Chinese Businesses Are Coming to Malaysia. Should We Worry?

I would be angry too, if I owned the salon next door

Imagine running a salon in KL for ten years, paying Malaysian rent and Malaysian salaries and all the usual costs. Then someone from China opens right next door with very cheap promotional prices, imports products directly, brings in foreign staff, stays open until ridiculous hours and is already planning more branches. If I owned the salon next door, I would be angry too.

But one detail in a CNA report stuck with me. A hairdresser who moved from Guangdong opened a salon here offering promotional haircuts and washes for under RM10, with the washing basin built into a massage chair, open until the early hours, with more outlets planned. Why did he come? Because competition in China had become too intense. He left because China was too hard, arrived in Malaysia, and now Malaysian businesses say he is too competitive. That should tell us something.

When I hear "they are undercutting us, how are we supposed to compete?", my first thought is that maybe there is unfair pressure. My second question is more uncomfortable: why can they do it, and why can't you?

The car workshop that just fixed the basics

Car servicing shows the problem clearly. Tuhu, a Chinese company, entered Malaysia in 2024 and has already expanded to more than 13 outlets around KL and the Klang Valley. Tyres, repairs, maintenance, servicing: the same things your neighbourhood workshop does. The difference is the experience. You use an app, see the prices, book an appointment, store your car's details and know what you will pay before you arrive. When you get there, the tyres or oil are already waiting.

When I first saw it I thought: why does this even feel innovative? It is basic customer experience. If you have taken a car to a random workshop, as I did with my old second-hand car, you know the routine. The uncle looks for a while and says, "Boss, this one must change." RM700. Somewhere else quotes RM450 for the same job. There are plenty of great workshops, and I am not bashing all of them. But there is often no standardisation, no transparency, and you never know if you are being ripped off.

Tuhu did not invent car servicing. It took a messy experience and made it simple. As a consumer, I am the one who benefits. So why would I want to stop them?

Protecting businesses is not the same as protecting Malaysia

Let me be clear on the line. If a foreign company breaks Malaysian law, brings in workers illegally, dodges rules local companies must follow, or gets a genuinely unfair advantage, punish it. I have no problem with that. But if it plays by the same rules and simply runs a better business, I do not think the government should save competitors who run worse ones.

Imagine I open a restaurant. The food is bad, service is slow and it is expensive. A Korean owner opens next door with better food, lower prices and dishes in ten minutes. Should Malaysians be forced to eat at mine because I am Malaysian? Should the government fund me? I would not eat at my own restaurant. A merit-based market, where the best product and service win, is better for everyone in the long run.

Protecting businesses too much can be exactly what makes them worse. If nobody will ever challenge me, why invest in better software, customer service, staff training or systems? I can keep doing what I did for 20 years, on fat margins, until someone finally arrives and embarrasses me.

The SME Association's fair point, and its more important one

The SME Association raised a valid concern: some foreign businesses bring almost everything with them. Workers, ingredients, furniture, renovation materials, even their point-of-sale systems. If a company imports everything and employs no Malaysians, we should ask how much value actually stays here.

But they also admitted something far more important: Malaysian businesses are behind on processes, systems, operations and supply chains. That is the part that should worry us. You can regulate foreign businesses, raise hiring requirements, change ownership rules or mandate local suppliers. None of that magically makes Malaysian businesses better. If their systems are better, we still need better systems. If their customer experience is better, we still need to fix ours.

Why they look superhuman when they land

Look at the environment they came from. Over a billion people. Twenty businesses on the same street doing the same thing, all fighting on price, copying whatever works, moving faster, cutting costs. If a competitor finds a cheaper supplier, improves its app or automates something, you respond or you disappear. The survivors come out battle-tested. It is almost evolutionary.

When those businesses expand to Malaysia, where some industries have not faced that intensity, they look superhuman by comparison. They are not superhuman. They were forced to improve faster than we were.

It is not just China. Look at Mont Kiara's little Korea: restaurants, supermarkets, beauty clinics and salons. Around 25,000 Koreans reportedly lived in Malaysia before COVID; it fell to around 15,000 and is rising again. Korean companies see Malaysia as a gateway to Southeast Asia. Succeed here, then replicate across the region. Honestly, I want that. I want foreign founders choosing Malaysia, regional companies building teams here, and capital and talent coming in. There are trade-offs, though. Wealthy newcomers can push rents up, which is great if you own the shoplot and painful if you are an SME renewing a lease.

The right question: how much value stays here?

So it is not "foreign investment good" or "foreign investment bad". The useful question for policymakers is how much of the value created stays in Malaysia. A company that pays tax, hires and trains Malaysians, uses local suppliers and brings better technology and methods we can learn from makes the whole country more competitive. A company that recreates its home country here, importing workers, suppliers and systems with little spilling into our economy, deserves harder questions. That is a far more productive conversation than focusing on the owner's nationality.

A related issue is labour. Malaysia has more than 210,000 registered refugees and asylum seekers according to UNHCR, over 90% from Myanmar, and they currently cannot legally work. But telling someone they cannot work does not stop them needing food and rent. They work informally anyway, for RM50 to RM80 a day in construction, cleaning or moving, sometimes not even paid in full. Malaysia is now trialling legal work in sectors with shortages. From first principles that makes sense: register people, regulate them, let them work legally, tax them, and make employers follow the law.

Our addiction to cheap labour

Malaysia also has to be honest about its reliance on cheap labour. Foreign workers make up around 15% of the workforce by some reports, and the government wants that down to 10% by 2030. Think about the incentive. As a factory owner, I can spend RM500,000 automating part of my line, improving systems and training staff, or I can hire ten more low-cost workers. If hiring is cheaper and easier, that is what most businesses will choose. That does not make them evil. It is incentives.

But if the answer to every operational problem is more cheap labour, companies never have to evolve. Ten years later we wonder why salaries are not rising, why nobody automated the tedious work, and why a foreign company arrives and makes our systems look 20 years old.

Foreign competition, struggling SMEs, cheap labour, automation and wages look like separate debates. Underneath, they are one question: how much value can Malaysia create with each worker and each company? We will not become rich by making sure every SME survives forever. We become richer when Malaysian companies get better: better software, management, systems, supply chains, more automation and more skilled workers. That is also why I care so much about Malaysians learning to build software. Somebody has to build those systems.

Where are the Malaysian companies doing this abroad?

If a Chinese company runs a better workshop, my reaction should not be "how do we stop them?" As a competitor, I would want to know why they are cheaper, how their supply chain works, why their service is better and how they expand so fast, and then learn from it. Malaysia still needs sensible rules on ownership, hiring and local contribution. But we should not confuse protecting Malaysian businesses with protecting Malaysia. Sometimes competition is exactly what forces improvement.

I am Malaysian and I want Malaysians to win. But I do not want us to win because the government protects us or because nobody else is playing. I want us to win because we are good. Chinese companies come here. Korean companies come here. Singaporean businesses operate all over the region. Where are the Malaysian companies going into Thailand, Indonesia, Vietnam or China and making local businesses nervous?

Maybe instead of asking how to stop foreign companies, we should ask the uncomfortable, more useful question: why are we not good enough to do the same to them? Part of the answer is skills. Building better systems takes people who can build and automate with technology. If you want to become one of them, the free trial is a no-cost first step, and our AI-Native Software Development Programme is the full path.