Host-Site Dynamics and their Impact on China’s Investment in Malaysia: A Fuzzy-Set Qualitative Comparative Analysis

This study examines host-site political and socio-economic conditions under which China-funded projects in Malaysia shape local acceptance and avoid contestation. Employing a fuzzy-set qualitative comparative analysis (fsQCA) of 35 China-funded projects and 60 in-depth interviews, this study identifies multiple interrelated causal pathways to locally accepted investment. Two conditions consistently emerge as necessary to minimize contestation: 1) strong political alignment between federal and state governments, and 2) the deep integration of the local workforce. Notably, the absence of bumiputra equity or employment also emerges as a necessary condition, challenging prevailing assumptions on the role of Malaysia’s affirmative action policies. This study finds that, rather than relying on mandated inclusion, firms that engage with bumiputra communities through externally oriented corporate social responsibility (CSR) initiatives are more likely to achieve sustained social acceptance. Furthermore, a combination of substantive technology spillovers and proactive community-based engagement significantly enhances local receptivity. Together, these findings offer valuable insights for policymakers, international investors, and scholars concerned with the governance of FDI in politically plural and institutionally complex settings. The study highlights the critical need for adaptive localization strategies that align commercial goals with the social and political fabric of host countries, both in Malaysia and across the broader Asia-Pacific region.