Malaysia’s Role in the South China Sea

Malaysia's strategy, though often operating away from international spotlights, embodies a model of balance and pragmatism in a region marked by growing tensions

By Emanuele Ballestracci

Located at the heart of Southeast Asia’s maritime trade routes—with more than $3 trillion worth of goods passing through its waters annually—the South China Sea (SCS) is one of the most strategic maritime regions in the world. Rich in hydrocarbons and fishery resources, it is a vital corridor linking the Indian and Pacific Oceans. Several countries—China, Vietnam, the Philippines, Malaysia, Brunei, and Taiwan—have overlapping territorial claims here. The region has become increasingly contested, especially since the discovery in recent decades of vast hydrocarbon reserves.

China’s claims are the most extensive, based on a narrative of supposed “historical rights” and codified in the so-called “ten-dash line,” which overlaps the Exclusive Economic Zones (EEZs) of other claimant states. These claims were rejected in 2016 by the Permanent Court of Arbitration in the case “Philippines v. China,” which reaffirmed the primacy of the United Nations Convention on the Law of the Sea (UNCLOS). Despite the ruling, Beijing’s actions have intensified, particularly increasing tensions with Manila.

In this context, Malaysia has long adopted a balanced approach, preferring strategic ambiguity and quiet diplomacy—even informal diplomacy—over explicit confrontation. This method is often cited as a successful model in managing disputes in the SCS. Despite limited operational resources, Putrajaya has managed to maintain control over its claimed territories and ensure stable relations with other claimants. This approach contrasts with other mid-level powers involved in territorial disputes. The Philippines has frequently resorted to international legal mechanisms, while Vietnam has become increasingly assertive, including through naval provocations. 

As a maritime nation whose identity and economic development are deeply tied to surrounding waters, Malaysia’s interests in the South China Sea are existential. The SCS connects Peninsular Malaysia with the states of Sabah and Sarawak on Borneo, making control over islands and atolls—seven out of the ten claimed—and regional stability top foreign policy priorities for Putrajaya. However, Malaysia’s strategy faces significant structural constraints: limited military capabilities and defense budgets; the need to balance relations with both China and the United States; and the importance of maintaining economic ties with Beijing, given the close trade relationship. Malaysia has thus anchored its strategy in: a legal consistency based on UNCLOS to legitimize its claims, an active diplomacy, both bilateral and multilateral, and strong support for ASEAN centrality in managing disputes. On the defense front, Malaysia maintains a pragmatic, non-aligned stance, focusing on presence rather than projection, due to its limited resources.

Despite the relative effectiveness of this strategy, its future sustainability is uncertain, especially amid escalating U.S.-China rivalry that risks triggering a broader crisis in the South China Sea. Over the past decade, Chinese presence has increased in areas claimed by Malaysia, especially around the Luconia Shoals and off the coast of Sabah. Chinese coast guard vessels have repeatedly disrupted operations by Petronas, the Malaysian national energy company, and Chinese military aircraft have violated Malaysian airspace on several occasions. These incidents have been managed quietly to avoid escalation, but they reflect growing strategic pressure on Malaysia. 

Malaysia’s deep economic dependence on China—its largest trading partner, with over $190 billion in bilateral trade in 2022—further limits Putrajaya’s room for maneuver. Regional and multilateral mechanisms have so far failed to effectively address the imbalance: ASEAN remains divided, and negotiations on a Code of Conduct with China remain stalled. Legal and diplomatic tools alone may not be enough to guarantee deterrence, especially as the role of international organizations continues to erode. Still, Malaysia’s low-profile strategy stands as a model of balance and pragmatism in a region of intensifying rivalries. Putrajaya has shown that it is possible to defend national sovereignty and safeguard strategic interests without entering direct confrontations with dominant powers, all while maintaining the stability essential for economic and political development. However, the viability of this Malaysian model is increasingly called into question by China’s growing assertiveness and the intensifying Sino-American rivalry. The success of Malaysia’s approach will depend on its ability to strike a new balance between sovereignty assertion and diplomatic flexibility.