China’s Burma Strategy: Elections, Ethnic Politics and Economics

 A Burmese Perspective | September 24, 2010 | Friday

Burma s 2010 elections present challenges and opportunities for China’s relationship with its south-western neighbors. Despite widespread international opinion that elections will be neither free nor fair, China is likely to accept any poll result that does not involve major instability. Beijing was caught off-guard by the Myanmar military offensive into Kokang in August 2009 that sent more than 30,000 refugees into Yunnan province. 

Since then it has used pressure and mediation to push Naypyidaw and the ethnic groups that live close to China border to the negotiating table. Beyond border stability, Beijing feels its interests in Burma are being challenged by a changing bilateral balance of power due to the Obama administration’s engagement policy and China’s increasing energy stakes in the country. Beijing is seeking to consolidate political and economic ties by stepping up visits from top leaders, investment, loans and trade. But China faces limits to its influence, including growing popular opposition to the exploitation of Myanmar’s natural resources by Chinese firms, and divergent interests and policy implementation between Beijing and local governments in Yunnan The Kokang conflict and the rise in tensions along the border have prompted Beijing to increasingly view Burma ethnic groups as a liability rather than strategic leverage. Naypyidaw unsuccessful attempt to convert the main ceasefire groups into border guard forces under central military command raised worries for Beijing that the two sides would enter into conflict. China Burma’s diplomacy has concentrated on pressing both the main border groups and Naypyidaw to negotiate. While most ethnic groups appreciate Beijing’s role in pressuring the Junta not to launch military offensives, some also believe that China’s support is provisional and driven by its own economic and security interests.

The upcoming 7 November elections are Naypyidaw’s foremost priority. With the aim to institutionalize the army political role, the regime launched the seven-step roadmap to “disciplined democracy” in August 2003.The elections for national and regional parliaments are the fifth step in this plan. China sees neither the roadmap nor the national elections as a challenge to its interests. Rather, Beijing hopes they will serve its strategic and economic interests by producing a government perceived both domestically and internationally as more legitimate. Two other factors impact Beijing’s calculations. China sees Burma as having an increasingly important role in its energy security. China is building major oil and gas pipelines to tap Burma rich gas reserves and shorten the transport time of its crude imports from the Middle East and Africa. Chinese companies are expanding rapidly into Burma’s hydropower sector to meet Chinese demand. Another factor impacting Beijings strategy towards Burma is the U.S. administration’s engagement policy, which Beijing sees as a potential challenge to its influence in Burma and part of U.S. strategic encirclement of China.

Beijing is increasing its political and economic presence to solidify its position in Burma. Three members of the Politburo Standing Committee have visited Myanmar since March 2009 – in contrast to the absence of any such visits the previous eight years – boosting commercial ties by signing major hydro-power, mining and construction deals. In practice China is already Burma’s top provider of foreign direct investment and through recent economic agreements is seeking to extend its lead.

Beijing and Kunming

Yet China faces dual hurdles in achieving its political and economic goals in Myanmar. Internally Beijing and local Yunnan governments have differing perceptions of and approaches to border management and the ethnic groups. Beijing prioritises border stability and is willing to sacrifice certain local commercial interests, while Yunnan values border trade and profits from its special relationships with ethnic groups. In Burma, some Chinese companies resource extraction activities are fostering strong popular resentment because of their lack of transparency and unequal benefit distribution, as well as environmental damage and forced displacement of communities. Many believe such resentment was behind the April 2010 bombing of the Myitsone (ျမစ္ဆံု) hydropower project. Activists see some large-scale investment projects in ceasefire areas as China playing into Naypyidaws strategy to gain control over ethnic group territories, especially in resource-rich Kachin State. This briefing is based on interviews conducted on both sides of the China-Myanmar border, including Yunnan province, Kachin State and Shan State, as well as in Beijing, Kunming, Yangon, Chiang Mai, Bangkok, New York and Washington DC. Crisis Group spoke to a wide range of individuals, including: Chinese experts and officials, ethnic group representatives, members of Burmese civil society, and local and international NGOs. Most interviewees asked to remain anonymous, due to the sensitive nature of the subject.

China and Burma are bound by geography, economics and politics in a dependent but asymmetrical relationship. Burmar is the weaker partner. Its powerful neighbour protects it in the UN Security Council, neutralises attempts to isolate it internationally and bolsters its economy with trade and investment. While China sees problems with the status quo, its preferred solution to the long-term standoff between Naypyidaw and many of the countrys ethnic groups is gradual policy adjustment by a strong central government, not federalism or liberal democracy and certainly not regime change. Its priority is maintaining stability and protecting economic and strategic interests in the country above any democratic or political reforms.

Disagreement between Beijing and Kunming due to divergent interests and priorities in Myanmar is not new,but the 2009 Kokang incident increased its intensity.1When Kunming did not immediately warn Beijing about the attacks in Kokang, Beijing lost trust in Yunnans ability to report timely, accurate information about local developments to the centre. Beijing started to rely more heavily on its own intelligence for information and assessments. By dispatching its own officials, Beijing has also stepped up its efforts to engage directly with the border ethnic groups. Before the Tatmadaw attack the Kokang, ceasefire groups mostly interacted with officials from the Yunnan provincial government’s foreign affairs department has now changed. Several ceasefire groups also observed that Kunming rarely paints Beijing an accurate picture about border politics and stability since Yunnan benefits from the instability and worries about the economic consequences of Beijing asserting more direct control over border management.

Border management is another area of disagreement between Beijing and Kunming. While Beijing worries about border security, provincial leaders desperate for economic development seek to maintain and expand opportunities for trade.0 Given Beijing belief that security interests may trump shorter-term commercial interests, it ordered the border closed during the Kokang conflict. When it was reopened it adopted a more cautious approach, 143 suspending plans to establish new border posts and deploying an additional 5,000 PLA troops.145 Justifying the decision to close the border, a visiting senior Beijing official commented that the cross border trade with Burma constituted a negligible part of overall foreign trade. A local official responded hat while it might be slight for the nation as a whole, “it is our livelihood for Yunnan”.1 Border trade with Burma makes up more than three quarters of Yunnan total border trade and 12.2 per cent of its annual foreign trade.148 “Business is booming along the border and a lot of people have a lot to lose by closing it Burma is Yunnan largest export market, second-largest import market and access point to South East Asian markets. Tensions have also emerged when Beijing is called to account for illegal business activities by Chinese companies and officials. Such operations are often conducted without Beijing’s knowledge and without Naypyidaw approval as required by law.151 despite a ban on illegal logging and agreements to strengthen bilateral collaboration to address it, illegal imports to China continue.

A Yunnan government official publicly acknowledged that illegal logging has led to several serious incidents this year. While illegal mining has also been banned, local companies continue extraction in areas controlled by ceasefire groups in violation of both countries laws. Ethnic groups profit through taxation, bribery and management fees. Complaints by the Myanmar government cause diplomatic headaches for Beijing. Despite the two countries strong rhetoric about cracking down on illegal logging and mining, both practices continue and cause dissension between Kunming and Beijing. Yunnan’s single-minded pursuit of its economic interests also brings it into conflict with Beijing’s diplomatic protocol. The capital believes that provinces should report to the centre and obey its directives on border management, trade, and other issues regardless of local interests. Yunnan’s relationships with ceasefire groups and its business behaviors have prompted Naypyidaw to complain to the Chinese embassy, angering the Ministry of Foreign Affairs. Yunnan ignores diplomatic protocol by calling for Naypyidaw to open land ports to jade trade and for more investment to develop the border area.159 It has also expressed the desire to establish direct communication with Burma

Beijing’s Concern

Beijing’s top concern in Burma is the security of its 2,192km shared border. Unrest on the border could disrupt China domestic stability and regional economic development. The August 2009 Kokang conflict created the largest refugee crisis on China border since the Sino- Vietnam War.7 Beijing was caught off-guard by Naypyidaw attack on the ethnically Chinese troops of the Myanmar National Democratic Alliance Army (MNDAA Shan State-North, Special Region-1) just a few kilometres away in the Kokang region of northern Shan State. The assault was the first to break the ceasefire agreements in existence since 1989.9 Beijing was forced to deploy People Liberation Army (PLA) units to support Peoples Armed Police forces to stabilize the border region.10 The Kokang conflict has dramatically changed China view of the ethnic groups. Prior to the crisis, Beijing viewed them mostly as buffers that provided strategic leverage over Naypyidaw. It was able to maintain the status quo by using its influence with both sides. But the Kokang conflict made China realize it had underestimated Naypyidaws willingness to use force against the ethnic groups and to seize control of territory. Beijing began to increasingly perceive the ethnic groups as the last source of leverage in their long-running battle for autonomy with the military government. Fearing that Naypyidaw may launch another offensive similar to that in Kokang18 the major ceasefire groups along the border have been building up their forces. In spring 2010, the Kachin Independence Army (KIA), the military wing of the KIO, ordered soldiers to prepare for military mobilization and guerrilla warfare. The group positioned its forces defensively and increased recruiting. Many in the KIO civilian administration were ordered back to the jungle. Soldiers in UWSA controlled areas and Special Region-4 also stepped up training and dug trenches in territory close to government held areas. Families of SPDC officials in the area were told to return to the capital while government troop levels increased near ceasefire group-controlled territory.

China only became concerned about the border guard forces proposal after the Kokang conflict.26 initially; Beijing welcomed it, particularly the possibility of having a negotiated resolution to the ethnic group issue. It endorsed related negotiations and opposed any agreement unilaterally dictated by the military government. While Beijing did not press the groups to accept the plan, it urged them to negotiate about its details; including the ceasefire forces status, size and relations with the new government.29 Beijing worried that forceful disarmament could lead to conflict that might threaten the elections and border stability.

The Chinese Pressure

Beijing has consistently called for “national reconciliation but these calls became urgent afterthe Kokang conflict.30 Top Chinese leaders made border stability a priority during high-level visits. During Vice-President Xi Jinpings trip in December 2009, Senior General Than Shwe offered an almost apologetic reassurance that “Burma deeply understands and knows that maintaining peace and stability on the border is extremely important to both countries. Six months later, Premier Wen Jiabao visited Naypyidaw and signed an agreement “on protecting the peace and stability of the Burma border regions”. During Than Shwe visit to Beijing from 7-11 September 2010, the two countries leaders emphasized the importance of cooperation to “maintain the peace and stability of the border regions.

In January 2010, two events in towns close to the border compelled Beijing to take a hands-on approach: the assassination of NDAA leader Min Ein and the discovery of a bomb at a UWSA office in Muse. Naypyidaws involvement was widely suspected, leading the Chinese Ministry of State Security to send multiple officials to the border areas to assess tensions. The Chinese ambassador also reportedly met Myanmars information minister to emphasize Beijings concerns. The prospect of imminent conflict also prompted China to step in to mediate privately between the two sides and to intensify engagement with ethnic leaders and groups that operate near the border, including the Wa, Kachin, the NDAA and the Shan State Army-South. In January and February, China intervened after UWSA Chairman Bao Youxiang twice declined Chinese requests to meet with representatives from Naypyidaw to discuss the border guard forces proposal.38 After learning that Bao rejected the meetings because he feared assassination, Beijing privately pressed Naypyidaw to ensure his safety. Negotiations took place on 25 February in government- controlled territory with the participation of Chinese officials.39 though the talks were inconclusive, China remains confident that further negotiations will take place. In addition, at least thirteen rounds of negotiations took place between the KIO and the government between April 2009 and April 2010. Chinese officials encouraged both sides to talk while counseling them to exercise restraint. The KIO and other ethnic armies distrust the Tatmadaw and its ability to stick to deals; some groups have suggested that China could be involved in negotiations as a guarantor. Tensions peaked at the end of April 2010 (the final deadline for ceasefire groups to accept the border guard forces proposal). Many analysts – Chinese, Western and Burmese – cited Beijing mediation and pressure as a key factor in ensuring that tensions did not boil over.

The situation with the Wa cooled down was because of the China factor. The relationship between the UWSA and China is too integrated for the latter to support a crackdown on the Wa”.

Beijing was relieved to see Naypyidaw back off from the border guard forces proposal when tensions escalated in late spring 2010. Chinese analysts reasoned that Naypyidaw had little to lose by leaving the issue until after the elections, as most ceasefire groups were in a defensive posture and not seeking to expand their territory. Beijing emphasised to the Myanmar government that conflict with the Wa and Kachin would be more difficult and costly than its offensive into Kokang. The ethnic groups in turn also recognised that they were unlikely to win, and could at most only delay a government victory by launching guerrilla attacks.

The Junta’s Response
Naypyidaw has largely accepted Chinas role in facilitating negotiations, although it still views China ties with the UWSA and KIO with suspicion given Chinas consistent support to the Burmese Communist Party until 1989. Chinese analysts say Naypyidaw is now convinced that Beijing will not obstruct it in solving the issue of the ethnic groups, which was not the case prior to the Kokang conflict. Yet China objection to any use of force irritates hardliners within the Burmese military who are eager to take a more aggressive stance to bring the ethnic groups under central government control.

The ethnic groups perceptions of Chinese strategy are more complex. While some appreciate China advising Naypyidaw against military action, others including the Wa feel that Beijing, by forcing them to the negotiation table, has betrayed or abandoned them to protect its own security and commercial interests.54 In their view, despite Chinese pressure and mediation, any premature agreement on their future is not likely to bring peace and stability. Some ethnic group leaders are also sceptical of Beijing support because of its growing relationship with the Junta “We don’t know what game China is playing and are concerned what it may ask from us in return for its continued support”. But a Kachin activist noted that China had played a positive role in helping to stem ethnic conflict in the past few years through its expression of private concerns, sending the message that the SPDC “cannot do as it wishes in the border areas. A KIO official who hoped China would help the two sides reach a political settlement said that the group has had “basic discussions” with Beijing over the contours of a “genuine union” in which the ethnic groups would have autonomy, possibly like the Chinese Special Administrative Regions (SARs).

The Kachin are working on a common peace proposal for which they plan to seek Beijing backing.59. They believe Chinese involvement might help prevent the government from reneging on any deal reached, and that China would be the “best custodian of a peace process between the ethnic groups and the army”. Others are more skeptical. A commander from an armed group on the border said: “Its very possible that the ethnic nationalities of Burma are pawns in China game with the Junta. Most Burmese are inclined towards the West. If the situation in Burma is more stable then Burma wont need China as much. Burma could then turn to other countries for help”.

Other groups, like the Shan, are also seen increasingly turning to China rather than Western countries as they used to do in the past: These groups believe that China is the only external actor that has real leverage with the Junta. Many ethnic groups also express the desire for those outside the region to pressure China, as well as India and the Association of Southeast Asian Nations (ASEAN), in order to improve their situation.


China would like to see the broadest participation possible from the ethnic groups in the elections to boost the credibility of the polls.65 Refusal to participate also increases the risk of military confrontation with a central government that might feel its legitimacy and authority challenged. But many ethnic groups are reluctant to participate precisely because this would indicate acceptance of the 2008 constitution, which deprives them of the right to self-determination and dismisses all armed groups, except the Tatmadaw Several ethnic leaders warned: “Most of us think the new constitution will cause more conflict, possibly violent, if its not amended” Beijing hopes that elections, if conducted smoothly, will help chart a path for the country towards stability and legitimacy. It has been disappointed that both the National League for Democracy and some ethnic groups have rejected the elections, because this diminishes the credibility of the polls. While Beijing anticipates Western condemnation of the elections, it believes that in the long term they may help mitigate international criticism of China for its political support to and business deals with Naypyidaw.80 China does not expect the polls to lead to a democratic government which could align more closely with the U.S., India and Western democracies.81 While a more accountable government in Myanmar would likely offer a more stable business environment, it could also increase public scrutiny of large-scale Chinese investments.


Trans-shipment of oil and the country’s natural gas are among China foremost interests in Myanmar. In June 2010, China National Petroleum Company (CNPC) began construction of major oil and gas pipelines from the deep-water port of Kyaukphyu (Sittwe) in Myanmar to Kunming, the capital of Yunnan province.83 Once complete, the pipelines will improve China access to crude oil from the Middle East and Africa, cut transportation time, and provide an alternate energy supply route should access to the Straits of Malacca be reduced because of conflict, piracy or terrorism.84 The pipelines will also make China the primary recipient of natural gas from the Shwe fields; by 2013, China is expected to replace Thailand as the largest consumer of Myanmar natural gas Burma`s hydropower resources are also a target for investment because they offer an abundant source of inexpensive energy close to the border that can be used to satisfy growing Chinese demand.86 Beijing also hopes nearly 80 per cent of China imported oil must pass through the Straits of Malacca. Proponents of the Burma pipeline argue that it will reduce China reliance on the straits for oil transportation by at least one third, and provide easier access to crude oil for China inland refineries. It will also shorten the route from Africa and the Persian Gulf by about 1,200km. Burma hydropower resources can help improve the ratio of clean energy in its power companies output. All five state-owned Chinese power companies are investing in Myanmar hydropower sector. The Chinese company Huaneng constructed the Shweli River Power Station, Burmas largest hydropower project, and has signed a memorandum of understanding with the Myanmar government for the follow-on Shweli II facility.88

Indian Ocean and Regional Powers

Burma is a strategic corridor allowing China to secure access to the Indian Ocean.89 China is constructing transport routes and oil and gas pipelines in the country that provide it access to port cities. Burma also serves as a continental bridge into South and South East Asia, as well as a buffer between China and other major powers around the Indian Ocean. Some Chinese and foreign analysts refer to China efforts to “overcome its „single ocean strategy (the Pacific and Indian Oceans). Geopolitical significance has resulted in enhanced military-to-military exchanges, including the first visit to Burma by PLA naval warships. Shipping routes through Myanmar will reduce China reliance on the Straits of Malacca, alleviating the “Malacca dilemma”, 93 which refers to Beijing fears that access to the passage could be threatened by the U.S., particularly in the event of conflict in the Taiwan Strait. But Chinese views on the Malacca dilemma are changing: energy transport via pipelines is not necessarily considered more secure than through the straits because U.S. military supremacy in the region renders both vulnerable. The China-Myanmar pipeline could “improve on an already complete picture” (上添花), but would not “help in times of trouble” (雪中送炭). The pipelines can still diversify China oil import routes97 and mitigate dependence on the Straits of Malacca in the case of closure due to piracy, for example.

Beijing believes the Obama administration shift from a sanctions-centred policy to one which balances existing sanctions with “pragmatic engagement” has driven A Strategic framework for a Global Relationship In February 2009, U.S. Secretary of State Hillary Clinton announced a comprehensive review of U.S. policy towards Myanmar. The conclusion of the policy review, released in September 2009, stated that in addition to ongoing U.S. sanctions and support for the democratic opposition, it would also primarily by the desire to contain Chinese influence in Burma and the region.99 Some Chinese analysts have said that U.S. Burmar policy is part of a larger effort to encircle China through security alliances and a military presence in the South Pacific and Indian Oceans. China believes that the U.S. wishes to “return to SouthEast Asia”, after a post 9/11 Washington’s engagement policy has various implications for Beijing’s interests in Burma. The possibility of warmer ties between the U.S. and Burma is viewed as a potential threat to Chinese security, in particular its south-western border and access to the Indian Ocean. A U.S.-friendly Burma may also create uncertainties with regard to oil and gas pipeline operation and supply. Fraught relations between the U.S. and Burma have contributed to continued sanctions under which Chinese companies have thrived. Chinese business people and officials worry about what might happen should the current situation change. China understands the military government’s desire to engage in dialogue with the U.S. as part of an effort to rid itself of sanctions, receive more development assistance, attract more foreign investment and build its international legitimacy.105 Naypyidaw’s relationship with Washington is also a means for Burma to strengthen its bargaining position vis-à-vis China and other countries.

Some suggest: “The junta … is talking to the Americans as a way to balance Beijing”.106 While Beijing is aware that the U.S. engagement policy has not achieved its stated objectives so far, it worries about changes after the elections which could give momentum to the relationship.108 Given Western criticism of the elections, Chinese analysts predict that both the Obama administration and the military regime are likely to wait “for the dust to settle” after the controversial polls before making further moves. They suggest that such actions could include the release of Daw Aung San Suu Kyi, which would set the stage for rapprochement.

China is also concerned about growing competition in Burma from other countries in the region such as India. Beijing feels that India is ready to take advantage of any chill in China-Burma relations to position its corporations for further investment. Senior General Than Shwe state visit to New Delhi from 25-29 July 2010, which highlighted deepening bilateral ties, irritated Beijing. Not only did the trip closely precede the China visit, but it raised concerns about closer ties with U.S.-friendly India. Afterwards, Indian state-owned energy companies announced a $1.3 billion investment in gas-field development and pipeline projects. Earlier this year, India state-owned National Hydropower Company Limited announced it would increase investment by $5.6 billion. Competition between India and China allows Burma to diversify the sale of its energy resources as well as expand its sources of trade and assistance. With regard to Kachin State in particular, the Junta seeks to use India as a counterweight to China rapidly expanding influence. “The regime wants to offset Chinese influence by whatever means. This is one of the main reasons why the Tatmadaw is dealing with India”

China effort to consolidate ties with Burma is reflected in the increasing level and frequency of senior official visits. Three of the nine members of the Politburo Standing Committee114 visited Burma In the previous eight years, no members had visited the country (the last was former technology; information cooperation; and an MOU on Indian assistance in restoring the Ananda temple in central Burma. India EXIM bank pledged a $60 million line of credit for railway projects and equipment, and the Indian government promised $10 million for the purchase of modern agricultural equipment. “India pledges millions in credit to the Burmese regime.

As far as China is concerned with the military establishment almost certain to retain power after the elections, economic integration has become a key part of China mapping of bilateral relations beyond this year. China believes that the future Burma government will face domestic pressure for economic growth in order to bolster its legitimacy and popularity.This is expected to create demand for technology, investment and infrastructure – and hence business opportunities. With Western sanctions on Burma still in place and relying on the “Going Out policy to spend its massive foreign exchange reserves, Beijing views it-self as poised to “jump in and fill the void”. A Chinese businessperson working in Burma remarked that the country was like China at the early stage of reform and opening. “It has no infrastructure, no industries, and no modern economic fundamentals. It has nothing and needs everything. That’s where we come in.” While weak governance and widespread corruption in Burma challenges for Chinese companies, they have not discouraged investment. Chinese officials and businesspeople see this chaotic economic reality as an opportunity rather than as a deterrent. Many in the Chinese business community feel that while the lack of market regulation can pose problems, it also can be a boon that allows them to exploit labour and natural resources.

Bribery is seen as a necessary cost of business according to Chinese investment and trade in Burma is growing dramatically. Official data does not depict the full extent of China economic engagement in Burma Chinese build-operate transfer (BOT) projects128 are classified as government loans/aid and therefore omitted from official investment figures. Major BOT projects such as the $440 million Shweli I hydropower station constitute a significant influx of Chinese capital. The level of Chinese investment is also underreported because many private companies and individual investors invest under local partners’ names to gain preferential treatment reserved for nationals. And while Chinese investment in the areas controlled by the ethnic groups is also rising, nor is it often included as foreign investment in official reporting because government control in these areas is weak or non-existent Reporting omissions are also common for small-scale investments, such as Chinese government loans for crop substitution and commercial investments in rubber plantations and the mining sector.

Tayoke” Mr Mean

Tayoke(တရုပ္) in Burmese language means Mr Mean (ယုတ္မာ) Several factors contribute to China deteriorating image in Burma. First, the distribution of benefits from large projects is regarded as unequal and unfair. The colossal Myitsone Dam in Kachin State is expected to send most of the power generated to China after its scheduled completion in 2017. This is widely resented by local residents, who continue to suffer serious electricity shortages. “We don’t want dams. The Junta and China Power Investment (CPI) signed an agreement without giving notice to Kachin people to construct seven dams in Kachin State. All the power will support China. It is not for locals, it’s not for our country”. According toa Kachin leader, “The Chinese government and Chinese companies are a big vacuum; they suck all the resources out of Kachin State, making it a desert, which is fully resented by the Kachin people”. The Kachin resent that they are often unable to compete against Chinese companies which dominate gem mining in smallto-medium scale operations. There is also considerable traditional ways of life and to the environment by Chinese projects. The Myitsone dam project will displace up to 15,000 farmers and fishermen, who will lose their original livelihoods.169 The dam will alter the environment, ecology and biodiversity of the region, including the river itself, yet no independent, international impact assessment has been conducted Local residents have not received relocation compensation from CPI, which argues that the money has been paid to Naypyidaw. Many found that replacement housing was “uninhabitable”.

A Chinese company operating in Kachin State has been accused of polluting rivers with cyanide, and another has used harmful dredging techniques, altering the course of the Irrawaddy River. Local people further complain about disregard for sacred sites and cultural artefacts.176 A Burmese analyst noted that while ethnic Chinese have lived in Kachin State for decades, if not centuries, the antipathy towards them was relatively new. Immigrant Chinese are often scapegoats for the unaccountable behaviour of Chinese companies and Naypyidaw.

The planned pipeline through Rakhine and Kachin States is another source of resentment. Its projected path is largely unknown to the general public, “creating anger and anxiety” for communities who fear displacement and relocation. The local population feels “futility and hopelessness” about convincing its government and China to share the benefits of the oil and gas with them. 180 Residents also fear Chinese-built pipelines will lead to increased militarisation of border areas.181 In October 2009, the Shwe Gas Movement sent an open letter to President Hu Jintao signed by more than 100 Burmese and international organisations exhorting him to immediately halt the pipeline project. While much anger is directed at Naypyidaw, some believe Beijing could become a target of attacks because of resentment about its support for the Burmese Junta. While China possesses less influence over members of the Rakhine than the Wa or Kachin, several sources said that concerns about pipeline security may force Beijing to be more proactive in preventing conflict. A prominent Kachin leader commented: “China has to be part of the solution to Myanmar’s ethnic problem if it wants to guarantee the safety of the pipeline”.As negative impressions of Chinese companies grow within Burma.


As Burma prepares for its first elections in twenty years – polls expected to be neither free nor fair – China is ready to welcome any result that does not involve major instability and get its 100 % economic gain, not matter with the people of Burma may suffer. Beijing’s top concern is preventing conflict on its 2,192km shared border, which could affect China’s domestic stability and regional economic development. While China sees problems with the long-term standoff between Naypyidaw and many of the country’s ethnic groups, its preferred approach to solve the situation is gradual policy adjustment by a strong central government on the basis of internal stability, not liberal democracy or federalism and certainly not regime change.

The Kokang incident led Beijing to view the ethnic groups along the border as a liability rather than a source of strategic leverage. It has subsequently invested considerable diplomatic resources to facilitate negotiations between the military government and the ethnic groups. The Kokang conflict
also deepened differences between Beijing and local Yunnan governments. The capital now seeks to manage relations with the border ethnic groups more directly, by dispatching its own officials. Continued illegal cross-border trade by Yunnan companies and government officials also heightens tensions with Beijing. China’s growing demand for energy supplies is making Burma increasingly important as a conduit for trans-shipment of oil and a source of natural gas. Chinese companies are also expanding rapidly into Burma’s hydropower sector. These investments, along with the U.S. administration’s engagement policy – which Beijing sees as a potential challenge to its influence in the country – contribute to China’s perception that Naypyidaw may be gaining leverage in the relationship. While increasing it’s economic presence in the country, Beijing is also stepping up diplomatic engagement through high-level visits.

But Beijing pursuit of its interests in Myanmar is encountering significant hurdles. The location of large scale Chinese energy investments – including in Kachin, Shan and Rakhine States – links their security to the stability of ethnic group areas. Yet many projects are increasing resentment of China in Burma, due to unequal distribution of benefits, environmental damage and harmful impacts on local communities and traditional ways of life. If China does not act to limit the negative impact of its companies in Burma, it risks increasing tensions in ethnic group areas and possible violent backlash, all of which would undermine its economic and security interests. China’s efforts at enhancing its relationship with Naypyidaw could also affect relations with the ethnic groups to the extent that it may no longer be able to act as a broker of talks and instead becomes a target of protest itself. How will the US reacts is still to be seen.

This Article is based on ICG’s Report

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