Businesses in various sectors in Malaysia are feeling the force of an aggressive commercial “storm.” Enterprises, large and small from China, are pouring into the country, bringing new products, services, and fierce competition.
In particular, they have imported the relentless culture of hyper-competition (“neijuan”) from China, forcing local industries to feel the full impact of this competitive storm.
Consumers generally view the influx as a positive development—it offers wider variety, drives down prices through competition and pushes local operators to improve their offerings and customer service.
Local business owners, however, see an unlevel playing field. They point out that many foreign operators enter and conduct business on tourist visas without making long-term capital investments or setting up physical store infrastructure.
In contrast, local operators face strict licensing requirements, statutory employee contributions (such as EPF), local tax obligations, and heavy administrative overhead.
How should Malaysian businesses navigate this tide?
Will they be crushed by the competition, forced to adopt hyper-competitive practices themselves, or ultimately drive themselves out of business in a race to the bottom?
Some operators take a more constructive view, arguing that rather than complaining, local businesses should leverage this momentum to reform, upgrade, and rely on core strengths to face the challenge head-on.
In this special “storm” series, Sin Chew Daily examines the dining sector—the most widely discussed arena of this commercial wave—to analyse the shift in Malaysia’s food and beverage (F&B) ecosystem: Is it an existential crisis, or a golden business opportunity?
Malaysian palates are subtly transforming. Diners who once shied away from the tongue-numbing heat of Sichuan peppercorns have fallen in love with málà hotpots, spicy diced chicken, Chinese skewers, and poached fish—dishes that now dominate certain streets, shopping malls and night markets nationwide.
While some fear that Malaysian eateries will be squeezed out, industry leaders from both the local scene and the Chinese F&B community offer nuanced perspectives on the road ahead.
From under 100 to over 22,000: An explosive surge
In 2007, Malaysia was home to fewer than 100 Chinese F&B outlets. By 2020, that number had grown to roughly 3,800. Although over 1,000 outlets shuttered during the two years of the COVID-19 pandemic, China-based dining establishments expanded 10-fold starting in 2022.
Today, the Malaysian market boasts more than 22,000 China-based eateries.
Gao Hao Yun, president of the Malaysia-China Restaurant Industry Association, shared these startling statistics with Sin Chew Daily. The figure encompasses Chinese restaurants, milk tea chains, and more than 1,800 Asian supermarkets.
However, Gao made a point to clarify: “We are not here to land an invasion or surround the local market. We are conducting legitimate business in Malaysia under the principles of fair competition.”
He noted that the wave of Chinese F&B establishments over the past few years has not only boosted tourism but also invigorated the broader Malaysian economy. It has stimulated interior renovation, raw material supply chains, food exports, commercial shoplot rentals and wage growth. The sector currently employs over 50,000 people in Malaysia.
90% of franchisees are Malaysians
Addressing the common perception that the operators from China are flooding the market to squeeze locals, Gao—who has lived in Malaysia for 19 years and operated in the F&B industry for 15—clarified that most brands rely on local partners.
“Many Chinese F&B brands simply export their brand IP, recipes, and management technology. In reality, 80% to 90% of the franchisees of these Chinese chain outlets are Malaysians,” Gao revealed, adding that fully Chinese-owned outlets represent only 15% of the market.
Joint ventures: The key to long-term sustainability
As the initial craze for chain franchises matures, many Chinese F&B operators are shifting toward joint ventures with local Malaysian partners to create mutually beneficial business models.
Gao explained that foreign investors opening F&B businesses in Malaysia must satisfy local ownership requirements by having a designated proportion of Malaysian shareholders and directors. Consequently, joint ventures represent the most practical vehicle for long-term operational success.
Exiting Singapore for Malaysia
Singapore was initially the primary overseas launchpad for Chinese F&B brands entering Southeast Asia. However, sky-high rents, steep labour costs and space constraints limited growth opportunities, prompting a collective shift toward Malaysia over the past two to three years.
“The primary reason is that Malaysian Chinese already appreciate Chinese cuisine. Combined with cultural diversity, strong bilateral relations between Malaysia and China, political stability and a large Chinese-speaking population, there are virtually no language barriers,” Gao noted.
Malaysia as a Southeast Asian testing ground
Another key advantage lies in operational sophistication. While local Malaysian Chinese cuisine emphasises traditional heritage passed down through generations, China’s F&B industry has evolved into a highly systemised commercial machine featuring chain operations, brand building and integrated supply chain management.
Gao added that Chinese F&B operators view Malaysia as a crucial proving ground. Success achieved in Malaysia can be leveraged to accelerate expansion into other Southeast Asian nations.
“In business, there is no such thing as ‘stealing’ a market—it is all fair competition. To those who claim they are being surrounded, I would say it is because you have remained static. In the face of strong market pressures, I hope local operators can find their path, adjust their operations and board this express train with us,” Gao said.
He also urged the Malaysian government to pay closer attention to the development of the F&B sector and SMEs, foster a healthy business environment and help dispel local misconceptions regarding Chinese operators.
Local association: “Our local flavour and diversity are unbeatable”
Facing the heavy influx of China-based restaurants and dining outlets, Chong Kam Fai, secretary-general of the Pan Malaysia Koo Soo Restaurants and Chefs Association, offers reassurance to local Chinese restaurant operators.
He emphasises that Malaysia’s greatest competitive edge lies in its unique local flavours and culinary diversity.
Even if Chinese restaurants engage in price wars, local operators do not need to follow suit; by holding onto their “two trump cards”—distinctive local taste and high-quality service—they can successfully navigate the competition, he said.
Chong said that hyper-competition in the F&B sector is a global trend affecting markets worldwide, not just Malaysia.
In an open market, he argues, there is no question of local eateries being “surrounded” or “invaded.”
Rather than pointing fingers, it is more accurate to say that Chinese restaurants have created more competition within specific market niches.
Greater impact on small and medium-sized outlets
Speaking to Sin Chew Daily, Chong acknowledged that the large-scale entry of Chinese dining brands has a more pronounced impact on small and medium-sized local eateries—particularly fast-casual outlets, single-dish stalls, and quick-service joints.
Conversely, large banqueting halls and traditional wedding venues remain largely unaffected, as Chinese brands have yet to enter the local wedding and longevity banquet markets, operating in an entirely different domain.
“This is an open market. We encourage new dishes, cross-cultural exchanges, and mutual learning. Located at the heart of Southeast Asia, Malaysia boasts a rich culinary heritage with highly adaptable recipes. That remains our core competitive advantage,” he said.
Acknowledging the systemisation gap
Chong candidly admitted that local Chinese restaurants lag behind in systemised management. Chinese F&B brands feature mature management systems and standardised kitchen workflows that ensure consistent operations regardless of staff turnover. To bridge this gap, the association has sent local chefs to China to study modern operational methods.
Local establishments can modernise their management while retaining their signature culinary identities, he said.
Consumers always return to local comfort foods
Chong observed that while the surge in Chinese restaurants offers consumers more variety, local dining habits have not fundamentally altered. While novel flavours offer an exciting change of pace, everyday dining preferences return to local comfort foods.
“Malaysian Chinese are true food lovers who appreciate a wide spectrum of flavours—sweet, sour, bitter, and spicy. Local Chinese cuisine has blended with indigenous culture to create a flavour profile that is uniquely Malaysian,” he said.
Price wars risk compromising quality and service
Chong strongly cautions against engaging in price wars, warning that competing purely on price leads to a vicious cycle. To preserve profit margins, businesses cut corners on ingredients, which ultimately degrades food quality, service standards, and standard of the industry.
“Price wars harm everyone. F&B competition should always return to food quality, service, and unique character—not just race to the bottom on price,” Chong said.
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