World Economy

Missing flight won’t impact China ties: Malaysia trade minister

Leslie Shaffer | Writer for
Malaysia trade minister: China trade is stable

Malaysia's exports to China may have slipped in March, but the countries' trade ties won't face a long-term hit from strains over the missing Malaysia Airlines flight, Malaysia's trade minister told CNBC.

"It's been tough in the past couple of months," Mustapa Mohamed, Malaysia's minister for international trade and industry, told CNBC.

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Shortly after takeoff from Kuala Lumpur to Beijing on March 8, Flight MH370 disappeared with 239 passengers and crew, about half of whom were Chinese. The search for the plane, which is suspected to have gone down in the southern Indian Ocean, continues. Malaysia's handling of the disappearance has faced sharp criticism and families of passengers have held several protests in China.

But Mustapa added, "You've got to see it at two levels. One is the official level. Another would be the people-to-people [level]."

Wang Zhao | Getty Images

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While tourism from China has slipped over the past two months, "for trade, people look at the long term and trade continues to grow between Malaysia and China," Mustapa said.

Citigroup expects Malaysia's tourist arrivals will only edge up around 2 percent this year, despite the Visit Malaysia Year promotional efforts to boost tourism.

In March, Malaysia's exports to China fell 1.8 percent from the year-earlier month, but over the first quarter, exports to China actually rose 8 percent from a year earlier, even as economic growth on the mainland decelerated, he said.

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"That's the long-term picture," he said. "The March numbers are nothing unusual and we believe going forward it's going to be stable." He noted that Malaysia's Prime Minister Najib Razak will be visiting China at the end of the month.

In addition, Mustapa noted that while China is Malaysia's largest trading partner, it accounts for only about 13 percent of his country's total trade.

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"The other 87 percent comes from many parts of the world," he noted, with Southeast Asia accounting for around 26-27 percent, offering a growth cushion.

"What has happened in the first three months is well within our own expectations," he said, noting last year's total trade rose 4.7 percent. He expects total trade will rise between 5-7 percent this year, citing signs of recovery in Europe and the U.S.

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Analysts are relatively sanguine on Malaysia's exports, even though March's data came in below some expectations.

Barclays noted March's exports rose 8.4 percent from a year earlier, compared with the bank's expectation for 11.3 percent growth. But it added, "Export growth has turned more broad-based," with higher exports of manufactured goods, palm oil, refined petroleum products and chemical products.

"We expect exports to remain supportive of overall activity in Malaysia. Meanwhile, domestic demand is expected to remain resilient," Barclays said.

—By CNBC.Com's Leslie Shaffer; Follow her on Twitter