CCP Inc. In Malaysia

This case study focuses on Huawei and Alibaba for insight into how the “CCP Inc.” ecosystem of Chinese party-state actors can both support and constrain private sector firms. In Malaysia, both companies rapidly expanded their footprints throughout the 2010s, becoming deeply integrated in national telecommunications, artificial intelligence, and e-commerce infrastructure — and opening doors for other Chinese companies in Malaysia’s tech sector along the way. In the past few years, however, Huawei and Alibaba have both faced major hurdles due to their integration in the CCP Inc. state capitalist system. Political pushback against Huawei is damaging its ability to expand internationally, while a government crackdown on China’s own tech sector is challenging Alibaba’s growth prospects.

Introduction

CCP Inc. in the Private Sector

Beyond China’s borders, CCP Inc. can be thought of as the latest evolution of China’s “Going Out” state capitalist strategy to promote outbound investment. It is comprised of an international ecosystem of key state-owned and private commercial actors, state-owned financiers, government regulators, and Chinese Communist Party (CCP) organs that are connected through an increasingly complicated web of direct and indirect transactional, financial, strategic, operational, and political relationships.

Importantly, these ecosystems operate both within China’s domestic commercial space, where they have been honed to provide integral support to state development goals, and in the international commercial space, where they provide a significant boost to the reach and economic influence of a given Chinese commercial entity, especially when compared with standalone private sector competitors from other countries.

While Chinese entities within this ecosystem often enjoy a wide degree of commercial autonomy, the CCP leadership maintains significant leverage (active or latent) to steer or support firms through financial, political, and regulatory channels. Each firm tacitly understands that they will be supported in their operations where there is overlap with national strategic objectives, and that they will likely be constrained if their operations are perceived to be counterproductive to the CCP’s policy goals.

This case study will examine CCP Inc. in the private sector by focusing on two of China’s highest-profile companies: Huawei and Alibaba. Both benefited from a favorable domestic environment that helped propel them to international competitiveness. Both succeeded in expanding across the world — this study focuses specifically on Malaysia as one example, but Huawei and Alibaba are both among China’s most global companies. Then, both Huawei and Alibaba fell prey to the major internal and external risks of being tied to CCP Inc.

The 2000s and 2010s marked a period of rapid growth for both tech giants. The two titans were able to bring unlevel playing fields with them during their international expansions, thanks to the practical (financial) and political (diplomatic) safety nets delivered by the Chinese party-state. The intrinsic advantages that companies like Huawei and Alibaba could once bring to bear help explain their remarkable success in places like Malaysia, as this report argues. The ten- and five-year odysseys of Huawei and Alibaba, respectively, in that country paint a picture of what it looks like when the CCP Inc. ecosystem generates industry giants and then unleashes them abroad. Over time, their success bred more success for other Chinese tech players. Eventually, both firms became so deeply entrenched in Malaysia that Kuala Lumpur’s technological reliance on China became a story in its own right.

Huawei and Alibaba both followed the CCP leadership’s general directional guidance for China’s firms when they expanded into Malaysia, but both also walked a commercial path and implemented their own for-profit corporate visions in the process. In so doing, they were initially able to move faster, and go farther, than the more tightly controlled state-owned enterprises (SOEs).

By the early 2020s, however, the narrative for both firms had changed, in part thanks to the changing reach of the CCP. Huawei’s international predominance in areas like 5G services and mobile telecommunications had been severely undermined by U.S.-led pressure campaigns — which were driven largely by the perception that Huawei is a tool of CCP interests. Meanwhile, Alibaba’s global momentum had been stymied by its own government as a part of the CCP’s crusade against its domestic internet companies. While both firms remain major players in the global tech sector, the narratives around them have shifted drastically over the past few years, due in large part to their relations with CCP Inc.

For a long time, Malaysia was a success story for both companies — and it may yet be again. But for now, Huawei seems to have missed out on its largest goal (building out and running the country’s 5G network), and Alibaba has been losing ground to regional rivals in e-commerce while its flagship City Brain project in Kuala Lumpur appears to have lost momentum. However, the story is no longer just about two flagship firms; there are now dozens of Chinese players extending into every element of Malaysia’s digital ecosystem. CCP Inc. has stalled to some degree in Malaysia, but many of its tech roots remain firmly in place, and Huawei and Alibaba are the two companies most responsible for growing those roots.

Regardless of new challenges, China’s tech footprint in Malaysia remains unmatched from both countries’ perspectives: China has not achieved such an extensive technological presence anywhere else, and no other foreign country has achieved such a large presence in Malaysia. Thus there are lessons to be learned both from the shape of the CCP Inc. presence in Malaysia in its heyday and from the challenges that severely complicated that presence during the 2020–2022 period.

This report will proceed in three chapters. Chapter 1 will examine CCP Inc.’s “incubation” of private sector champions, showing that both Huawei and Alibaba benefited from state financing and political support throughout their expansion both domestically and abroad. Chapter 2 will focus in on Huawei’s and Alibaba’s expansion in Malaysia, which benefited from a strong domestic base, connectivity between Chinese companies, and diplomatic support. Finally, Chapter 3 will examine blowback on Huawei and Alibaba in the late 2010s and 2020s, resulting from a combination of external pushback against China’s involvement in strategic infrastructure and an internal crackdown by the CCP on its own private sector internet champions.

CCP Inc. as an “Incubator” of National Champions

Privately held Chinese companies present unique analytical challenges when examining CCP Inc. For SOEs, it is relatively easy to draw a straight line from CCP proclamations of intent and SOE behavior abroad. State financing patterns are overt, goals are explicit, specific policy obligations find their way into the performance reviews of SOE executives, and mega-initiatives like the Belt and Road Initiative (BRI) generate predictable call-and-response patterns for all to see. SOEs have easier access to China’s policy banks for financing, particularly those that have taken on high levels of policy responsibility. Researchers have even found that privatized companies that were once SOEs enjoy a higher level of state support in comparison to companies that were privately owned since their inception. A closer relationship with the state also extends to international projects, as SOEs may enjoy a higher degree of state support than their private counterparts. Among the private players, for whom revenue and profit are more of an existential imperative, the line from CCP proclamations to boardroom decisionmaking is less direct and visible — but the line exists, nonetheless.

More importantly, both China’s SOEs and its private enterprises emerge from the same shielded, subsidized, politically guided, expectation-laden, and ultimately high-intensity crucible that is China’s domestic economy. Therein lies a fundamental parallel: long before any “national champion” firm leaves China’s shores, it has been nurtured, toughened up, ladened with resources, and positioned for dominance by China’s political-economy system. On the one hand, competition within China’s national arena can be as cutthroat and winner-take-all as anywhere else in the world. On the other, those private players that emerge victorious (and those SOEs that play their own game the best) end up with vast financial and political resources that they can bring to bear once they begin to “go out.”

Nowhere has this phenomenon been more evident than in the telecommunications and technology space. Two of China’s best-known tech champions, Huawei and Alibaba, form the backbone of this case study report. Both companies honed their corporate vision and perfected their competitive approach decades ago, demonstrating legitimate business acumen within China’s brutal marketplace. Both also benefited enormously from not having to compete with international rivals, follow international legal norms, or respect intellectual property rights during their nascency. Both leveraged tech-friendly domestic subsidy policies, both accumulated outsized power and influence with the help of cheerleading regulators, and both enjoyed an unlevel playing field for more than a decade after their rise to prominence.

State Support for Huawei’s Domestic Rise and International Expansion

Ren Zhengfei, a former People’s Liberation Army (PLA) engineer, founded Huawei in Shenzhen in 1988. At the time, China relied heavily on imports for its telecommunications infrastructure needs. Ren built up Huawei’s reputation (and its revenues) via a business model that centered on government procurement and leveraging his old relationships, and over time he positioned the company as China’s solution to its reliance on foreign suppliers like Lucent, Ericsson, Motorola, and others. Government subsidies poured in (see Figure 1 below and Appendix A).

Thanks to Beijing’s market-access policies for foreign technology companies, Huawei eventually was able to extract enough intellectual property (IP) from its foreign competitors (legally, via forced technology transfers and joint ventures (JVs), and illegally, via reverse engineering) to become an effective manufacturer of its own switches, handsets, and 2G and 3G network equipment. Once it could produce enough lower-cost homegrown telecom products to carve out a dominant position in its own protected domestic marketplace, Huawei began to look abroad, particularly at underserved and tech-starved emerging markets. After several years of exponential growth at home — built on the back of guaranteed government contracts, many of which still exist today (see the recent multi-billion-dollar 5G award from China Mobile) — Huawei’s technical expertise matured to the point that it was able to manufacture reliable and affordable telecom products for export, at scale.

After that, it was a relatively simple matter for Huawei to leverage its cost advantages, its access to favorable export financing, and its competitors’ hesitancy to carve out dominant positions in a wide swath of emerging markets where Western technology companies had only a limited presence (or in markets where those same technology companies determined they could not profitably do business). In 2012, Huawei became the largest telecommunications manufacturer in the world. It has become a company with global reach; along with its much-publicized role in international 5G networks, Huawei is a key provider of an array of digital infrastructure, from 4G networks and mobile devices to AI surveillance devices. By 2021, international revenues rose to constitute 35 percent of Huawei’s total revenue. Huawei has undeniably become a global powerhouse and developed its own sophisticated research and development (R&D) capabilities, so much so that it became competitive even in the most advanced markets (until recent geopolitical blowback). Meanwhile, the emerging markets that Western firms once ignored eventually became wealthy enough to be attractive, but by then Huawei was already largely entrenched.

▲ Figure 1: A Snapshot of Huawei’s State Support. Source: Full table included in Appendix A.

This evolution played out under the watchful eye of the CCP, which from the beginning has counted on Huawei — and a few others, like ZTE — to guarantee China’s ability to supply its own telecommunications infrastructure. This obligation (and burden), which Huawei has borne since the 1990s, also provided Huawei with a privileged position within China’s state financing ecosystem.

For a generation, Huawei — officially a private company — has received a steady stream of government support from China’s economic managers. The strength Huawei draws from this support has given it significant advantages abroad. Figure 1 provides representative examples of how different parts of the Chinese state and financial apparatus supported the company through the period of Huawei’s nascency, adolescence, and emergence as a global power.

Huawei’s benefits extend well beyond favorable export financing terms and a consistently green light from China Exim Bank and the China Development Bank (CDB). One prominent study suggested that Huawei saved as much as $25 billion between 2008 and 2018 just via tech-related tax incentives. In 2019, the Wall Street Journal claimed that Huawei’s total state support amounted to the equivalent of $75 billion, mainly in the form of credit facilities and tax breaks. The U.S. Department of Commerce determined in 2020 that as much as 10 percent of Huawei’s annual R&D is covered by Chinese government grants. In 2020, the party-state stepped in to arrange the offloading of Huawei’s Honor phone brand as a way to cushion the blow from U.S. sanctions. And finally, it could be argued that Huawei was able to offer goods and services at a 20 to 30 percent discount internationally, based solely off of the currency management policies implemented by the People’s Bank of China (PCOB) and the State Administration of Foreign Exchange (SAFE).

A plethora of government grants, low-cost land, and below-market lending continued to stream in Huawei’s direction throughout the late 2010s, even after the company had become internationally competitive. By then Huawei was already entrenched across much of the developing world. Although Huawei was expanding internationally as a private sector company, it thus still benefited from a state support system distinct from what market economy private sector companies enjoy. Disentangling the impact of state support from that of Huawei’s independent business acumen and position in a burgeoning new technology field is difficult. But state support certainly played a key role in building up Huawei during its early days and later supporting its international expansion — a pattern also seen in the rise and global spread of fellow private sector champion Alibaba.

A Quick Review of Alibaba’s Nascency and Global Emergence

Alibaba was founded in 1999 in Hangzhou by Jack Ma and a small cohort of his friends. It started as a business-to-business e-commerce marketplace but rapidly evolved into China’s answer to eBay — and eventually Amazon. Today, Alibaba is one of the world’s largest e-commerce companies, and its international subsidiaries AliExpress and Lazada have carved out competitive — and occasionally dominant — positions in various offshore e-commerce markets. Cainiao (菜鸟网络), its e-commerce-centric logistics and delivery platform, has also become prominent in various external markets, often coming hand-in-hand with operations like Lazada.

For the purposes of this study, Alibaba’s core e-commerce competencies are only part of the story. Alibaba’s attractiveness to countries like Malaysia derives not only from the value it provides in fostering cross-border and in-market e-commerce dynamism, but also from the vast array of technology solutions offered by the full suite of Alibaba Group companies. Alibaba’s innovations at home began with electronic payments in the form of Alipay, moved quickly to a more expansive fintech vision in the form of Ant Financial, and eventually moved into cloud computing, AI, and cutting-edge “smart city” software and networking. Before the rollout of China’s new regulatory regime, Alibaba’s all-in-one digital umbrella had helped it establish a reputation for being Amazon, Microsoft, PayPal, FedEx, and TD Ameritrade all in one.

The government of Hangzhou municipality, where Alibaba was founded and is still headquartered, provided critical support to Alibaba in its early development. By Alibaba’s teenage years, Beijing was also subsidizing its explosive growth. Although Alibaba was a much-celebrated member of China’s cohort of new digital behemoths for many years, its status as an internet-first company — rather than a tech infrastructure company — led to somewhat less overt state support than telecommunications peers such as Huawei received. Besides its tax benefits, most of Alibaba’s friendly treatment came at the local level, rather than the national level. Nonetheless, Alibaba benefited from the same unlevel, protected, and subsidized nascency as the rest of China’s tech giants, and this home field advantage enabled the growth of Alibaba’s resources to their eventual world-leading levels.

▲ Figure 2: A Snapshot of Alibaba’s State Support during Its Rise. Source: Full table is included in Appendix B.

Additionally, for better or for worse (from Alibaba’s perspective), the Chinese government is a significant minority owner of the firm: in 2012, a consortium led by China’s sovereign wealth fund, the China Investment Corporation (CIC), bought half of Yahoo’s then-40 percent ownership stake in Alibaba. Thus, in some small way, China’s own national bottom line is tied in with Alibaba’s valuation.

Over the years, Alibaba’s U.S. SEC filings have consistently reported an effective tax rate of 10 percent for the company and its subsidiaries, because Alibaba continues to be a “key software enterprise within the scope of the PRC national plan.” This tax rate is well below China’s standard corporate tax rate of 25 percent, reflecting a tax exemption benefit that the Chinese government grants to “high and new technology enterprises.”

The different types of state support — preferential financing, favorable tax rates, and government-guaranteed contracts — enjoyed by Alibaba and Huawei are key to understanding how the private sector is connected to conduits of state influence in the CCP Inc. system. Before Huawei or Alibaba ever took their business abroad, they were already embedded in an ecosystem of Chinese state capitalism, which would continue to influence their behavior and success beyond China’s borders.

Huawei’s and Alibaba’s Expansion in Malaysia

The CCP Inc. ecosystem’s “incubation” of private sector champions helps Chinese companies to develop rapidly and cultivate a competitive edge which they can then use to expand internationally. And state support does not stop at China’s borders: CCP Inc. continues to promote private sector players through conduits of financing, diplomatic support, and connectivity between Chinese companies. The following section will examine how Huawei and Alibaba built up their businesses in Malaysia.

Malaysia is a middle-income country, with a nominal per-capita average annual income of $11,200 (or $29,000 in purchasing power parity, or PPP, terms). Malaysia ranks 62nd on the latest UN Human Development Index — somewhat lower than its global rankings for income, but ahead of every other Association of Southeast Asian Nations (ASEAN) country besides wealthy Singapore and Brunei. As of 2022, over 80 percent of Malaysians had access to the internet, and according to surveys, nearly 90 percent of that connected cohort had access to a smartphone. Malaysia’s technology demographics have improved by leaps and bounds over the past decade — in 2010, only 56 percent of the population was online — and today Malaysia has one of the most dynamic digital economies in Southeast Asia. The fingerprints of China’s tech firms can be found all over the background stories driving these accomplishments.

China’s tech presence in Malaysia started similarly to its approach in many other markets: Huawei got there first. Years before Western telecom competitors would see Malaysia as an attractive market, Huawei was already there, offering lower-cost market-appropriate pricing and service options for telecommunications infrastructure. This familiar storyline would lead to a dominant position for Huawei — and, eventually, other Chinese telecom players — and open the door for wider Chinese participation in Malaysia’s broader technology space. Huawei’s quiet success via its 3G and 4G rollouts set the stage for more advanced China projects, like Alibaba’s next-level City Brain buildout in Kuala Lumpur and its related AI, cloud, and e-commerce presence.

China’s international investments, which for most of the last decade have fallen under the BRI brand, tend to center on more traditional physical infrastructure — ports, roads, rails, and energy. In Malaysia, however, technology emerged as the featured element. Even as SOE-driven real estate ventures, high-speed rail initiatives, port developments, and energy projects came and went and started and stopped again and again, China’s private tech players distinguished themselves by following through on projects and developing positive reputations among Malaysia’s consumers.

In the mid-2010s, Malaysia’s need for digital infrastructure and its potential as a lucrative technology market also provided an opportunity for Chinese actors to engage under the purview of a new sub-brand of the BRI: the Digital Silk Road (DSR). While DSR projects are less likely to draw substantial financial resources from China’s export-oriented policy banks, by some measures the scope of the DSR already matches that of the regular BRI. However, only 16 countries have signed formal DSR-related memorandums of understanding (MOUs) with China, meaning the vast majority of DSR projects are moving forward at the subnational and sub-diplomatic level. Moreover, while Chinese SOEs overwhelmingly serve as the vanguard in BRI-branded projects around the world, among DSR-branded projects it is China’s private players that tend to be the lead actors.

For China, tech carried the flag in Malaysia for at least a decade, particularly as other projects faltered or were derailed by scandal — such as the massive 1Malaysia Development Berhad (1MDB) corruption fiasco that rocked Malaysian politics starting in 2015. For the CCP, this meant that tech not only reinforced China’s reputation but also served its national interests by securing a valuable international relationship.

Huawei Leads Off in Malaysia’s Tech Sector

Bolstered by CCP Inc.’s systemic incubation, protection, reinforcement, and guidance of its national champions — followed in turn by flexible yet non-negotiable outbound marching orders, like China’s original Going Out policy, and later initiatives like the BRI and DSR — Huawei went to Malaysia in much the same way it went everywhere else. It also found commercial success in much the same way as it did elsewhere. The significant difference is the extent to which Huawei seemingly opened the door for more Chinese investment in Malaysia’s technology sphere, which eventually reached a level unseen in perhaps any other market.

For China in Malaysia, the 2000s and the beginning of the 2010s still involved substantial investment in local energy, natural resources, manufacturing, and transportation industries — all of which was typical for China in the 2000s and earlier, both in Malaysia and everywhere else. But Huawei’s arrival in the country signaled the beginning of a different dynamic. Increasingly, technology-related business, transactions, and investments began to dot the record of China’s activities in-country. Initially it was mainly Huawei itself, but eventually others began to follow, expanding a CCP Inc. ecosystem of Chinese companies.

While Huawei first entered Malaysia in 2001, its in-country activities began to truly scale up in 2011, when Huawei Marine was contracted to lay a 353-kilometer fiber-optic cable for Telekom Malaysia, PT XL Axiata Tbk, and PT Mora Telematika, connecting Indonesia and Malaysia. In the following decade, Huawei continued to build its footprint in Malaysia through a cascade of MOUs, investments, contracts, joint ventures, and other initiatives. In 2014, Huawei was selected to install 4G infrastructure across Malaysia. Huawei securing the contracts for, and then successfully building out, Malaysia’s 4G network changed the game going forward. Outside observers took little note at the time, but after Huawei’s 4G deal with Altel, the momentum began to build — not only for Huawei’s partnerships with Malaysia’s other aspiring 4G operators to develop, but also for additional Chinese firms like ZTE to get involved.

Later in 2014, Huawei signed an additional 4G deal with Malaysia’s U Mobile, and this time fellow tech giant ZTE was brought into the deal from the get-go. Shortly thereafter, ZTE would build its own commercial relationship with U Mobile. This kind of pattern would repeat itself with other Chinese firms across other digital projects, with Chinese companies often working in collaboration rather than competition. This behavior exemplifies how interconnectedness between Chinese companies in the CCP Inc. system boosts their collective market power. Rather than a unitary actor, Huawei was opening doors for other Chinese companies — including ones that could have been seen as competitors outside the collaborative ecosystem of CCP Inc.

With Huawei setting the stage in Malaysia for several years — and, importantly, doing well — the time eventually became ripe for a new generation of China’s outbound technology players to enter the scene. Alibaba would be the leader of this next charge.

Alibaba Goes to Malaysia

In 2016, Alibaba staked its claim as an economic force in Southeast Asia by acquiring a $1 billion controlling stake in Singapore-based Lazada, which at the time was one of Malaysia’s and Southeast Asia’s largest e-commerce platforms. Helped by this reputational and branding boost and driven by the commercial logic of increasing its presence to support Lazada’s expansion, Alibaba’s participation in Malaysia’s technology ecosystem grew rapidly after the acquisition.

In late 2016 and over the course of 2017, Alibaba became extremely prominent in Malaysia. Following its acquisition of Lazada, in March 2017 Alibaba announced a major e-commerce hub in collaboration with the Malaysian government, which also included deals between Ant Financial and Malaysia’s Commerce International Merchant Bankers Berhad (CIMB) and Maybank. Later in 2017, Alibaba Cloud opened a data center in Malaysia, brokered a deal to connect the first bilateral “e-hubs” between China’s Hangzhou municipal government and the Malaysia Digital Economy Corporation, and aided the development of a Digital Free Trade Zone (DFTZ) in the country.

In addition to these corporate deals, Alibaba enjoyed close political ties to the Malaysian government. In 2017, Malaysian prime minister Najib Razak visited Hangzhou meet with his “friend” Jack Ma and personally discuss the DFTZ. A pilgrimage to Hangzhou was representative of the kind of access Alibaba had with the Malaysian government at the time, and it was not a unique occurrence. Over the course of 2017 and 2018, Jack Ma met with Malaysia’s heads of state at least five times.

Before the Covid-19 pandemic, Alibaba’s senior leaders regularly secured meetings and cohosted events with Malaysia’s senior political leaders, regardless of who was in power in Kuala Lumpur.

Chinese diplomats regularly advocate for China’s flagship companies abroad, including the private players. Lobbying of this sort is relatively standard practice for most countries, but China’s leaders heavily imply to their foreign counterparts that doing business with China’s technology firms is the equivalent of doing business with China itself, particularly in the context of the BRI and the DSR. The diplomatic heft that China’s SOEs carry is more well known, but the private tech players often receive similar support.

The fact that China’s private companies are often associated with the Chinese state and the CCP has created unwanted political blowback for China’s tech and internet companies in the West. In Malaysia, however, this association has been much more beneficial. Alibaba has been able to meet with Malaysian delegations many times, both under the aegis of various BRI initiatives and independently.

The 1MDB Scandal: China’s Image Takes a Hit, but Alibaba Gets a Pass

Between 2015 and 2020, the Najib regime was brought down by a corruption scandal involving the 1Malaysia Development Berhad (1MDB, a government-run economic development agency). Najib and his associates were accused of, and eventually convicted of, channeling hundreds of millions of dollars of 1MDB’s assets into personal bank accounts. Following the scandal, media and judicial investigations alleged that China attempted to rescue Najib from his problems with 1MDB in exchange for green lights on preferred BRI projects. While China was not involved in the core of the 1MDB corruption scheme, Najib’s quagmire offered Beijing an opening to curry political favor and fast-track strategically important rail and energy projects.

Najib’s successor, Prime Minister Mahathir Mohamad, defeated Najib partially on an “anti-China” platform, raged against Najib’s supposedly excessive embrace of China, and blamed Najib for putting Malaysia in China’s debt. And yet, within three months of taking power, Mahathir visited Hangzhou to assure Jack Ma that Alibaba was still welcome and that Malaysia wanted to proceed with everything previously planned in the technology space. In this case, Alibaba’s status as a private company likely insulated it from some degree of anti-China backlash. However, the CCP Inc. integration of private companies into the fold of party control is reducing the plausibility of treating private companies as separate entities from the Chinese state.

Opinion leaders in Malaysia have embraced the notion that transactions with Chinese tech firms are good for Malaysia-China relations, and local reporting indicates that Malaysia’s regulators can be quite purposeful in drawing these associations. One such source described a Malaysian politician seeking confirmation from his Chinese interlocutors that a particular project would be considered a part of the BRI. Another anecdote related the story of Malaysian regulators discussing the fact that Huawei had already received plenty of recent contracts and that it was time to give one to ZTE.

How Huawei and Alibaba Helped Other Chinese Companies in Malaysia

With the Malaysian government seeing developmental and diplomatic benefit in opening its doors ever wider to China, Alibaba continued to charge through, and others started to follow. Huawei, Alibaba, and their peers demonstrated that they could affordably provide Malaysia’s leaders and consumers with what they wanted, and this value delivery was apparently enough to redeem a vast array of China-related cybersecurity concerns, corruption scandals, and failed or stalled infrastructure projects, and even to weather a dramatic regime change — following the 1MDB scandal — that was partially anti-China in nature. This positive association between different Chinese companies demonstrates a strength of the CCP Inc. ecosystem, as newer tech companies benefited from the reputational foundations laid by Huawei and Alibaba.

To this day, China’s tech companies are warmly received in Malaysia, even as the U.S.-led campaign against Huawei has achieved many of its goals. The story is no longer about two flagship firms; now there are dozens of Chinese players extending into every element of Malaysia’s digital ecosystem. CCP Inc. has stalled to some degree in Malaysia in the 2020s, but many of its tech roots remain firmly in place, and Huawei and Alibaba are the two companies most responsible for growing those roots. A fuller timeline of individual business deals can be found in Appendix C.

The network of tech companies in Malaysia continued expanding throughout the 2010s, from Huawei to ZTE, to Alibaba and Ant Financial, to Tencent, then to services like Alipay, WeChat Pay, and UnionPay, and eventually to less well-known Chinese tech players and services — such as Wuhan FiberHome Technologies, which signed an MOU with Malaysia’s PP Telecommunication Sdn Bhd in 2019. The dotted line between this cohort of companies is indicative of the mutually beneficial web that firms in the CCP Inc. ecosystem weave for one another in host countries. Although many of them compete on a micro level, on a macro level they open doors for each other as well.

Alibaba’s City Brain, Huawei’s 5G Push, and the Pinnacle of China Tech in Malaysia, 2018–2020

While Huawei and other Chinese telecommunications firms continued to expand their prominence as Malaysia’s providers of choice for physical technology infrastructure, Alibaba began a new wave of local investment in AI, cloud computing, the internet of things (IoT), and ultimately “smart cities” via its high-profile City Brain project in Kuala Lumpur. The latter years of the 2010s show a demonstrable difference in the nature (and participants) of China’s technology ventures in Malaysia. A wider range of companies became involved — like Tencent, UnionPay, SenseTime, China Unicom, and others — and the more “advanced” nature of the projects stands out. This transition aligned perfectly with the Malaysian leadership’s publicly stated intentions to develop Malaysia’s “knowledge economy” and its call for foreign investors to help facilitate the country’s tech evolution.

Eventually, major Chinese engineering SOEs — who had been there the whole time, struggling to make progress on more traditional port, rail, and energy projects — began couching their in-country projects in high-tech terminology to match the catchphrases of their more successful private sector peers (suddenly every factory was “smart,” and every port used “AI”). Over the course of the 2010s, China’s foreign direct investment (FDI), construction, and financing in Malaysia began to show less emphasis on old-economy priorities (manufacturing, auto, energy, etc.), and more on real estate, smart infrastructure, technology parks, payments, and e-commerce. Alibaba’s entrance was a clear pivot point.

The list of tech- and telecom-related infrastructure contracts, MOUs, joint ventures, and multi-layered multi-partnered initiatives undertaken by China’s private enterprises in Malaysia already seemed vast prior to 2018. But after Alibaba’s City Brain project in Kuala Lumpur hit the headlines — described below — the magnitude of China’s tech endeavors hit another gear.

China’s Tech Footprint Becomes Central to Malaysia’s Development Strategy

Alibaba pioneered its City Brain AI platform in Hangzhou in 2016 and 2017. At the time, it dovetailed perfectly with the CCP’s declared national technology priorities, which in that era centered on what increasingly came to be called “smart infrastructure.” Not surprisingly, this same “smart infrastructure” concept eventually migrated into the core talking points attached to the Digital Silk Road (DSR). In its role as a leading national tech company, Alibaba could thus be seen as both carrying out CCP policy and feeding into CCP policy with its technology innovations.

When Malaysian leaders came calling to Jack Ma to inquire about ways that Malaysia (in general), and Kuala Lumpur (specifically), could leverage Alibaba’s most cutting-edge AI solutions, City Brain was an obvious choice. Not only was the platform already blessed by Chinese policymakers, it also naturally lent itself to additional collaborative infrastructure buildouts (ideally by Chinese engineering firms), and it would tie a wide array of the city’s digital ecology to Chinese suppliers and Chinese IP. Furthermore, the scale of Kuala Lumpur as a testbed and proof of concept was highly attractive to both Alibaba and China’s DSR advocates. The goal, of course, was to do this again and again around the region.

City Brain itself is a package of AI-driven technologies designed to help improve city management. Cloud-based networks connect with street-level visual sensors, data collection points, municipal systems, security cameras, streetlights, city vehicles, public transit, emergency response teams, GPS trackers, and so on, and work to optimize all manner of functions (traffic being the most obvious and most commonly referenced). In Hangzhou, public and private video is incorporated, as is social media and big data gleaned from personal devices. In theory, all of this is (or will be) optimized to run on 5G.

Given that Alibaba itself provides only the software platform, AI programming, cloud services, and virtual digital infrastructure, there remains a huge array of physical infrastructure — electronic or otherwise — that needs to be put in place to operationalize City Brain. It is a perfect opportunity for a multifaceted CCP Inc. ecosystem of China tech suppliers.

In January 2018, the Malaysia Digital Economy Corporation (MDEC) — which already had a track record of working with Alibaba — announced the City Brain project for Kuala Lumpur. It kicked off later that year with the installation of smart traffic lights at hundreds of intersections, and it eventually connected with a range of urban management systems like ambulances, emergency dispatches, and traffic control. Month-by-month progress is hard to track, but it appears that the early stages of implementation were successful, and that further functionality is meant to roll out in stages — although the pandemic seems to have slowed its progress.

As City Brain was capturing the imagination of the tech cognoscenti, Alibaba’s entire suite of digital solutions implanted itself in the Malaysian marketplace. Along with the ubiquity of Lazada and its logistical support from Cainiao, Ant Financial established cooperation agreements with numerous banks, Alipay appeared on smartphones, and Alibaba’s corporate cloud and AI business began integrating with Malaysia’s financial community.

Meanwhile, Huawei was trying to get out in front of a U.S.-led campaign against its 5G business by locking in its role in Malaysia’s next-gen telecom infrastructure. In February of 2019, Huawei announced an MOU with Malaysia’s Maxis Communications, centered on eventual 5G trials and “end-to-end systems and services” throughout the country. By October, Huawei and Maxis had a formal agreement on rolling out a nationwide 5G network, with Maxis as the service provider and Huawei handling the technology. By January of 2020, the two companies were planning a 5G-centric “TechCity” initiative and a joint 5G innovation lab. For Huawei, it looked as if a new cycle of deeper involvement in Malaysia was beginning, and ZTE and even state-owned China Unicom were conspicuously present as well.

Towards the end of the 2010s, China’s tech FDI in Malaysia was accelerating at a remarkable rate. Alibaba and Huawei remained the leaders, but other Chinese companies were increasingly involved in Malaysia’s tech space as well; key examples of CCP Inc. collaboration in Malaysia include projects that do not even include a direct role for Alibaba or Huawei. After the flagship companies had paved the way, other, newer Chinese firms were able to ride in on their coattails, and even SOEs started to find new opportunities. According to RWR’s IntelTrak, from which many of these project data points derive, April 2019 marked the kickoff of a mega-project that encapsulates a potentially ideal outcome for CCP Inc. abroad.

That month, it was reported that China’s SenseTime Group and G3 Global Berhad, a Malaysian ICT company specializing in IoT and AI, were exploring a collaboration with China Harbour Engineering Company (CHEC, a subsidiary of CCCC) to develop a $1 billion AI park over the next five years. The project’s goals were to promote technological developments in AI, grow Malaysia’s AI sector, and provide training to future workers at the AI park. Under the MOU, CHEC would provide infrastructure engineering and construction services, SenseTime would build an AI and supercomputing platform, and G3 would form partnerships with Malaysian government agencies, universities, and corporations in support of the park. At first, the AI park developers showed strong momentum. A few months after the agreement, SenseTime’s founder Tang Xiao’ou made Malaysian history as the first foreign national to be appointed as a board member of Malaysia’s sovereign wealth fund, underscoring Malaysia’s interest in expanding technology investment.

▲ Figure 3: A CCP Inc. Microcosm in Malaysia. SenseTime, G3 Global, and CHEC collaborate to build an AI park. Source: Authors’ research based on multiple sources included in the text of the report.

In October of 2019, G3 secured a piece of land in Technology Park Malaysia for the new AI campus. The board of Technology Park Malaysia Corp reportedly awarded G3 the parcel of land over other applicants due to the impressive international (Chinese) names that were affiliated with their project.

Since 2019, however, the AI park project has made little measurable progress, and the original MOU recently expired. However, in April 2022, the original three parties (G3, SenseTime, and CHEC) reiterated their commitment to following through on their partnership. While company press releases do not specify what derailed the initial development of the AI park, it is likely that the pandemic, the long delay in cross-border investment activities, and shifting political winds all played a role. However, the partnership between SenseTime and G3 Global remains strong; in G3’s 2021 annual report, the company names SenseTime as an important partner for supporting AI initiatives.

The Covid-19 Pandemic and the Beginning of the End

By the late 2010s and the start of the 2020s, Malaysia had begun to perceive itself as a relatively technologically advanced country (especially compared to most of its neighbors). It is not a stretch to say that Malaysia owed much of this confident self-perception to the work of Chinese technology companies. Moreover, the locally and regionally produced literature and reporting suggests that many Malaysians are keenly aware of this cause and effect. By 2020, China had its hooks firmly in Malaysia’s tech space, and the hooks appeared to be mostly welcome.

Networking among Chinese companies in Malaysia continued in 2020; for example, Tencent signed an MOU that year with China Construction Bank’s Labuan Branch in Malaysia to use Tencent Cloud sevices and WeChat Pay. However, it soon became clear that early 2020 represented a peak for both Alibaba and Huawei domestically and internationally, including specifically in Malaysia. The sum total of technology investment activities by the two companies and their Chinese technology peers — as measured by mergers and acquisitions (M&As), MOUs, and other announcements captured by the RWR IntelTrak database — dropped into the single digits for the 12-month period. By the end of the year, it was clear that the façade of China’s technology dominance in Malaysia was cracking.

The Liabilities of CCP Inc.

External Suspicion and Internal Crackdowns

In the past few years, Huawei’s and Alibaba’s business momentum have been curtailed by the same CCP Inc. ecosystem that helped cultivate their success. The story behind the different sets of challenges faced by Huawei and Alibaba provides a useful two-pronged lesson. The reversals demonstrate that China struggles to achieve its goals internationally just as much as any other major power. Moreover, the stumbles by both companies show that corporate association with, and reliance on, CCP Inc. can turn from a boon to a liability.

After early 2020, Chinese activities in Malaysia essentially froze for at least two years, well into 2022. Three fundamental causes of this sudden change of fortune can be identified, and all emerged from outside of Malaysia itself. First, to be sure, was the Covid-19 pandemic, which led to an immediate suspension of person-to-person contacts and travel, as well as the suspension of — or long delays in — cross-border investment activities. China’s corporate advance in Southeast Asia was just as constrained by lockdowns and travel restrictions as every other cross-border activity. A large proportion of publicly reported announcements and activities by China’s SOEs and private enterprises in Malaysia that year centered on PPE donations, health-related collaborations, and other philanthropic or corporate social responsibility (CSR) activity.

However, two other factors more closely related to the nature of CCP Inc. itself played a more important role. The close association between private firms and Chinese government and party networks led to debilitating external blowback against many Chinese firms — and against no one more than Huawei. In Malaysia, Huawei likely lost important 5G telecom contracts due to this new sensitivity. Finally, in addition to external pressure against CCP Inc., the shifting relationship between the CCP and prominent private sector actors within China became a third factor challenging the system. In this case, it was Alibaba that became a case study on how China’s symbiotic government-to-private-sector relations can turn sour.

The Chinese government’s crackdown on private sector champions over the last few years indicates that the success of a company like Alibaba is no longer of chief concern to the decisionmakers in Beijing. Alibaba was not perceived to be in lockstep with the party’s ideology, and therefore its wings were clipped, despite its lofty position as China’s most well-regarded company internationally. Under the growth-oriented mentality that was once dominant among China’s top leadership, this outcome would have been unlikely, as Alibaba’s China-enhancing stature abroad would likely have given the company more political wiggle room at home.

Huawei, on the other hand, has enjoyed reinvigorated state support in recent years. For such on-side private companies, there are costs and benefits attached to being politically lumped in with SOEs. While their strategic scope of operations may become more limited, the ease of doing business within approved parameters tends to increase.

The cost-benefit analysis becomes more complicated abroad, however. Excessive proximity to, and alignment with, the CCP can become a reputational stain internationally and create intractable challenges for a private company’s global ambitions. For many of China’s most prominent tech companies, the situation has become extremely delicate. Huawei is the most obvious example of CCP adjacency becoming more of a hindrance than a boon, but dozens of other private sector Chinese firms have found themselves constrained internationally for the same reason.

Huawei Becomes the Poster Child for International Suspicion of CCP Inc.

While connectivity to an ecosystem of banks, regulators, SOEs, and other Chinese state actors helped Huawei develop into a global tech powerhouse, those connections later became tripwires for Huawei’s international operations. Since the late 2000s, concern about its close ties to the Chinese government have complicated business deals and engendered suspicion from international governments — chief among them the United States. This trend has intensified in the past few years with the United States’ effective blacklisting of Huawei in 2019 and the decisions by a growing number of U.S. partners to bar Huawei from their 5G networks.

Through various legal and administrative mechanisms, Huawei was slowly disconnected from U.S. technology supply chains, a development that eventually crippled many of Huawei’s most prominent businesses. Arguably just as devastating was the Trump administration‘s diplomatic campaign against Huawei‘s involvement in 5G infrastructure around the world, an effort that continues under the Biden administration. The Trump administration emphasized to allies and unaligned countries that if they allowed Huawei to be a part of their 5G rollouts, they risked their relationship with the U.S. national security apparatus and their access to intelligence sharing.

Throughout 2020 and 2021, country, after country, after country, announced they would not be using Huawei for next-generation telecommunications buildouts. Some countries explicitly banned Huawei, while others moved away from the company more quietly. While the U.S. campaign of pressure and persuasion played a key role in swaying allies, it was not U.S. concerns alone that drove countries away from Huawei. Australia, for one, also harbored deep concerns about Huawei’s state ties — in fact, according to media reports, this helped sway the Trump administration toward a harder line on Huawei. Meanwhile, moves away from Huawei in European countries came amid a broader downturn in China’s relationship with Europe.

Under the Trump administration, the United States ratcheted up a rhetorical, regulatory, and diplomatic campaign against Huawei on the basis that Huawei technology constitutes a security risk due to the firm’s close ties to the Chinese state.

In Q2 2020, Huawei shipped more smartphones than any other company in the world, exceeding Apple and Samsung’s totals for the first time ever. This would prove to be Huawei’s peak. With no access to Google’s operating systems, no way to supply its customers with many globally popular apps, and — most importantly — no way to replenish its stock of advanced U.S.-designed semiconductors, Huawei’s decline was swift.

At the end of 2020, Huawei spun off its largest smartphone brand, Honor, in an attempt to preserve that subsidiary’s ability to continue operating (via a deal that was itself an excellent example of CCP Inc. in action). By late 2021, Huawei was no longer in the top 10 among global smartphone producers, and the company was regularly reporting staggering quarterly losses. All told, Huawei’s revenue dropped by 28.6 percent in 2021, reversing years of steady growth (see Figure 4).

▲ Figure 4: Huawei’s Annual Revenue. Years of steady growth in Huawei’s annual revenue dropped off in 2021. Note: Conversions to USD are based on yearly average exchange rates, as listed by the IRS and OECD. Source: Huawei Investment & Holding, 2017 Annual Report, Shenzhen: Huawei, 2018; Huawei Investment & Holding, 2021 Annual Report, Shenzhen: Huawei, 2022.

Most salient for this report is Huawei’s 5G fate in Malaysia. The company had been Malaysia’s provider of choice for its 4G rollout for many years, had long-established working relationships with Malaysia’s largest mobile service providers and internet service providers, and, over the course of 2018 and 2019, had signed numerous MOUs with those same companies designating Huawei as the vendor of choice for Malaysia’s eventual 5G rollout. Nonetheless, in mid-2021 Huawei lost its bid to provide Malaysia’s new 5G telecommunications network. Kuala Lumpur chose Sweden’s Ericsson instead.

Malaysia’s political leaders offered no formal explanation as to why they spurned Huawei. Analytically, however, two obvious explanations stand out: first, the U.S. pressure campaign probably addled nerves, even in a China-friendly capital like Kuala Lumpur; and second, potential clients have likely lost faith that Huawei can maintain its status as a long-term reliable provider of cutting-edge technology services now that the company lacks access to advanced U.S. semiconductors and other related inputs. It is difficult to measure the impact of backlash against Huawei in nations that have not taken an explicit stance for or against the company. To be sure, a growing number of nations have barred the company from their networks — but at the same time, Huawei is growing its business in other international markets. Huawei faces massive challenges, but given the strong support it receives from CCP Inc., it will likely survive, maintaining its infrastructure equipment sales and pursuing initiatives like providing telecom services and manufacturing components for electric vehicles.

The CCP vs. Alibaba

Alibaba’s political problems with China’s regulators over the past two years have also been well-documented, and in many ways the company’s fate has been far more shocking than Huawei’s. Numerous voices in the U.S. national security community had long been calling for the ostracization of Huawei, and when those voices got their wish, the results were at least somewhat predictable (although the magnitude of the success was perhaps surprising to some). For Alibaba, however, almost no one predicted the company’s twist of fate.

In late 2020, Alibaba’s own government began a political, regulatory, and legislative assault on China’s private sector “platform economy” internet giants, of which Alibaba is by far the largest. Due to Alibaba’s stature — and, perhaps, due to an ill-timed contentious speech in which Alibaba founder Jack Ma criticized China’s financial system — the company quickly became the poster child for what was eventually dubbed China’s “techlash.” Beijing’s crackdown on China’s internet companies centered on anti-monopoly investigations, corruption probes, stringent new privacy and data security regulations, strict new anti-“unfair competition” rules, burdensome cybersecurity inspections, and ramped-up penalties for non-compliant financial practices.83 Alibaba at one time or another came under the microscope for almost all of these and endured wave after wave of fines and penalties.

As with the U.S. assault on Huawei, China’s assault on its own digital economy champions led to an inevitable slide in business performance for the targeted companies, particularly Alibaba. By the end of 2021, Alibaba’s revenue growth and profits had cratered to historically low levels. Previously high-flying portions of its business, like advertising, suddenly flatlined. Its market valuation suffered commensurately: in October 2020 Alibaba was worth $837.84 billion, but by November 2022 that figure had fallen below $200 billion, a decline of more than three-quarters. Alibaba’s shareholders have lost nearly all of their gains since the company’s IPO in 2014.

▲ Figure 5: Alibaba’s Stock Value. Since its peak in September 2020, Alibaba’s stock has steadily declined in value. Source: “Alibaba Group Holding Limited (BABA),” Yahoo Finance.

Alibaba does not delineate its financial performance in individual foreign markets in its quarterly or annual reports, so there is no way to be certain how much its struggles at home have impacted its business in Malaysia. However, from a qualitative perspective, open-source media chatter on Alibaba’s investment activities in Malaysia has dropped off considerably, as have discussions about expanding the company’s much-vaunted City Brain project in Kuala Lumpur.

Although the technocrats in China enacting this assault on Alibaba’s business model are for the most part members of the bureaucracy, the driver of the initiative was certainly the CCP itself. Movements of this magnitude, and decisions of this much consequence, can only arise from the top. And once the decision is made to shift gears on a governance concept — in this case, the decision to unwind and reconstitute the previous approach to developing the domestic internet economy — the entire legal-governmental apparatus falls into lockstep. For Alibaba, the very same CCP-centric ecosystem that had succored, built up, and unleashed the company upon the world became a suffocating burden.

CCP Inc. as Political Risk

This new dual-pronged threat (external pressure and internal pressure) does not bode well for China’s next generation of technology stars or its current roster of platform economy heavy hitters. With Washington and its allies increasingly hostile to China’s telecommunications companies and device manufacturers, alongside Beijing’s enduring disapproval of China’s e-commerce, social networking, gaming, and digital service providers, it is hard to envision another Huawei, Alibaba, Tencent, or ByteDance emerging on an international scale. Had the CCP not initiated its techlash, Meituan might have become as consequential in Southeast Asia as Alibaba by now, and DiDi might have had a chance to compete with Uber around the world. At the moment, both of these outcomes seem extremely far off, if not entirely precluded. Similarly, companies like SMIC, SenseTime, and Hikvision might be destined to go the way of Huawei, thanks to their close association with the CCP in the eyes of Western capitals. The Biden administration’s October 2022 semiconductor export restrictions underline that in the United States, political will to target China’s strategic technology capabilities is bipartisan and enduring across administrations.

The party’s regulatory assault on its platform economy giants will eventually end — but it is unclear how strong the companies will be that manage to rebound from the storm. The existing mega-players are much weakened, and even though they will likely once again be encouraged by Beijing to expand abroad, the resources they will be able to bring to bear in foreign markets will likely be much reduced. Presumably, the party will one day look to these firms to reintegrate with CCP Inc. abroad, but only time will tell the extent to which they will be able to contribute.

For good or ill, the CCP and its political-economy systems remain at the core of the story for companies like Huawei and Alibaba, both at home and abroad in places like Malaysia. Both those companies are, and will forever be, enmeshed in a network of politicized interests, benefits, and constraints that will continuously have outsized influence on their successes or failures over time.

Conclusion

What to Make of China’s Tech Story in Malaysia

For China’s technology players in a country like Malaysia, the party-state sets the direction, provides starting-gate advantages, and, where possible, uses diplomatic leverage to open doors, but companies like Huawei and Alibaba still need to succeed in the host country on their own merits. If and when they succeed, the floodgates open for the rest of China’s players, and the full CCP Inc. ecosystem of mutual reinforcement kicks into gear.

Despite these political interlinkages, it is important to acknowledge the fundamentally commercial nature of most of China’s tech investments in places like Malaysia. Companies like Huawei and Alibaba arrived years ago with huge advantages derived from their subsidized home front, but they also arrived with the intention to make money, and neither firm would likely have stuck around if business were bad — nor would they have been welcome if their goods and services failed to serve Malaysia’s consumers and national interests. As for Beijing, the lines between “commercial” and “strategic” success abroad have become blurred, and the concepts now often dovetail within the CCP’s more modernized authoritarian ideology.

It is difficult to assess how much of China’s tech presence in Malaysia came about because of the urgings of the party-state and how much arose from the individual firms’ rational business strategies. One could reasonably make the case that both Huawei and Alibaba would have gone to Malaysia even had the CCP never sent out the pro-expansion signal nor offered so many layers of assistance. The leaders of Huawei and Alibaba are astute businessmen who understood early on that their technical capabilities and experience were readily transferable to new markets such as Malaysia.

These arguments are valid, but they are perhaps no longer salient. China’s private sector technology companies have found success abroad because of both their home country’s party-state ecosystem and their own commercial imperatives and abilities. Whether one element or the other deserves the most credit is not the most important question; the issue is rather the extent to which this outcome matters. How should Western companies and policymakers think about and respond to this type of success? Is the Huawei treatment the correct and justifiable approach? Is it excessive? Is it not enough? Should more private sector Chinese companies be saddled with similar constraints? What might be the consequences if they are not?

China’s Malaysia model from the 2010s is still intact, and it could be revived. One needs look no further than the statement in April 2022 that the original three parties to the AI campus within Technology Park Malaysia (G3, SenseTime, and CHEC) were renewing their commitment to the project and their partnership. Such arrangements have the potential to serve as a template for other countries as the DSR regains momentum. Arguably, a similar process is already underway in places like Indonesia, Ethiopia, and to some extent even Russia (a process that may pause due the threat of sanctions over Ukraine, but which will likely ramp up considerably once the war is over). U.S., European, and Japanese competitors of Huawei, Alibaba, ZTE, Tencent, and the rest can expect to find a similar network of CCP Inc. players in every nonaligned emerging market in the world, save perhaps India’s. The case study of Huawei and Alibaba in Malaysia provides useful insight for understanding future CCP Inc. business expansion into international markets — as well as the critical internal and external challenges facing members of the CCP Inc. ecosystem.

Appendix A

A Snapshot of State Support for Huawei’s Rise

The following table presents a sample of the Chinese government’s financial, regulatory, and political support for Huawei during its global expansion.

Year	Chinese Government Entity	Nature of Support
Late 1990s and early 2000s	NDRC, Ministry of Posts & Telecoms, etc.	Forced JVs, forced technology transfers, and forced training from Lucent, NEC, Ericsson, Nortel, Motorola, etc.
2009	China Development Bank	$500 million loan at below-market rates to Brazilian firm Telemar Norte Leste to buy Huawei gear
2010	China Development Bank	$30 billion credit line to Huawei on “extremely favorable” terms
2010	Various	$150 million in government R&D grants
2010	China Exim Bank, CDB, ICBC	$1.1 billion loan to India’s Reliance Communications for purchases of Huawei (and ZTE) gear
2011	China Development Bank	$10 billion total loans to various Huawei customers for the year
2012	China Exim Bank	$2.8 billion in funding for Huawei’s overseas projects and investments
2012	China Development Bank	$7 billion in funding for Huawei’s overseas projects and investments
2013	China Exim Bank	$68 million bridge loan to Pakistani government to secure Islamabad Safe City Project for Huawei
2014	Dongguan local government	127 hectares of land for Huawei from the municipal city government at one-tenth the market rate
2014	China Development Bank	$214 million loan to Guinea to fund national fiber optic network to be built by Huawei
2014	China Exim Bank	$222 million loan to Zimbabwe’s NetOne Communications to pay Huawei to upgrade its generators
2015	China Development Bank	$1.2 billion loan to Brazil’s Telemar for more Huawei equipment and refinancing of its previous debt
2015	China Development Bank	$31 million loan to Russia’s MTS for Huawei equipment and services
2015	China Development Bank	$600 million loan to Russia’s MegaFon for a network upgrade from Huawei
2015	NDRC	$975 million fine extracted from Qualcomm for allegedly over-charging Chinese clients like Huawei for its patents, which led to a reduction in Qualcomm’s licensing prices for Huawei, which in turn provided a long-term input pricing advantage for Huawei over its competitors
2016	Various	$190 million in total Chinese government grants to Huawei
2018	Various	$222 million in grants from the Chinese government, $64 million of which went to R&D
2018	Shenzhen local government	Multi-hundred-thousand-dollar bonuses for over 100 of Huawei’s top engineers, directly from the Shenzhen government
2018	Unnamed state bank	Concessionary loan to Huawei, used to construct a 6,000 km transatlantic fiber optic subsea cable linking Brazil and Cameroon
2018	China Exim Bank	$382 million funding to Nigeria for Nigerian state-owned telecommunications firms to purchase Huawei equipment
2020	China Mobile	57.2% of state-owned China Mobile’s $5.2 billion 5G base station contracts awarded to Huawei

Source: See endnotes for complete references.

Appendix B

A Snapshot of Alibaba’s State Support from Central and Local Authorities

The following is only a small representative sample of the kind of support Alibaba received from official channels during the years it was emerging as a global champion.

Year	Chinese Government Entity	Nature of Support
2011	Hangzhou municipal government	Direct financial subsidies and tailored/loose regulatory environment designed to ensure Alibaba’s success (unspecified dollar figures)
2013	Ministry of Finance, State Administration of Taxation, various	$798.21 million in tax holiday and preferential tax treatment from various PRC regulators, as per Alibaba SEC filing
2013	Zhejiang provincial government, Jinhua municipal government	Deeply discounted pricing for 100 hectares of land to help Alibaba establish Cainiao Network Technologies subsidiary
2013	Hainan provincial government	Regulatory changes to facilitate Alibaba opening special “data ports” that increase local access to Alibaba’s internet services, e-commerce, and cloud computing
2014	Ministry of Finance, State Administration of Taxation	9.9% effective tax rate for Alibaba in the PRC, compared with standard enterprise income tax rate of 25%, because of Alibaba’s “key role” in “the PRC national plan,” as per SEC filing
2014	Guangzhou municipal government	Creation of a “Refund Guarantee Fund” to encourage growth of cross-border e-commerce, primarily benefiting potential Alibaba users
2016	Chongqing municipal government	Full reimbursement of personal income tax for all senior management and key technical staff for large-scale e-commerce enterprises (incentive to draw Alibaba local investment)
2016	Hangzhou municipal government	Establishment of special Alibaba-centric e-commerce “pilot zones” where the normal annual limit of $50,000 for foreign exchange for individuals was waived
2016	Shenzhen municipal government	Discounted 15% local tax rate for tech enterprises if more than 70% of their total revenue comes from e-commerce; subsidized income tax for overseas talent at large e-commerce companies
2016	Ministry of Finance, State Administration of Taxation	Effective PRC tax rate for Alibaba once again roughly 10%

Source: See endnotes for complete references.

Appendix C

Timeline of Chinese Tech Business Deals in Malaysia

The following timeline highlights some of the key developments in China’s tech expansion in Malaysia. Entries are based on data from RWR IntelTrak’s database, which included a repository of MOUs, M&As, company press releases, and other news on investment developments in Malaysia.

• 2011: Telekom Malaysia, PT XL Axiata Tbk, and PT Mora Telematika contracts Huawei Marine to lay a fiber-optic cable connecting Indonesia and Malaysia.

• June 2012: Huawei opens its first overseas training center in Cyberjaya and contributes to a $30 million government project to foster talent in the telecom and technology sectors.

• November 2012: Huawei signs a distribution contract with ECS Astar Sdn Bhd to provide its entire suite of enterprise products and solutions. ECS Astar had been appointed distributor of Huawei’s phones the previous month.

• May 2013: Syarikat Prasarana Negara Berhad, Malaysia’s national infrastructure firm, contracts Huawei to provide a railway communication system to the 18 km extension of Kuala Lumpur’s Ampang Line Light Rail Transit.

• August 2013: Celcom Axiata selects Huawei for a five-year renewable contract as Celcom’s digital service business operation partner for the majority of its digital content providers.

• August 2013: Huawei signs an MOU with Telekom Research and Development to research the most suitable, customized copper access and 4G solutions for Malaysia’s fixed and broadband landscapes.

• October 2013: Huawei signs an agreement with Khazanah Nasional Berhad to set up a regional data hosting and logistics center in Nusajaya, Iskandar Malaysia.

• April 2014: Altel Communications selects Huawei to install 4G infrastructure across Malaysia, providing wireless, core, transport, and billing services.

• November 2014: State agency CyberSecurity Malaysia names Huawei the Cyber Security Organization of the Year.

• December 2014: ZTE and Huawei sign a network partnership agreement with U Mobile worth $244 million to rollout 1,000 3G and 1,000 4G LTE network sites across the country.

• February 2015: ZTE signs an agreement with U Mobile to expand the operator’s 3G and 4G LTE networks.

• May 2015: Huawei Marine Networks signs an agreement with Telekom Malaysia Berhad, Symphony Communication Public Company Limited, and Telcotech Limited to construct the Malaysia-Cambodia-Thailand (MCT) fiber-optic submarine cable system.

• August 2015: ZTE and U Mobile sign an MOU on developing pre-5G mobile technology infrastructure.

• March 2016: Huawei signs an MOU with the Sabah State government to support the state’s target of becoming a regional ICT hub and smart state.

• April 2016: Celcom Axiata announces that it will partner with Ericsson Malaysia and Huawei to boost its 4G LTE network.

• June 2016: ZTE announces that it will set up a training center at Malaysia’s Multimedia University to provide internships to students and ZTE employees.

• September 2016: Huawei Marine Networks is selected by Super Sea Cable Networks to construct SEA Cable Exchange-1, a 250 km fiber-optic cable connecting Mersing, Malaysia; Singapore; and Batam, Indonesia.

• October 2016: Huawei establishes a strategic alliance with I-Berhad as part of the Comverse@iCity smart city project in Kuala Lumpur.

• October 2016: Huawei expands its presence in Malaysia by launching a new digital center in downtown Kuala Lumpur, on the 15th anniversary of its entrance into the market.

• H2 2016: Alibaba expands its Cainiao Smart Logistics Network into Malaysia, to support Lazada.

• March 2017: Alibaba announces an e-commerce hub in Malaysia encompassing logistics, cloud-computing, and e-financial services, part of a collaboration between Alibaba and the Malaysian government for the development of a Digital Free Trade Zone (DFTZ). To finance the venture, Ant Financial partners with Malaysia’s CIMB and Maybank.

• May 2017: The Malaysian government announces the signing of a $3.45 billion deal between the Johor Corporation and Siasun Robot Automation (Shenyang) to set up a “Robotic Future City.” This is one of the first large-scale advanced technology arrangements with a Chinese firm outside of the usual majors.

• May 2017: Alibaba signs an MOU with the Malaysia Digital Economy Corporation (MDEC) and the Hangzhou Municipal Government to connect the first “e-hubs” between the two countries via the Electronic World Trade Platform (eWTP).

• May 2017: Alibaba Cloud announces it will open a data center in Malaysia later in 2017.

• July 2017: MDEC launches the previously announced DTFZ, centered on the Kuala Lumpur airport and structured around Alibaba’s Yidatong (an online customs clearance platform), Cainiao’s logistics platform, and Lazada. Alibaba is designated to handle the DTFZ’s digital infrastructure.

• 2017 (various): Prime Minister Najib signs a strategic cooperation agreement with Alibaba, meets three times with Jack Ma, and visits Hangzhou to personally deliver the news that Alibaba will qualify for tax exemptions.

• July 2017: Malaysia’s CIMB Bank and Ant Financial announce that the two firms will create an equity joint venture to provide mobile wallet and other mobile financial services.

• Late 2017: Malaysia formally becomes the site of the first “Electronic World Trade Platform,” a techno-political concept invented by Jack Ma, which he at one point described as “a non-state-enterprise exploration of the Belt and Road strategy, that can be understood as business participating in and advancing the Belt and Road.”

• November 2017: Hong Leong Bank announces that it has received approval from Bank Negara Malaysia to enter into an agreement with Tencent to provide the WeChat Pay payment solution.

• December 2017: Alibaba begins a two-week business-to-business e-commerce training program for Malaysia’s small and medium-sized enterprises, supported by the MDEC and the Malaysia External Trade Development Corporation (Matrade).

• January 2018: UnionPay International partners with iPay88, a Malaysian fintech company, to expand its online acceptance in the region.

• February 2018: Alipay begins partnering with e-payment enabler MOL Global to expand mobilepayment options for Malaysians.

• H1 2018: Alibaba’s City Brain installs smart traffic lights at 281 intersections in Kuala Lumpur, designed to reduce congestion, detect accidents, and facilitate priority access for emergency vehicles.

• June 2018: Alibaba opens a Malaysia office in Kuala Lumpur, its first country office in Southeast Asia.

• July 2018: Alibaba Cloud announces it will set up its first cloud-based Anti-DDoS Scrubbing Center in Malaysia in August 2018.

• 2018 (various): Over the course of the year, Alibaba’s entire suite of cloud-based solutions becomes available in Malaysia, for private sector, government, and SOE clients.

• 2018 (various): Ant Financial establishes cooperation agreements with six Malaysian banks, and Alipay promotions ramp up nationally.

• August 2018: Celcom Axiata Berhad signs an agreement with Huawei for software as a service (SaaS) products. Celcom becomes the first Malaysian company to adopt Huawei’s Operation Support Service (OSS) system.

• November 2018: Malaysia’s Edotco Group signs an MOU with Huawei on partnering to deliver telecom equipment for mobile network operators.

• February 2019: Huawei announces it will collaborate with Celcom Timur (Sabah) Sdn Bhd to deploy an optical integrated service transport network covering 40 nodes.

• February 2019: Huawei announces the first of several 5G-related MOUs and contractual agreements with Maxis Communications, as per the description in the text above.

• March 2019: A delegation of 30 senior Malaysian officials makes another pilgrimage to Hangzhou to ensure the Alibaba collaboration remains on track.

• March 2019: ZTE signs an MOU with U Mobile to accelerate 5G network development in Malaysia.

• April 2019: Huawei signs an MOU with the government of Malaysia to continue supporting the country’s Digital Economy Transformation Agenda, specifically in the domain of digital talent development and technology innovation.

• April 2019: Malaysia’s Ambank Group announces that it will integrate WeChat Pay into its e-wallet in order to offer cross-border services to its clients.

• May 2019: Alibaba Cloud announces a collaboration with Sena Traffic Systems to build a smart traffic management system.

• June 2019: Huawei announces an MOU with TIME dotCom on the construction of a pilot 10-gigabit passive optical network, which will provide high-speed broadband to fixed access users in Malaysia.

• June 2019: The Standard and Industrial Research Institute of Malaysia (SIRIM) signs an MOU with Huawei for cooperation in manufacturing and ICT.

• June 2019: PP Telecommunication Sdn Bhd signs an MOU with Wuhan FiberHome Technologies, another new Chinese entrant to the country.

• July 2019: Alibaba Cloud signs an MOU with Malaysia’s Bank Muamalat.

• August 2019: Huawei, China Construction Bank, Jianhui Paper, and Beibu Gulf sign an MOU to construct a 5G Smart Industrial Park and Port project in Pahang.

• August 2019: Shenzhen Qianhai Quantum Cloud Code Technology Co Ltd signs an MOU with Malaysian company Packtica for technology transfer and various additional products.

• October 2019: Telekom Malaysia and Huawei sign an MOU to collaborate in 5G commercialization.

• October 2019: Huawei signs an MOU with IFCA MSC to form a strategic partnership on cloud technologies, AI, smart townships, IoT, digital transformation, machine-to-machine, and voice recognition applications and technology.

• October 2019: Huawei signs a letter of intent with U Mobile for additional 5G collaboration, including live trials in advance of full commercial rollout.

• November 2019: OCK Group signs an MOU with China Information Technology Designing & Consulting Institute Co., a subsidiary of China Unicom, on infrastructure and network services, including 5G, fiber-optic infrastructure, bandwidth leasing, IoT, and AI.

• December 2019: Skymind AI Berhad and Huawei sign an MOU to develop a Cloud and AI Innovation Hub designed to foster innovation and talent development in ASEAN countries, with a focus on Malaysia and Indonesia.

• January 2020: Weibo Corp signs an MOU with the MDEC to develop and implement a pilot for a Virtual City portal project.

• May 2020: Tencent signs an MOU with China Construction Bank’s Labuan Branch in Malaysia to use Tencent Cloud services and WeChat Pay to enhance digital banking in the country.

• July 2020: Huawei signs an MOU enabling Telekom Malaysia to offer its small and medium-sized clients Huawei’s cloud services.

• October 2020: ZTE is selected by Digi Telecommunications as a contractor for its nationwide Radio Access Network (RAN) modernization in Malaysia.

• December 2020: Huawei signs an MOU with the Aladdin Group to co-develop a halal-focused social e-commerce platform in Malaysia.

---

Ethan Cramer-Flood is the head forecasting writer at Insider Intelligence and senior adviser to Trivium China. Previously, he was a senior fellow at the Conference Board’s China Center for Economics and Business, where he helped direct the Beijing-based China Center and supported the Conference Board’s Asia-based operations in Hong Kong and Singapore. Prior to the Conference Board, Cramer-Flood served as a professor of international relations at China Foreign Affairs University in Beijing, where he specialized in international relations theory and U.S. foreign policy and conducted research on U.S.-China relations. He holds an MS in global affairs from New York University, where his research focused on China’s engagement with Africa, Chinese foreign policy in general, and global scenario-based planning. Cramer-Flood has been published numerous times in academic and scholarly journals focusing on international affairs and has appeared in media in China and the United States both on-screen and in print. He earned his BA in history from Haverford College.

Briana Boland is a research associate for the Freeman Chair in China Studies at the Center for Strategic and International Studies (CSIS), supporting the program’s research on party-state governance and evolving political discourse in China. Prior to joining CSIS, Briana worked as a political risk analyst at Dentons, where she researched China’s economic policy and shifting trends in U.S.-China relations for firm leadership and international clients. She holds a BA in international studies with minors in economics and Chinese language from Fordham University.