The fast-growing US$21 billion digital economy of Malaysia stands to get an infusion of Chinese capital as a nearly decade-old effort by Beijing to develop infrastructure overseas shifts more toward new technology. Malaysia’s digital economy grew last year due to a 68 per cent surge in e-commerce, according to a Google study on Southeast Asia. As more people in the middle-income country adopt digital services, the study says e-commerce’s gross merchandise value could reach US$35 billion by 2025. China’s ambassador to Malaysia, Ouyang Yujing , said at a forum in Kuala Lumpur last week that Chinese companies were working with their Malaysian e-commerce counterparts. “China continues to deepen cooperation with its international partners in the digital economy,” Xinhua quoted Ouyang as saying at the Malaysia-China Digital Economy Forum 2022. Ouyang added that China and Malaysia would “explore new growth points and development paths in the long run”. The development of foreign digital economies comes under China’s 149-nation, multi-trillion-dollar Belt and Road Initiative , which was launched to smooth trade with China by funding cross-border infrastructure projects via investments and loans. Over its nine years, the initiative has focused mainly on energy and transport projects. “The underpinning point of a digital strategy ultimately will be the availability of digital infrastructure,” said Sudev Bangah, managing director of tech-market research firm IDC Asean, adding that the pandemic has “laid bare” holes in that infrastructure. “The belt and road helps to enable this [availability] further as China aims to collaborate with Malaysia on the building of digital infrastructure as one its key initiatives,” Bangah said. The belt and road will probably lead Chinese tech heavyweights to invest in Malaysian companies with a stake in e-commerce, according to Farlina Said, a foreign policy and security studies analyst with the Institute of Strategic and International Studies, a think tank based in Kuala Lumpur. And licensing technology to Malaysian counterparts is seen as another likely strategy. China cosies up with Central Asian ‘stans’ as tensions rise with the West Joint projects to date include a cloud data centre, an e-commerce free-trade zone and an artificial intelligence industrial park, Ouyang said. Chinese networking giant Huawei Technologies said it signed a memorandum of understanding in March 2021 with a Malaysian mobile provider and Malaysian government-backed agency to launch Southeast Asia’s first “5G Cybersecurity Test Lab”, aimed at reducing wireless network threats. Cybersecurity and data centres especially could use investment, as internet penetration rises in Malaysia, Said suggested. She said those investments could develop “human capital” and stimulate the digital-economy ecosystem in turn. “In terms of Malaysian technology adoption, [e-commerce] has been on the rise. And because of the pandemic, it’s made it more crucial for things you want to do, like ordering groceries,” she said. The government’s Malaysian Digital Economic Blueprint calls for developing a digital economy from 2021 to 2030 and turning the country into what the document describes as a “pioneer in digital content and cybersecurity in the regional market”. The blueprint suggests a review of regulations and policies that hinder or that could aid the growth of the tech industry. Malaysian laws allow a relatively free flow of Chinese investment, compared with some other countries where China has launched belt and road projects, said Naubahar Sharif, a professor and acting head of the Division of Public Policy at the Hong Kong University of Science and Technology. Chinese technology firms “largely have taken into account local nuances and culture as part of their operations and set-up”, said Sudev at IDC Asean. Malaysia, among other belt and road recipient countries, is examining “how they can move up the value chain” for Chinese-funded projects, Sharif said. He said China, for its part, is entering a more “value added” belt and road phase that covers the development of cross-border digital economies. Malaysia welcomes Huawei despite Western concerns China has been looking for an “integration of markets” along the pan-Eurasia belt and road via digital infrastructure, according to findings by the Lahore University of Management Sciences’ Centre for Chinese Legal Studies. China and Pakistan plan to work on emerging technologies, the study said. China and the Philippines also will explore the digital economy as a “new growth point” for the two countries, according to comments by China’s ambassador to the Philippines, Huang Xilian, published last week by the state-run Global Times. Chinese officials in charge of the Belt and Road Initiative may also “nudge” major tech firms such as Alibaba, Huawei and Tencent to join belt-and-road projects in Malaysia, Sharif said. Alibaba owns the SCMP. He expects that the companies would pursue specific investments that stand to make money.