Malaysia’s Chinese Investment Boom Has a Hiring Problem

Malaysia had a banner year in 2025. Approved investments reached a record MYR426.7 billion, with China contributing MYR58.0 billion — effectively tied with Singapore as the single largest source of foreign direct investment (FDI). Much of Chinese FDI is in engineering-intensive activities — solar manufacturing, semiconductor packaging and design support, electric-vehicle and component production, and data centres — rather than in labour-intensive assembly. The staffing question is therefore about the need for more highly-trained technicians and engineers, not production-line headcount.

In mid-2025, the author interviewed managers at Chinese-invested technology manufacturers  that have established operations in Malaysia over the past few years, with follow-up interviews at their Shenzhen headquarters in May. Recruiting Malaysian technicians and engineers, that fieldwork suggests, is only the first challenge; retaining and developing them can be harder still.

Managers at these newer operations raised three distinct reservations about local hiring. The first is skills mismatch. Firms in precision manufacturing and electronics find it difficult to recruit technicians and engineers with specialised process experience. This resonates with Malaysia’s broader and well-documented shortage of high-skilled workers.

The second reservation concerns differing expectations about the length of working hours, which is compounded by perceived risks of dismissal. Chinese managers are accustomed to long hours and faster production cycles. They expressed surprise that Malaysian staff declined overtime even at double their hourly rates. This suggests an assumption that overtime incentives will produce the same response as in the Chinese factories they know. In addition, there is a perception that “dismissing an employee is procedurally difficult”. The Industrial Relations Act 1967 allows employees who consider themselves to have been dismissed without just cause or excuse to seek reinstatement through formal dispute-resolution procedures. This perception has led to some firms to hire conservatively.

The third and most consequential reservation is about training. Interviewees have frequently described training as “making wedding clothes for others”, in which a firm invests heavily in a local technician, only to lose that person to a competitor or, more often, to a firm across the Causeway. Chinese firms in Malaysia also typically lack the standing in the local labour market that established multinationals enjoy. The rational response is not to abandon training but to ration it. For example, firms would train narrowly against immediate operational needs, and keep the deepest technical and managerial knowledge with staff posted from headquarters. The collective result is a sector that under-invests in a talent pool.

In theory, Chinese investors could hire students from China who are studying in Malaysia. Malaysia hosts a sizeable cohort of graduates from China who understand Chinese corporate culture and the local operating environment — precisely the bridging profile these firms need. In practice, however, few Chinese firms follow this route. Malaysia introduced a post-study Graduate Pass in December 2023. The pass allows eligible graduates to remain in the country for 12 months, explore job opportunities and work part-time in permitted sectors. However, the pass is not by itself a route into regular full-time professional employment. Chinese and Indian nationals were added subsequently on a case-by-case basis, subject to an additional good-conduct letter and the standard requirement for a Malaysian citizen sponsor. The programme is due to expire on 31 December 2026. Few firms would want to build a sustained graduate recruitment pipeline around a bridging arrangement with a short shelf life.

Malaysia hosts a sizeable cohort of graduates from China who understand both Chinese corporate culture and the local operating environment — precisely the bridging profile these newer entrants need. In practice, however, few Chinese firms follow this route.

Converting to a longer-term Employment Pass is harder still. The Immigration Department’s published criteria require a degree plus at least three years of relevant experience, and salary thresholds which were revised upwards with effect from 1 June 2026. This is not attainable for fresh graduates.

Given the context, Chinese firms tend to hire staff from China. The average cost of hiring an expatriate from China is roughly RMB600,000 (about USD84,000) a year. This covers an assignment premium (commonly two to three times domestic salary), tax equalisation across both jurisdictions, housing, international schooling, medical cover and home-bound flights. For mid-sized Chinese manufacturers operating on thin margins, a dozen such postings would be a material financial drain.

The manpower cost is only half the problem. Expatriate-heavy staffing tends to produce what several interviewees described as “an island effect”: a China-dominated management layer that is distinct from the local workforce, whether it be organisationally, socially or in terms of remuneration. Because postings are temporary and few firms have formal succession arrangements, the technical and managerial knowledge held by these staff is rarely transferred to local staff of the same firm. When these assignments end, much of that knowledge leaves with the expatriate.

To compound matters, Malaysia is tightening the conditions of expatriate employment. Expatriate tenure is already capped under the revised salary policy, and from 1 January 2027 employers sponsoring relevant Employment Pass categories are required to prepare Malaysian successors through time-bound programmes of training, mentoring and knowledge transfer.

Over a longer horizon, any firm intending to stay has to hire locally, which means meeting the three reservations rather than working around them. With regard to skills, a more productive response would be to move upstream to build a talent pipeline instead of competing for trained technicians. This includes scholarships, joint laboratories, internship placements and co-designed curricula with Malaysian universities and polytechnics. To address the issue of working culture, the adjustment falls on the investor. Cross-cultural competence should be a core qualification for Chinese expatriates so that expatriates arrive prepared to build local capability rather than simply to replicate headquarters practice. The issue of training constitutes a collective-action problem that no single firm can solve. Chinese chambers of commerce are well placed to organise an industry training fund or a shared training centre. This would help to ensure that when trained technicians move, they are more likely to move within the group that paid for the training.

Malaysia holds the other half of the solution. The succession requirement will only bite if it is audited against outcomes rather than paperwork. The former refers to clear Malaysian successors, completed training, demonstrated transfers of responsibility and measurable progress towards localisation, not merely schedules attached to a form. The Graduate Pass arrangement for Chinese and Indian nationals should also be placed on a durable, rules-based footing before the current extension expires on 31 December 2026. It will cost little in public spending and help retain Chinese graduates that Malaysia has already educated. This channel is not an alternative to hiring Malaysians — it is part of what makes hiring and developing them work.

2026/227