures that are already in force, which means Malaysian regulators are expected to mirror many of Washington’s restrictions on goods, software, and technology with perceived security implications.
This goes well beyond classic tariff arrangements and pushes Malaysia deeper into a rules-based economic security partnership.
One of the most sensitive provisions establishes that Malaysia will adopt similar import restrictions in situations where the United States imposes economic or national security-related measures on third countries.
The deal also contains a clause that allows Washington to terminate the arrangement if Malaysia concludes a trade agreement with a country that US authorities judge to jeopardize essential American interests, which many analysts see as a veiled reference to potential future agreements with China.
What role do rare earths and critical minerals play in this clash?
The pact has a strong focus on critical minerals and rare earth elements, which are vital for clean energy technologies, electric vehicles, and military systems.
Malaysia committed not to ban or impose export quotas on rare earth shipments to the United States, subject to its existing ban on unprocessed ore, giving Washington greater confidence that supply from Malaysia will remain available.
This commitment is significant because China still dominates global rare earth processing capacity, while Malaysia hosts substantial deposits and an emerging processing sector.
Malaysia’s strategy aims to capture more value onshore by encouraging foreign partners to invest in refining and downstream industries, so the US deal and China’s role as a processing and technology partner together create a complex triangle of interdependence and competition.
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How is Malaysia managing ties with China, the US, and ASEAN?
Malaysia has long pursued a policy that can be described as careful hedging, maintaining deep trade and investment ties with China while strengthening security and economic cooperation with the United States.
By signing the export-control-focused agreement while insisting there are no plans to renegotiate it, Malaysian leaders signaled that they regard the pact as a strategic tool to unlock higher technology investment rather than a purely geopolitical alignment.
At the same time, Malaysia continues to support ASEAN-centered arrangements and regional integration efforts that include China, and has welcomed Chinese interest in rare-earth processing projects under strict environmental and regulatory conditions.
This dual approach reflects a broader Southeast Asian pattern in which states try to keep options open with both major powers while avoiding hard choices that could fracture regional cohesion.
What does this pact signal for the next phase of US-China rivalry?
The Malaysia-US pact illustrates how the second Trump administration has leaned heavily into export controls, supply chain security, and targeted trade deals to reshape the regional economic order.
Rather than relying only on tariffs, Washington is embedding its national security standards in partner countries’ domestic regulations, which increases the extraterritorial impact of US measures.
For China, this development underscores the risk that more states could adopt US-aligned controls on advanced technologies and critical materials, thereby amplifying the practical reach of Washington’s restrictions.
The protest directed at Malaysia, therefore, serves as both a warning and a signal to other countries that Beijing will respond diplomatically when trade agreements appear to lock in policies that disadvantage Chinese firms.
Malaysia now occupies a pivotal position in this evolving contest. Its success will depend on whether it can translate the new pact into real gains in technology, jobs, and sustainable resource development while preserving constructive ties with China and maintaining credibility in ASEAN forums.
If Kuala Lumpur manages that balance, it could turn current tensions into leverage that shapes future trade rules and supply chain governance across the region.
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