Impact of Democratization on China’s Investments in Myanmar
China and Myanmar share a long border and a long history of interactions and relationships, not always friendly, especially after the first military coup in 1962. As a matter of fact, Mao’s China provided the anti-military Burmese Communist armed movement with arms, financial support, sanctuary and other military supplies in the late 1960’s when the Ne Win regime was seen as the invisible hand behind violent anti-Chinese riots in the country: the local Chinese were scapegoated as “greedy profiteers” in the midst of rice shortages in the country. The country was beginning to reel from the failures of the military’s “Burmese Way to Socialism” economic policies. General Ne Win’s regime was seen using anti-Chinese racism as a way to re-direct public anger and frustration away from the military’s failures towards local Chinese, including Sino-Burmese interracial communities.
As a brief detour, the Burmese military was originally founded, armed and patronized by Japan’s Fascist/Imperial Military in 1942. After the total defeat of Fascist Japan in Asia, including the Burmese theatre, independent Burma’s military, largely under the leadership of General Ne Win, was re-patronized, trained, armed and advised by UK, the former colonial ruler, and subsequently, by the United States, and Israel. This support for the Burmese military from the Western powers continued towards the end of the Cold War, which was marked by the fall of Berlin Wall in November 1989.
When the Western powers decided to make the post-Ne Win military junta an international pariah on grounds of human rights breaches, particularly in the context of the bloody crackdown of peaceful anti-dictatorship protesters in August and September of 1988, Deng Xiaoping’s China, now categorically less ideological and solely driven by its economic and geo-strategic equations, had stepped in and offered the Burmese pariah military on its southern borders international protection at the Security Council, and new cross-border trade opportunities and military and intelligence training. In fact, China itself became a pariah after the bloody crackdown of Tiananmen Square protests in June 1989.
As a bird of the same feather, China has since become the Burmese military’s most reliable protector and enabler since the early 1990’s. However, after the military regime initiated commercial opening and semi-democratic transition in Myanmar by the ex-General Thein Sein, wearing the civilian attire as “elected President” in 2010, the rate of Western investment also increased exponentially in Myanmar. This Western capital penetration significantly impacted Chinese investments as public pressure for reform began to grow. This has led to a negative impact on China’s economic projects in Myanmar while posing many challenges to the Chinese projects, such as (the Myitsone dam – 3.6 USD billion investment) in terms of actual implementation.
Following the military coup on February 1, 2021, the bilateral relations between China and Myanmar have reemerged as a topic of interest. Myanmar under the military coup regime of Min Aung Hlaing has come to be ostracized by major Western democracies. Various waves of western sanctions (primarily by USA, Canada, UK and EU) were imposed on the military junta as an ostensible response to the domestically widely unpopular coup of 2021.
In sharp contrast, and to the popular dismay of Myanmar public, China had characterized the military coup in Myanmar as a “major cabinet reshuffle or internal affair ” and avoided the term “coup”, amidst international/Western sanctions and condemnations, even from the generally non-interfering members of the Association of Southeast Asian Nations (ASEAN). Moreover, China is expanding its investment projects and is reluctant to agree on a resolution condemning the military despite the unfolding humanitarian crisis in Myanmar, with 1.8 million civilians having been forcibly displaced as the result of the military-sponsored violent repression over the last 2 years. Today 15 million people are facing severe food insecurity” throughout Myanmar. This essay will apply the “hedging to band-wagoning” theory in order to assess where China’s position is headed and why the China-Myanmar military relationship has grown since the military coup. It will also discuss China’s geo-political interests and geo-economic interests in Myanmar.
Unpacking China’s Geo-Strategic Interest in Myanmar: Key Drivers
For China, the geographical location of Myanmar has been a significant factor that has historically driven Beijing’s policy toward its southern neighbour. China’s Myanmar policy is seen to marry the (economic) developmental needs of China’s underdeveloped inner or landlocked provinces with the country’s need to secure access to the Indian Ocean, which Myanmar with its 1,000-mile-long southern and western coastlines and islands in the Andaman Sea offer.
Even before the coup, with its launch of the Belt and Road Initiative, and partnering with Aung San Suu Kyi’s National League for Democracy government, the Chinese state’s investments in Myanmar had quadrupled, thereby increasing its strategic/economic interests in Myanmar. China now has around 34 investment projects in Myanmar, mainly in power or energy sector, transportation, economic cooperation zones, new city development, and commercial agriculture. The total investment amounted to USD 24 billion, while the budgets for the 14 projects remained unknown. The major chunk of these investments has come under the framework of the China-Myanmar Economic Corridor (CMEC). CMEC is one of the signature initiatives of China’s B.R.I., through which Beijing plans to connect its southwestern province of Yunnan with Myanmar’s Indian Ocean Port of Kyaukphyu port. The port would be a major transit hub for oil and gas for which China’s largest energy company, the China National Petroleum Corporation (CNPC), has built a 795 km long pipeline with an estimated cost of USD $2 billion. Through the eyes of China’s economic planners and political leadership, the twin-pipeline in Myanmar is a “sovereign asset”.
China has also invested heavily on other sectors, such as mining, hydropower, and agriculture, with its major State-Owned Enterprises involved in these investments. These investments have drastically increased China’s geo-strategic interest in Myanmar.
Access to Indian Ocean
Access to the Indian Ocean has been one of China’s major strategic ambitions in recent times and has been part of its two-ocean strategy. Although the Pacific has always been China’s core security concern, recent times have seen the growing geopolitical significance of the Indian Ocean to China. The Indian Ocean has a great geo-economic significance for China as 95% of its trade with Asia, Africa, and Europe is conducted through this stretch of water, and 80% of its oil imports transit the Indian Ocean via the Malacca Strait. The heavy reliance on the Malacca Strait with regard to Chinese oil imports led former President Hu Jintao to label it “a major vulnerability”, something that must be mitigated, known as China’s Malacca Dilemma.
The Malacca Dilemma is a Chinese threat perception of any naval blockade of the strategically important strait by the U.S. or its allies. In this strategic scenario, a naval blockade by US-led actors the Chinese economy and other national strategic interests will be severely impacted. In this context, the development of the two deep sea ports with access to the Indian Ocean, namely the port of Gwadar in Pakistan, a long-time Chinese ally, and Kyauk Phyu port in Western Myanmar state of Rakhine, holds great geo-strategic significance for China. The development of the Kyauk Phyu port will now enable China to access the Indian Ocean and protext its economic interests. For China can continue transporting goods and oil up north from the port, thereby reducing dependency on the shipping lanes of the Malacca Strait.
In 2021, China had successfully trailed a cargo run from Myanmar’s Yangon Port to China’s Yunnan Province. Some Chinese analysts argue that Myanmar will provide a bypassing route and strategic grounds to control access to the Malacca Strait. Therefore, Myanmar’s geo-strategic location is seen by Beijing as a key component of China’s broader global strategy to realize its geopolitical ambitions throughout the Indo-Pacific region at large. For that reason, the enhancement of the Sino-Myanmar relations is crucial for Beijing’s leadership.
China’s Position on the Coup in Myanmar – From Hedging to Bandwagoning?
China, being one of the world’s greatest powers in Myanmar’s immediate neighbourhood, the stand Beijing takes does have enormous domestic impact on Myanmar’s political developments. China’s position regarding the coup, in the beginning, had been mixed: the Chinese government appeared to have oscillated between condemning and supporting the military regime. Therefore, we argue that China’s initial reaction to the coup signalled that it was “a hedging approach”: it was keeping its line of political communications open to all parties involved in the emerging armed and non-violence conflicts in the post-coup Myanmar.
Hedging is understood as a phenomenon in which nations distribute their interests between different powers (external actors), so the chance of survivability in times of great power competition increases exponentially. Because of the universal opposition to the coup by Myanmar military, China appeared unsure of the junta’s survival. At least in the early months of the coup. Therefore, the window was kept open by Beijing for major warring parties in conflict.
On one hand, the senior most Chinese official in foreign affairs Wang Yi termed the situation in Myanmar “an internal matter.” Beijing even blocked UN resolutions condemning the military coup and received Myanmar’s foreign minister Wunna Maung Lwin in Beijing in June 2021, 4 months after the unpopular coup. On the other hand, China was also keeping open the window with the ousted NLD party. Officials from the Chinese consulate in Yangon were having phone conversations with NLD members, during which they discussed the situation of Myanmar. The coup regime initially tried to disband the NLD, something about which China had major reservations. The latter wanted the coup regime to keep the NLD as the most popular political party intact.
This clearly shows that despite its long-standing close relationship with the junta, China was keeping a window of communications with the NLD so that it would not be taken off-guard in the (unlikely) event wherein the junta collapsed due to Western pressure or intervention, domestic popular armed resistance or a combination of both. This hedging approach by China in Myanmar involves balancing Beijing’s bets on both the junta and civilian government with the sole purpose of protecting strategic interests in Myanmar, both economic and geo-strategic.
However, one year after the coup, there was a major shift in China’s position. We argue Beijing has shifted from Hedging to Bandwagoning.
The concept of bandwagoning is when a state joins a stronger power to salvage itself from its gains. One year after the military consolidated its power hold in Myanmar, the international community was in disarray, having been overwhelmed with developments in Afghanistan and the Russian invasion of Ukraine. In this context, Europe has become a major centre of geopolitics. The international attention too has shifted – from Myanmar armed resistance and other forms of popular opposition to the coup of 2021 specifically to the war in Ukraine, which has far wider global ramifications than Myanmar’s domestic resistance against the country’s own military.
The post-Russian invasion developments afforded the junta a free hand to operate in Myanmar, without much serious and sustained global scrutiny. In addition, as the result of the new waves of western sanctions, the military junta were desperate for foreign investments, which in turn created a lucrative opportunity for China to further tap into Myanmar’s markets. The unfolding situation, both globally and in Myanmar have created a win- win scenario for both.
China’s position started to change drastically with the Chinese statement that it would support the military government in Myanmar, no matter how the situation changed. According to Human Rights groups China and Russia have to supply military junta with weapons that are being used against its own people, including civilian communities. Beijing is also trying to legitimise junta by inviting it to participate in sub-regional forums. This is clearly an alteration from China’s previous stance regarding the junta government, where it was engaging both parties and trying to keep the windows of communications open. With the new bandwagoning stance, China has now clearly decided to support the junta as its grip over the nation is believed to be strengthening. This renewed embrace of the junta will enable Beijing to protect its economic and geostrategic interests, as well as to secure greater access to Myanmar’s natural resources.
Growing China-Myanmar Relations Post-Coup
After the coup, major foreign counties withdrew their investments from Myanmar due to various sanctions. However, amidst the outflux of major foreign companies and their investments from Myanmar, the junta has claimed that it has attracted $3.8 billion in FDI since the coup two and a half years ago. Two-thirds of the investment was from China. Therefore, the vacuum created by the outflux of investment from Myanmar by other non-Chinese investors has created a new economic opportunity for China.
Since the coup in February 2021, the Burmese junta has approved the Mee Lin Gyaing natural gas project worth $2.5 billion. Various Sino-Myanmar cross-border economic cooperation zones have been established. The Let pa daung Copper Mine is also a good example of post-democratization that faced various hurdles in civil society. However, the military junta has even reassured China that works in the mine will progress and the junta will provide security guarantees to the project from any threats from the armed resistance and any other civil unrests. Therefore, Beijing’s bandwagoning with the junta is already paying China the dividend. With other external powers restricting or curtailing their investment in Myanmar, China has taken advantage of Myanmar’s violent situation where the main warring parties – the junta on one hand, and the pro-NLD resistance networks and a handful of ethnic armed organizations, on the other – are intent on defeating the other side militarily. China’s economic and strategic gains are being made in blatant disregards of Myanmar’s resistance’s – and public’s – calls for China to desist from further enabling Myanmar military.
Soumyodeep Deb & Tual Sawn Khai
Soumyodeep Deb is a PhD Candidate in International Relations at the Department of Government and International Affairs, Lingnan University, Hong Kong. Prior to that, he completed his Masters in International Affairs and Masters in East Asian Studies from Lingnan University and University of Delhi. With intermediate-level proficiency in the Chinese language, his research interests include Chinese Foreign Policy, India China Relations, Geo-Politics of Rising Powers, and Great Power Competition in the Indo-Pacific. He can be reached through Email:
Tual Sawn Khai is a Zomi-Chin ethnic minority from Chin State in western Myanmar. He is currently a PhD Candidate in Sociology and Social Policy at the School of Graduate Studies, Lingnan University, Hong Kong, China. Khai is human rights advocator and researcher. Several of his pre-review academic articles have been published in different journals, as well as some of his human rights advocacy articles appeared in the Bangkok Post, Jakarta Post, and the University World News. His research focuses on interdisciplinary topics, such as human rights, Burmese migrants/refugees in Asia, welfare policies, climate change, and Indian/Chinese geopolitical interests in Myanmar. He can be reached through Email