China and India : challenges and opportunities for poverty eradication and moderating inequality in Malaysia

Malaysia has employed the mechanism of growth with equity in an effort to eradicate poverty and ameliorate inequality. During the New Economic Policy period, the government intervened extensively to ensure that all levels of society benefited from economic development and thereby maintain social cohesion. However, the increasing pace of liberalization coupled with developments in the region, such as the rise of China and India, has eroded the government’s ability to ensure the equitable sharing of the economic pie. The objective of this paper is to look at the challenges as well as opportunities posed by the rise of China and India with respect to poverty eradication and reducing income inequality. The challenges include competition for markets with the Malaysian small and medium producers, and competition for foreign direct investment. This has serious implications on employment opportunities and efforts at eradicating poverty and narrowing income disparity. On the other hand, the rise of these two giants also gives Malaysia opportunities in its effort to tackle poverty and inequality through the “prosper thy neighbour” effects, as there will be spillover from their growth and wealth accumulation. Furthermore, as China becomes integrated into the multinational regional production network, it will contribute to the improvement of trade through increased intra-trade, thus expanding exports and growth.