Why Chinese Muslim Food Entrepreneurs Choose Malaysia Before Indonesia

A smaller market with an easier starting point

Malaysia offers about 20 million Muslim consumers, while Indonesia has more than 229 million. Yet Chinese Muslim food and beverage entrepreneurs expanding overseas consistently choose Malaysia first, drawn by Mandarin business networks, familiar cultural connections and a practical base for entering larger markets later.

As of February 2, 2026, that strategy brings together several pressures: the damage caused by COVID-19 restrictions to restaurants in China, fierce competition during the country's uneven recovery, and the need to understand Southeast Asia's halal requirements before committing to expansion.

Malaysia's population of more than 34 million includes over six million ethnic Chinese. For entrepreneurs from Xinjiang, Ningxia and Gansu, that combination offers something market size alone cannot provide: access to Muslim customers alongside people who can help them run a business in Mandarin.

These operators serve Chinese Islamic cuisine, including Lanzhou beef ramen and noodles pulled by hand. Many speak Mandarin but have limited English proficiency, making the language used for leases, recruitment and company paperwork an immediate commercial concern.

Malaysia Chinese Restaurant Association president Gao Haoyun identified language as the central reason for choosing Malaysia:

Chinese Muslims typically speak Mandarin but are generally less proficient in English. This makes Malaysia a comparatively easy place for them to do business. Although they are Chinese Muslims operating halal restaurants, Malaysia's multicultural environment allows them to handle company registration, secretarial matters and staff recruitment in Mandarin. Therefore, language accessibility is a crucial factor.

The attraction is therefore both demographic and operational. Entrepreneurs can sell halal food while building the staff, supplier relationships and management systems needed for a business outside China. Malaysia becomes a place to prepare for regional expansion, with Indonesia remaining a major destination.

Mandarin makes everyday business easier

Malaysia's ethnic Chinese community maintains strong Mandarin proficiency, giving newcomers access to people who can help with due diligence, lease negotiations, supplies and staff supervision. That reduces the cost and complexity of using professional translators for routine business decisions.

Gao's explanation extends beyond conversations with customers. Company registration, secretarial work and recruitment can be handled through Mandarin speaking networks. Support is also available for government interactions, banking procedures and legal documentation, areas where unfamiliar language can slow an investment before a restaurant opens.

Indonesia presents a different linguistic setting. Historical assimilation policies, including restrictions on Chinese language use under the New Order regime, weakened Mandarin proficiency among its ethnic Chinese population. Bahasa Indonesia is the main business language, while English serves as a secondary language in international commerce.

Mainland entrepreneurs without English skills or established local contacts therefore face more difficult conversations about company formation, taxes and regulatory compliance. Each task also requires an understanding of Indonesian policy and administrative procedures.

Malaysia's advantage is the availability of a connected business community that can help translate commercial intentions into everyday operations. For a restaurant owner, understanding a lease or hiring agreement matters as much as finding customers who like the food.

Building a business before entering Indonesia

Chinese Muslim operators use Malaysia to develop products, train employees and establish management systems before entering Indonesia. This sequence lets them adapt to a new Muslim consumer market while working in a comparatively familiar linguistic and cultural environment.

Malaysian Chinese partners often speak three or four languages, including Bahasa Indonesia. Their ability to move between languages and business cultures can make later expansion smoother, particularly when mainland owners need help with Indonesian bureaucracy and local commercial expectations.

Broader Chinese food and beverage expansion provides examples of this approach. Mixue Ice Cream and Tea, Yili Group's Joyday and Chagee have used strong Malaysian operations as part of their preparation for growth in Indonesia.

Mixue opened more than 1,000 Indonesian stores within two years of entering the country, after testing operations and developing supply chain expertise in Malaysia and Vietnam. The commercial logic is to learn how to deliver consistent products and manage supplies before increasing the number of outlets.

Political confidence shapes the choice

Indonesia's halal economy was valued at approximately $279 billion in 2023, with projections of $807 billion by 2030. Its scale makes it an attractive destination, even when entrepreneurs choose another country for their first overseas operation.

Gao also cited Malaysia's political stability. He pointed to ethnic Chinese representation across government, from ministers to lawmakers, as part of the environment that makes Chinese entrepreneurs comfortable investing there.

Indonesia's history weighs differently on business perceptions. During the May 1998 riots in the final days of President Suharto's regime, widespread looting and targeted attacks disproportionately affected ethnic Chinese communities in Jakarta and other major cities.

Political confidence sits alongside practical considerations such as language and regulation. Entrepreneurs deciding where to open their first foreign restaurant must consider how easily they can work with institutions and how secure they feel making a substantial investment.

Malaysia's appeal also benefits from strong bilateral ties with China. Trade between the two countries reached $203.6 billion in 2024, when China completed its 16th consecutive year as Malaysia's largest trading partner. Established logistics networks and familiar business connections help Chinese companies enter the market.

Two halal systems require different preparation

Halal compliance is central to reaching mainstream customers in both countries. Muslims account for approximately 60 percent of Malaysia's population and 87 percent of Indonesia's. For food businesses, halal requirements affect ingredients, preparation and the handling of supplies.

Malaysia's Department of Islamic Development Malaysia, known as JAKIM, administers a certification system with protocols developed over decades. Its certification is recognized in 47 countries, giving businesses credentials that can support access to other Muslim markets.

JAKIM's process is demanding, with defined procedures connected to international quality benchmarks such as ISO standards. Chinese Muslim entrepreneurs can draw on Mandarin speaking consultants and established Chinese Muslim business networks to understand the requirements and organize their applications.

Indonesia operates under its Halal Product Assurance Law. Certification involves the Badan Penyelenggara Jaminan Produk Halal, or BPJPH, working with the Indonesian Ulema Council, known as MUI, and Halal Inspection Agencies. Coordination within this newer centralized system continues to develop.

Indonesia's Government Regulation No. 42 of 2024 introduced changes that included extended deadlines for micro and small enterprises and simpler applications for foreign products. Businesses still need to navigate the responsibilities of several institutions, creating possible delays.

Malaysia gives entrepreneurs a place to establish halal procedures, supply management and quality controls before tackling those requirements in Indonesia. The practical benefit comes from learning how to organize compliance across a business, rather than treating certification as a single piece of paperwork.

Mixue shows how quickly scrutiny can grow

Mixue's experience illustrates the public attention that can accompany halal compliance. In January 2023, Islamic groups protested in Jakarta over questions about the chain's halal status. MUI subsequently granted certification, but the episode showed how scrutiny could complicate entry into Indonesia.

A Malaysian Mixue outlet faced a different controversy in January 2025 after using rubbish bags labeled "non-Halal" in English. The bags had no contact with food, yet images spread online and prompted a formal apology and an overhaul of procurement procedures.

Both incidents show why operators need to manage public confidence alongside formal certification. Suppliers, packaging and purchasing decisions can become part of the debate about a brand's suitability for Muslim customers.

Entrepreneurs choosing Malaysia see it as a comparatively more forgiving environment in which to develop that understanding before expanding into Indonesia. The Malaysian incident also demonstrates the level of cultural attention required even where language and business networks are familiar.

The main dates behind these concerns and the wider expansion strategy are:

• May 1998: Riots during the final days of Suharto's rule disproportionately affected ethnic Chinese communities in Jakarta and other Indonesian cities.
• January 2023: Islamic groups in Jakarta protested over Mixue's halal status; MUI later granted certification.
• 2024: Indonesia introduced Government Regulation No. 42 of 2024, changing parts of its halal certification framework.
• 2024: Malaysia's trade with China reached $203.6 billion, with China its largest trading partner for a 16th consecutive year.
• January 2025: A Malaysian Mixue outlet apologized over rubbish bags labeled "non-Halal" and changed its purchasing procedures.
• First half of 2025: Malaysia recorded $7 billion in halal exports, representing 16.1 percent of national exports.

Recipes need to travel as carefully as businesses

Indonesian consumers generally prefer richer, sweeter flavors than Malaysian consumers, creating another reason to expand in stages. A product developed for China may need changes to its flavor, aroma or texture before it finds a broad Southeast Asian audience.

Malaysia provides a testing ground shaped by Malay, Chinese and Indian culinary influences. Businesses can gather customer feedback and adjust recipes in a setting with several food traditions, then use that experience when preparing products for Indonesia.

Yili Group's Joyday ice cream brand illustrates this process. After gathering consumer information from initial Malaysian operations, it developed products such as Crunchy Matcha Cheese and spicy chocolate variants for Indonesian tastes.

Yili Group Vice President Dr. Yun Zhanyou identified flavor and texture as priorities for Indonesian consumers, particularly sweet, rich tastes such as fruit and chocolate. Consumer research also points to a stronger preference for sweetness, aromatic qualities and creamy textures in Indonesia than in China.

Malaysian preferences often favor the subtler sweetness of ingredients such as gula Melaka, or palm sugar, and less intense sugar levels. Those differences mean that a recipe successful in Malaysia still needs attention before moving into Indonesia.

The value of Malaysian operations is the opportunity to develop a repeatable process for listening to customers and changing products. Food that succeeds there typically needs less modification for Indonesia than a product exported directly from China.

The pandemic accelerated the search for new markets

COVID-19 restrictions disrupted China's domestic restaurant sector through prolonged lockdowns, the loss of dining inside restaurants and interruptions to supplies. For Muslim food operators in northern and western China, those pressures accelerated plans to earn revenue overseas.

Competition intensified during China's uneven economic recovery, squeezing restaurant margins in major cities. Operators from regions including Xinjiang and Gansu increasingly treated overseas expansion as an immediate survival strategy rather than a distant ambition.

Malaysia's policies welcoming business, its relationship with China and existing logistics connections offered a practical destination. Those advantages helped entrepreneurs move from deciding to expand to organizing the staff, premises and supplies needed to open.

Consumer boycotts also created openings in Malaysia and Indonesia. Movements targeting Western food and beverage brands, including Starbucks and McDonald's, were linked to the Middle East conflict. Chinese Muslim brands presented themselves as neutral alternatives with competitive prices and gained from changes in consumer loyalty.

These forces worked together. Businesses in China wanted to reduce their dependence on the domestic market, while some Southeast Asian customers were reconsidering where to spend. Malaysia offered a place to respond to that demand without immediately taking on all the challenges of Indonesia.

Three urban hubs attract new outlets

Chinese Muslim food and beverage businesses cluster in George Town in Penang, Johor Bahru and the Klang Valley. Each location serves a different commercial purpose, from restaurants serving tourists to dense urban retail operations and preparations for further expansion.

The Klang Valley, which includes Kuala Lumpur and surrounding suburbs, is the most competitive and rapidly growing market. Industry estimates put Malaysia's Chinese food and beverage outlets at between 20,000 and 25,000 nationwide, with roughly 11,000 to 12,000 in the Klang Valley. The region is also described as accounting for approximately 60 percent of the national total.

A large population and strong consumer spending support expansion there. The concentration of restaurants also gives newcomers access to suppliers and service providers already familiar with Chinese food businesses, although it places them in direct competition with many established operators.

George Town draws entrepreneurs seeking tourist customers, particularly visitors from mainland China who want familiar halal cuisine. Johor Bahru serves as a logistics base for businesses considering entry into Singapore or southern Indonesia.

These locations allow entrepreneurs to choose a first market according to their immediate needs. A restaurant focused on visiting Chinese customers has different priorities from a chain preparing to distribute products across several countries.

Low prices put local competitors under pressure

Chinese chains have brought consumers more choice and competitive prices, while placing local businesses under pressure. Well capitalized operators can combine purchasing scale, technology and sophisticated supply management in ways that smaller competitors find difficult to match.

Some Malaysian operators have questioned how Mixue sustains bubble tea priced at RM5 and ice cream at RM2. Their concerns focus on whether very low prices can remain viable as costs increase and more outlets compete for the same customers.

Industry observers point to the operational efficiency of Chinese brands as a source of their competitive strength. Local entrepreneurs nevertheless worry about saturation, especially in areas where the rapid growth of Chinese food and beverage outlets is already visible.

The same density that helps newcomers find suppliers and specialist services can make sales harder to secure. An accessible entry point still requires a workable price, a suitable location and enough returning customers to support rent, wages and ingredients.

Cultural sensitivity reaches beyond food. A Mixue recruitment advertisement expressing a preference for Malay or Chinese applicants drew criticism for excluding members of the Indian community and required formal apologies.

That controversy exposed another responsibility for foreign operators: understanding Malaysia's ethnic diversity in hiring as well as marketing and customer service. Mandarin connections help businesses get started, while their conduct must account for the wider society in which they operate.

Malaysia's ambitions reach beyond Indonesia

Malaysia recorded $7 billion in halal exports in the first half of 2025, representing 16.1 percent of national exports. That trade gives Chinese Muslim entrepreneurs another reason to view their Malaysian businesses as potential regional bases rather than restaurants serving only local demand.

Malaysia is also pushing for an ASEAN common halal logo and closer integration with Gulf Cooperation Council markets. Those ambitions connect its domestic certification infrastructure with efforts to reach Muslim consumers across Southeast Asia and the Middle East.

A common logo remains an initiative being pursued. The attraction for entrepreneurs is the prospect of operating from a country already focused on halal production, certification and trade while developing the business systems needed for expansion.

Indonesia remains central because of its much larger Muslim population and the projected growth of its halal economy. Malaysia's role is to make the first international step more manageable through language access, established networks, product testing and practical experience with certification.

The choice is therefore about sequence. Entrepreneurs can begin where daily operations are easier to organize, learn how their products perform and then take those lessons into a bigger market. Malaysia offers the starting conditions; Indonesia offers the scale many ultimately seek.

At a Glance

• Chinese Muslim food entrepreneurs favor Malaysia as a first overseas base despite Indonesia's Muslim population of more than 229 million.
• Malaysia combines about 20 million Muslim residents with more than six million ethnic Chinese in a population exceeding 34 million.
• Mandarin business networks help with company registration, recruitment, leases, supplies and professional services.
• Entrepreneurs use Malaysian operations to develop products, train staff and organize halal compliance before expanding into Indonesia.
• Malaysia's JAKIM certification is recognized in 47 countries; Indonesia's system involves BPJPH, MUI and Halal Inspection Agencies.
• George Town, Johor Bahru and the Klang Valley are key locations, with the Klang Valley hosting roughly 11,000 to 12,000 Chinese food and beverage outlets.
• Pandemic disruption, competition in China and consumer boycotts of Western brands have helped drive expansion.
• Low prices, halal controversies and recruitment disputes show the commercial and cultural pressures newcomers must manage.
• Malaysia recorded $7 billion in halal exports during the first half of 2025, representing 16.1 percent of national exports.