Myanmar’s relations with the People’s Republic of China (PRC) have seen great ups and downs since the two countries established diplomatic relations in 1950. Myanmar was the first non-socialist country to recognise the PRC, a move it viewed as necessary for its own security. After an initial period of aloofness due to ideological differences, the bilateral relationship warmed up after 1954 as Beijing sought friendly neighbours against the US encirclement in the context of the Cold War. The next decade or so was a honeymoon period for the two countries. China settled the boundary disputes with Myanmar in 1960–61, the first such settlement among China’s neighbours. It was at that time that the term ‘pauk-phaw’ (literally, ‘fraternal’ in Burmese)—which to this day remains common in diplomatic rhetoric—started to be used to describe the special relationship.
The relationship took a heavy blow in 1967, when anti-Chinese riots broke out in Rangoon (Yangon) in response partly to the perceived spread of China’s Cultural Revolution overseas. At that time, China also moved away from its earlier constrained policy toward the Burma Communist Party (BCP) and began to support it openly, further aggravating the relations with the Ne Win military government that the BCP sought to overthrow. The BCP continued to be a thorny issue between the two countries even though they re-normalised ties in 1971. Moreover, the dramatic geopolitical shifts in the 1970s following the Sino–US rapprochement meant that Myanmar’s buffering role was no longer as important to China. Consequently, the country was sidelined in China’s diplomacy.
After China started the economic reforms in 1978, economic cooperation gradually picked up again. Myanmar agreed to open up border trade with China in 1988, right before the uprising that brought down Ne Win’s government and ended its experiment with a ‘Burmese Way to Socialism’. As both countries became targets of Western sanctions following their respective bloody crackdowns on pro-democratic movements—Myanmar’s in August 1988 and China’s in June 1989—they were drawn even closer together. Concurrently, China also cut support for the withering BCP, causing the latter’s final collapse in 1989 and thus shelving this long-standing issue between the two countries.
In the following decades, China gradually became one of the most important economic partners of Myanmar, as the State Peace and Development Council military regime installed in 1988 became increasingly isolated internationally due to its human rights abuses. When Western sanctions began to be lifted following Myanmar’s transition to semi-civilian rule in 2011, foreign investors showed great interest in Myanmar’s potential. Some Chinese investment projects were thwarted as Myanmar was expecting a rebalancing in terms of its relations with China and the rest of the world. However, the Rohingya crisis that hit international headlines in 2017 pushed Myanmar back again to the receiving end of Western criticisms, and the anticipated influx of Western investment dissipated. China, meanwhile, has provided diplomatic cover for the Myanmar authorities in international forums, and China’s importance for Myanmar’s economy has once again heightened.
In February 2021, Myanmar’s military ousted the elected government, effectively ending the country’s nearly decade-long experiment with democracy. This came after the military claimed fraud in the November 2020 election, in which Aung San Suu Kyi’s National League for Democracy (NLD) enjoyed a landslide victory. Leading figures in the NLD leadership were subsequently arrested and charged with a range of offences, with many going into hiding and setting up the Committee for Representing Pyidaungsu Hluttaw, a government in exile representing NLD lawmakers deposed by the coup. According to multiple sources, hundreds have been killed by security forces since, with many more injured or detained and held incommunicado.
The general public of Myanmar views the Chinese government’s role with suspicion, believing it is assisting the junta and shielding it from international pressure. China has denied offering direct support to the regime, and many rumours of Chinese involvement after the coup lack corroborating evidence, but tepid Chinese statements since the coup and failure to condemn the military violence have only served to further inflame local resentment. Meanwhile, a notorious lobbyist hired by the junta has claimed that the generals would seek to distance itself from China. On 14 March, individuals whose identity remains unknown vandalised more than 30 factories operated by Chinese privately-owned enterprises in Hlaing Tharyar, the country’s largest industrial zone, in Yangon, burning several to the ground.
The fates of the Chinese projects in Myanmar—carried out by variegated players ranging from state-owned enterprises, private firms, to civil society organisations—will hinge on the evolution of the situation of Myanmar. Hong Kong media reported that China’s State-owned Assets Supervision and Administration Commission (SASAC), the agency in charge of the country’s state-owned enterprises (SOEs), had ordered SOEs active in Myanmar to repatriate all non-essential staff. This was denied by China’s nationalist press, but various media reports indicate that Chinese businesspeople have shut down operations and are considering their futures in Myanmar. The country has been hit by nationwide strikes, including at the Letpadaung copper mine, which is the largest copper mine in the country and exports to China (for more details, see the Letpadaung Copper mine profile). Recent media reports have indicated that since the coup, exports of crucial metals including rare earths, tin and copper have dropped significantly, raising prices of these commodities in China. With protests and violence gripping the nation, armed conflicts in some states in northern and eastern Myanmar have also escalated.
When State Counsellor Aung San Suu Kyi, Myanmar’s then de facto leader, attended the first Belt and Road Forum in Beijing in May 2017, Myanmar signed an MoU to cooperate with China regarding the BRI. The move surprised many who did not expect Aung San Suu Kyi to fall back onto the foreign policy position of the military government vis-à -vis China. In November 2017, Chinese foreign minister Wang Yi proposed in his meeting with Aung San Suu Kyi that both countries jointly build a China-Myanmar Economic Corridor (CMEC) under the umbrella of the BRI, with the official MOU signed in September 2018. The envisaged Y-shaped corridor stretches from Yunnan province to Mandalay and then to Yangon New City and the Kyaukpyu Deep Sea Port and SEZ. To implement the CMEC, both sides have formed working groups to collaborate in twelve priority areas that include development planning, transport, energy, borderland economic cooperation, tourism, etc. Aung San Suu Kyi also personally chairs the Steering Committee for the Implementation of BRI. Actual progress has been slow, but the visit of Chinese president Xi Jinping to Myanmar in January 2020—the first visit for a Chinese president in nearly two decades—provided additional political momentum, with 33 more agreements for bilateral cooperation signed on that occasion.
Trade: China is Myanmar’s largest trading partner. Between 2011 and 2019, the share of Myanmar’s bilateral trade with China in its total trade averaged 32.5 percent. Around half of the formal trade flows through Myanmar’s largest border station Muse, in the northern Shan State, which is separated by a river from Ruili, Yunnan province. Myanmar’s main imports include complete equipment, electromechanical products, textiles, motorcycle accessories, and chemical products, while exports are mainly agricultural products and minerals. Chinese construction companies are also active in Myanmar. According to China’s Ministry of Commerce, over 50 Chinese companies, including some leading state-owned enterprises, provide EPC (Engineering, Procurement, and Construction) services in Myanmar in recent years. Data from China’s Ministry of Commerce show that between 2010 and 2018, Chinese companies completed construction contracts totaling 13.65 billion USD.
Investment: According to Myanmar’s Directorate of Investment and Corporate Administration (DICA), from 1988 to 2018 China was the second largest contributor to Myanmar’s FDI stock after Singapore. The stock of FDI from China during the period amounted to 6.9 billion USD. FDI from China slowed down in recent years, however, and China slipped to the seventh position in 2018 in terms of net FDI inflow. According to the Chinese Ministry of Commerce, Chinese direct investment mainly flows into oil and gas exploration and pipelines, electricity generation, mining resource development, and garment manufacture. Apart from officially-registered investment, small and medium-sized informal Chinese businesses also exist in sectors including small-scale mining, agriculture, and tourism. Such investment largely falls in a legal grey zone.
Aid: Though official data is not available, sporadic reports and anecdotal evidence suggest that China is active in providing development assistance to Myanmar. The Mohinga Aid Information Management System, managed by the Myanmar government, registers 15 projects totaling 68.3 million USD committed by the government of China since January 2011. However, the system is based on self-reporting by development partners, and the figure is likely incomplete. The difficulty with getting a complete picture of Chinese aid is also because aid has been provided by various entities from China—ranging from central, provincial, and local governments to NGOs. An unpublished preliminary research by the Chinese Academy of International Trade and Economic Cooperation shows that at least 342 Chinese-funded development cooperation projects in Myanmar were announced between 2014 and October 2019. The leading sectors of these programmes were education, government and civil society, and health.
Land: The image of Chinese investment in Myanmar has suffered from the poor management of land acquisition and livelihood compensation in some high-profile projects, such as the Myanmar–China Oil and Gas Pipelines, the Letpadaung Copper Mine, and the now suspended Myitsone Dam. For the acquisition of land, Chinese corporations had to rely on their local partners, often companies with ties to the military, whose lack of care in dealing with disputes over land ownership caused by vague property rights, coupled with corruption in the handling of compensations, led to recurrent conflicts. This is not specific to the Chinese investments but almost unavoidable in a country with weak governance, although the scale of the Chinese projects makes it more salient.
Conflicts: Many of the areas rich in natural resources where Chinese investment concentrates are near Myanmar’s borders with China and Thailand and are de facto governed by various local militias. Investment in such territories, if not carefully implemented, risks exacerbating existing conflicts and being undermined by local clashes. For instance, the suspended Myitsone Dam is located in an area that has been controlled by the Kachin Independence Organisation (KIO) for decades, but the Chinese company failed to consult the KIO and the local population in the negotiation of the project. The clash over the dam project is believed to have contributed to the collapse of the 17-year old ceasefire between the Kachin Independence Army (the KIO’s armed branch) and the Myanmar military in 2011. The Kyaukpyu Deep Sea Port and SEZ projects have also been repeatedly been the targets of complaints by Rakhine politicians because of their distrusts towards the Burman who lead the national government. The projects have been negotiated between the Chinese corporation and the Burman-led Myanmar central government, while local administrators complained that they received little information.
The perceived ties China has with the local militias, whose existence continues to threaten Myanmar’s statehood, have exacerbated the worries about China’s outsized economic influence in Myanmar. Some of the local militias residing on the borders with China have thrived financially from cross-border economic activities, including illicit trade. Their entanglement with local interests in Yunnan, the bordering province in China, have complicated the bilateral relationship sometimes beyond the control of the Chinese and Myanmar central governments. Some local militias are ethnic Chinese—for instance, the Myanmar National Democratic Alliance Army (aka Kokang Army) and the United Wa State Army—and can be traced back to the BCP, which makes their ties with China even more sensitive. While China has played some constructive role in the peace talks between the Myanmar government and the local militias, there is widespread suspicion that the government of China could leverage its influence over the local militias to pressure the Myanmar government into agreeing to China’s demands. Such distrust has tainted the nominally close diplomatic relations and held back economic cooperation.
Shadow economy: An emerging area of concern is what appears to be Chinese capital that has been flowing into Shwe Kokko village and the city of Myawaddy in Myanmar’s Karen State, on the border with Thailand, since around 2017. According to investigations by a local NGO, large-scale construction started with an influx of Chinese workers, while local villagers were kept in the dark about the true nature of the project. It only became clear later that the construction was to build casinos, hotels, and condos housing online gambling companies operated by Chinese companies. Some of them had started operation in 2019 even though the Myanmar government had yet to licence any casino. These unauthorised ‘special economic zone’ projects were operated in partnerships with local, mutually hostile armed groups, whose involvement has made it very difficult for local residents to speak out. Journalists were attacked when they tried to cover the project. A report released in April 2020 by the United States Institute of Peace asserts that ‘157 square kilometers of Burmese territory have fallen under control of Chinese enterprises tied to gambling, money laundering, cryptocurrency, and even criminal networks.’ A long-time observer of Chinese activities in Southeast Asia has pointed out that these investments involve overseas ethnic Chinese through companies registered outside mainland China and therefore fall out of China’s jurisdiction. However, there is evidence that certain Chinese state-owned companies have been involved in the projects as construction contractors. The surge of gambling investment into Karen State seems to be partially linked to a crackdown on online gambling that took place in Cambodia in August 2019, which pushed some of those businesses used to be active in Cambodia to seek opportunities elsewhere.
Debt sustainability: While the International Monetary Fund’s latest analysis assesses Myanmar’s risk of external debt distress as low, Myanmar politicians and civil society members are wary of so-called ‘debt traps’, a concept that has become popular in the country since mid-2018 in relation to the pending Kyaukpyu SEZ project, as well as other economic cooperation projects involving China. Aware of the public concern, Myanmar officials are carefully evaluating infrastructure projects to boost the economy while ensuring debt sustainability. China is one of the largest bilateral creditors of Myanmar’s public and publicly guaranteed external debt, along with Japan.
Reuters, Associated Press, BBC, Channel News Asia, and The Straits Times have correspondents in Myanmar and report from the nation.
Local media outlets in English include the independent The Myanmar Times (operations temporarily suspended), The Irrawaddy, Frontier Myanmar, Myanmar Now, as well as the government-owned Global New Light of Myanmar.
Books, Reports, and Scholarly Articles:
25 April 2021: In the discussion of unrest in Hlaing Tharyar, we replaced ‘rioters’ with ‘individuals’ to avoid confusion as the term ‘rioters’ is being used by the military junta to refer to anti-coup protesters.
Cover Photo: Shwedagon at night. Credit (CC): @deischi.