“This report sets out to address this issue by looking closely at how a Taiwan Strait crisis or conflict would affect Malaysia. China is Malaysia’s largest trading partner, and Malaysia’s role in the global semiconductor supply chain makes it particularly vulnerable to any potential Taiwan Strait contingency. The country also has significant bilateral trade with the US and Taiwan. Diplomatically, Malaysia employs ‘equidistant diplomacy’ to dynamically hedge against various risks, and in particular it avoids choosing sides between the US and China, instead seeking to maintain positive relations with both. As Prime Minister Dato’ Seri Anwar bin Ibrahim put it at the 2025 IISS Shangri-La Dialogue, Malaysia’s approach is one of ‘active non-alignment’, which it believes allows for the greatest self-determination and control over its strategic space. Nevertheless, like other countries in the region and beyond, Malaysia is likely to be negatively impacted by any change to the status quo in the Taiwan Strait.”
“Using hypothetical but plausible scenarios for a Taiwan Strait crisis, entailing the economic quarantine of Taiwan, and for a Taiwan Strait conflict, entailing a full-scale kinetic war that involves the US and allies, the report employs economic modelling to estimate the potential impacts on Malaysia’s economy, covering a time frame of up to one year in both scenarios…”