Oleh/By		:	DATO' SERI DR. MAHATHIR BIN MOHAMAD 
Tempat/Venue 	: 	THE SHANGRI-LA HOTEL, KUALA LUMPUR 
Tarikh/Date 	: 	23/01/95 
Tajuk/Title  	: 	THE INTERNATIONAL TRADE AND 
			INVESTMENT CONFERENCE MALAYSIA AND 
			CHINA IN THE 21ST CENTURY: 
			PROSPERITY THROUGH COOPERATION 


 
    It  is  indeed  a  pleasure  for me to be with you this
morning.  The theme of this Conference "Malaysia  and  China
in the 21st Century: Prosperity Through Cooperation" is very
topical  and relevant in the context of the current surge in
interest in China.
2.   It is high time for us to stop seeing China through the
lenses of threat and to fully view  China  as  the  enormous
opportunity that it is.
3.   The perception that China is a threat is a popular one.
Malaysia  itself  once nursed this view, but then those were
the days when the Communist Party of Malaya drew inspiration
and support from the Chinese Communist Party and when  fears
of a Chinese fifth column in Southeast Asia was strong.
4.   To be sure, we must never be soft headed and naive.  We
must  always be realistic and ready.  But times have changed
dramatically.  And Malaysia is one  of  the  countries  that
recognises  these  changes.   We no longer regard China as a
threat.  We do not believe in feuds.   We cannot  allow  the
past to determine our future forever.
5.      Nevertheless,  many countries and many thinkers with
strategic mindsets moulded in concrete during the  Cold  War
continue to hold firmly and religiously to this threat.  The
end  of  the  Cold  War  has not led to a diminution of this
inclination.  Instead it may have strengthened  this  habit.
I suspect that many do not feel secure or comfortable unless
they  can  clearly  see  a  threat.  A threatless world is a
frightening prospect.  And China is favourite  game  because
of  its  size, its ideology, its burgeoning economic weight,
its  recent   increases   in   military   expenditure,   its
traditional  public  reticence  on  domestic matters and the
prejudices built up against it by half  a  century  of  Cold
War.    If  we  are not terrified of China, who should we be
terrified of?
6.    In my view, to perceive  China  as  a  threat  and  to
fashion  our  security  order  around this premise would not
only be wrong policy,  but  it  would  also  be  a  bad  and
dangerous  one.    We  need  to  fundamentally  reassess our
notions about the so-called Chinese threat.
7.   Almost every day, we are told that China  is  a  threat
because  it  has  hegemonic and territorial ambitions.   The
increase in its military expenditure in recent years, it  is
argued,  is  also  testimony to this.  Every day we are told
that the reduction in U.S.  presence  in  the  region  would
encourage China -- and some other regional powers as well --
to  dominate  the  region.   Finally, the icing on the China
threat cake among some quarters is that it will be a leading
protagonist against the "West" in a clash of civilisations.
8.    Nobody nowadays seriously  entertains  the  view  that
China  is  bent  on exporting its communist ideology.  So we
can lay to rest the threat  of  ideological  subversion  and
wholesale conversion.
9.      Will  China eventually have hegemonic ambitions?   I
don't really know.   Big powers cannot but cast big  shadows
over  neighbours.    How  light  or how dark the shadows are
depends not on just the power concerned but  also  on  those
overshadowed.  It is well to remember that the Malay states,
all  tiny  by  comparison to their neighbours, have survived
despite numerous very large and powerful neighbours.    They
only succumbed when distant powers intrude.
10.   Will China use military means to advance its ambitions
in the region?  To answer this question  one  must  look  at
China's conduct in history, and its disposition to resort to
military means.
11.    How  many  times in the past has China sent its armed
forces across borders to invade and occupy?   On  the  other
hand, how many times has China been attacked and parts of it
been  occupied?  How many colonies did China establish?  How
many  military  bases  does  China  maintain   overseas   to
perpetuate  its hegemony?   And with how many countries does
China have treaty alliances, for defence or otherwise?
12.  Much has been made regarding the  increase  in  China's
defence   expenditure.    If  we  compute  from  the  latest
statistics set out  in  the  authoritative  SIPRI  Yearbook,
published  by  the  widely recognised Swedish think tank, in
constant 1985 prices and exchange  rates,  China's  military
budget has gone up from US$5,965 million in 1985 to US$6,387
million  in 1993.   This is an increase of 7.07 percent.  In
comparison, South Korea's military budget increased by 51.63
percent  over  the  same  period,   and   Japan's   military
expenditure rose by 29.76 percent.
13.    The  obsession  with  increases  in  Chinese military
expenditure also obscures many other important things.   For
instance, it obscures the fact that Japan, despite a defence
treaty  with  the  United  States,  is  spending more on the
military than does the much larger China, which  has  to  be
completely self-reliant.  Last year, Japan spent three times
as  much  as China.  Even South Korea spent more than China.
14.               The latest issue of The  Military  Balance
published  in London estimates China's military expenditure,
in purchasing-power-parity terms, at US$27.4 billion.    The
budget  allocation  for  the United States for the same year
was ten times more -- US$276.1 billion.   If, despite  their
heavy military expenditures, the United States and Japan can
be  considered  benign  and  not threatening, perhaps we can
also be allowed to sleep well, without too many  nightmares,
after looking at China's own military expenditure.
15.   For these and other very good reasons Malaysia refuses
to see China as a military or political threat.   We  prefer
to see China as a friend and partner in the pursuit of peace
and prosperity for ourselves as well as for the region.
16.  The future may change of course.  But until it does, we
believe  that  China is deeply committed to the perpetuation
of a peaceful, regional security environment.  It wants this
for its  own  national  political  and  economic  interests.
China  believes, as we do, that peace is a pre-requisite for
its own internal development.  This conviction  is  unlikely
to change in the forseeable future.
17.    So much for China as a military and political threat.
How about China as an economic threat?   Again,  things  may
change.    But  I  prefer  to  see  China  not so much as an
economic threat as it is an economic opportunity.
18.  If we are foolish enough as to compete with China  head
to head, to compete against China in those areas where China
is  strongest  in  the  world,  then  we are surely in for a
drubbing.  Some countries may have no choice.  They have the
same comparative advantages as China but not the scale.  But
Malaysia   has  choices.    We  have  lost  the  comparative
advantage of low  labour  cost  for  example  without  being
unable to compete.
19.    We  will  have  to  be  more  capital  and technology
intensive.  We will have to go for  more  value-added,  less
labour  intensive.  We will have to take fuller advantage of
our resources in material, in human assets and in  the  vast
experience  accumulated  in  the  running  of the nation and
other organisations, in  particular  the  legal  system  and
framework within which we function.
20.    I  do  know  that  the  theme  of  this conference is
"Malaysia and  China  in  the  21st  Century  --  Prosperity
Through  Cooperation".    Let me merely mention, in passing,
however, that we  can  also  help  each  other  and  prosper
through competition, through competing with each other.
21.  We in this country have adopted the strategy of earning
our living from the rest of the world.  In order to do this,
to  use the international marketplace, we have to be able to
match and  if  possible  beat  all  comers.    Our  fiercest
competitors  are  our  best  allies  for they force us to be
better and better.
22.  Imagine a race in which we have to run against the weak
and the flabby.  Instead of becoming the best  that  we  can
be,  we  would  in  due  course become almost as weak and as
flabby as the others.
23.  It is in this sense  that  fierce  Chinese  competition
serves  our  purpose and is in our interest.  And we must be
able to respond to this fiercest of all economic challenges.
24.  Fortunately, although a huge country like China has  to
be  very  good and competitive at a large number of athletic
events, a small country like Malaysia need only be  good  at
very  few  in  order  to  prosper.   China cannot be a niche
player.  A niche player is all we have to be.  We must find,
discover and constantly re-discover our niches.
25.  I  have already intimated that Malaysia and  China  can
be  regional  partners in the making of cooperative peace in
East Asia.  Just as we in Asean have created a zone of peace
in the Asean community and are in the process  of  expanding
this  to  the  rest  of Southeast Asia, China along with the
rest of us in East Asia should proceed to build  a  zone  of
cooperative peace amongst ourselves.
26.    Cooperative  peace  starts  with one's own back-yard.
Ensuring peace and tranquility within one's  own  boundaries
is  one  of  the  greatest  gifts that one can make to one's
neighbours and one's region.  It is a  fundamental  form  of
"cooperation".
27.    Ensuring  the  best  of  friendly bilateral relations
between us  and  our  regional  neighbours  and  helping  to
strengthen  the  patchwork  of  productive bilateral ties is
also  fundamental.    This  too  constitutes  "cooperation".
Building processes of peace and structures of confidence and
comfort  at  the  multilateral  regional  level too can be a
fundamental contribution.
28.   Malaysia and China can and  should  cooperate  at  all
these three levels.
29.    I believe that equally important as the building of a
region of cooperative peace is the building of a  region  of
cooperative prosperity in East Asia.
30.   Again, cooperative prosperity starts at home.  We must
all  ensure  domestic  economic  dynamism  and   sustainable
growth.
31.  At the bilateral level much can and must also be done.
32.   Because it is a relatively new idea, let me once again
reiterate the importance of adopting "prosper thy neighbour"
policies.
33.  Two months ago,  at an international meeting in Penang,
I expressed fears that "beggar thy neighbour" policies  were
for  some  of the biggest economies more popular now than at
any time since the 1930s.  I argued most vigorously for  the
adoption  of  "prosper  thy neighbour" policies.  We in East
Asia have been adopting this basic  stance,  with  the  most
productive results for ourselves.   Incidentally, it is also
very  much  in  our  interest  to see Europe prosper, to see
North America, indeed the whole world prosper.
34.  With regard to the Malaysia-China nexus, I  am  tempted
to  say  that  the limits are only imposed by our creativity
and our resources.   Both,  I  am  glad  to  say,  are  more
abundant than we presume.
35.    You  will  hear  over  the next two days the enormous
opportunities in China.   There will  be  enough  incredible
statistics and facts to boggle the mind and to challenge the
imagination.
36.    Please  allow me to make some remarks on the regional
level.
37.  Today, in purchasing power parity  terms,  and  despite
rates  of sustained growth in East Asia unprecedented in the
annals of mankind, the United States is  still  by  far  the
largest economy in the world.  Japan, the second largest and
China,  the  third largest economy, added together amount to
80 percent the size of the U.S.  India is, after Germany and
France, the sixth largest economy.  Indonesia is  number  12
and South Korea is number 15.
38.    The  World  Bank now forecasts that by the year 2020,
which is only a quarter  century  away,  China  will  be  40
percent bigger than the United States.  Number three will be
Japan,  number  four  will  be  India,  number  five will be
Indonesia.
39.   According to what is  forecast,  six  of  the  world's
biggest  economies will be in East Asia.
40.  In my view, by the laws of  reality,  this will not  be
allowed to happen.  It can only come  to  pass  if  we  join
hands, if we work together, if we synergise our strength and
concert our power -- without ill will towards anyone. It can
only come to pass if -- without confrontation and antagonism
-- we cooperate  together for our common prosperity. In this
process,  the  EAEC  will  have a role to play.   And in the
context of the EAEC, let me again for the record register my
appreciation  for   China's   statesmanship,   support   and
leadership.
41.    As you all know, Malaysia has launched a generational
plan called Vision 2020.  Starting from 1991, our intent  is
to  double our Gross Domestic Product every 10 years so that
by the year 2020, our GDP will be eight times bigger and our
standard of living will  be  four  times  higher.    If  our
thirty-year plan succeeds, our standard of living will match
almost  exactly  the present standard of living found in the
United States   although,  hopefully  with  an  even  better
distribution  of  income  than  is found in American society
today.
42.  So far, we are ahead of schedule.    At  the  rates  of
growth  we have achieved since the launching of Vision 2020,
we will get to  2020,  substantially  before  2020.    I  am
tempted  to say that obviously we cannot sustain better than
eight percent  a  year,  year  after  year  over  an  entire
generation.    Except that history has shown what other East
Asian economies have been able to do.
43.  And through an accident of history, we are blessed with
the means by which we can have an easy and deep access  into
the  economic  heart  of  Indonesia, predicted to become the
fifth largest economy in the world by 2020.
44.  We are blessed with the  means  of  reaching  into  the
economic  heart  of  India,  predicted  to become the fourth
largest economy in the world by 2020.
45.  We are,  through sheer will and effort, well placed  to
reach  into  the  economic heart of Japan, the third largest
economy in the world by 2020.
46.  We are through traditional  ties  and  experience  well
placed  to  reach  the  four  corners  of the great American
economy, which will be the second  largest  economy  in  the
world of 2020.
47.    We  are  also  extremely  well  positioned, supremely
poised, to take every advantage afforded to us by what  will
be by far the biggest economy in the world by 2020: China.
48.    We must not lose judgement.  There is the need always
to retain sobriety.   To retain a proper  balance.    To  be
mature.    At  the  same  time,  let  me issue a call to all
Malaysians to take full advantage of the excellent relations
that have been established between Malaysia and China.   Let
me  issue a call to all Malaysians to take full advantage of
the great China Opportunity.