Are Chinese exports crowding out competitors? Evidence from Malaysian electrical and electronic exports

The rapid expansion of China's production of electricals and electronics is benefiting Malaysia, which is exporting more intermediate parts and components to China to feed into its production networks, especially for finished goods assembly. However, Malaysia concurrently faces competition from China in exports to third markets and import penetration of own domestic markets. The positive side of China's rise is characterised in terms of complementary effects, and the negative side as competitive impacts. As China's effect on Malaysia's electricals and electronics is not clear-cut, there is a need for combined analysis conducted at different levels. This paper combines the analysis of Chinese and Malaysian export performance in their major destination markets with the analysis of ongoing transformative processes in the production and trade of electricals and electronics in the two economies. Our findings highlight that China's effect on Malaysian electrical and electronic exports differs according to the market destination of the exports, with some trade war effects between the USA and China captured in the analysis. Overall, Malaysia's response to China's rising exports has been to upgrade its value chain.