Country Reports

Dancing with the Dragon

by Thomas S. Knirsch, Annabelle Heugas

The changing relations between Myanmar and China

Myanmar's heavy dependence on China was one of the main reasons for the democratic change after 2008, but China is now once again Myanmar's largest trading partner and investor. The country has outstanding geostrategic importance for China and is a central building block of the Belt and Road Initiative (BRI). Relations with China will remain a difficult balancing act between its foreign and its own interests in the future.

In January 2020, Xi Jinping became the first Chinese president in 19 years to travel to Myanmar for a two-day state visit. This visit was especially significant as both countries were celebrating the 70th anniversary of diplomatic relations this year. In addition to this official occasion, the visit was mainly motivated by the economic cooperation between the two countries. China is Myanmar's largest trading partner. In 2018, 25 percent of all foreign direct investments came from China and 32 percent of all exports went to China. China's main goal is to ensure that the major projects that are part of the China-Myanmar Economic Corridor (CMEC) and part of China's Belt and Road Initiative (BRI, also known as the New Silk Road) are implemented as soon as possible. These projects include: the deep-sea port of Kyaukphyu in the Indian Ocean and its special economic zone; a railway and a highway that will connect Kunming in Yunnan province to Kyaukphyu via Mandalay; the New Yangon City project; and economic cooperation zones along the China-Myanmar border. As early as 2014, a more than 700-kilometer-long oil and gas pipeline from the port of Kyaukphyu to the southwestern Chinese province of Yunnan was commissioned. The Kyaukphyu project and the associated highway and railway line are older than BRI and reflect China's longstanding desire to gain direct access to the Indian Ocean via Myanmar. Has Xi Jinping's visit brought China closer to this goal? What does the outcome of the visit mean for the future of China-Myanmar relations? Will Myanmar, as many fear, increasingly become China's "client state" again?

 

Politics between pragmatism and distrust

As often, a look into history helps us answer questions from the present. Only two years after its independence from Britain in 1948, Myanmar, then called Burma, established relations with China. The early recognition of the People's Republic of China (Myanmar was the first non-communist country to do so) is indicative of the foreign policy strategy Myanmar has pursued since independence: a policy of neutrality. The world was divided between a Western and an Eastern bloc. However, a group of countries, mostly former colonies, did not want to support either block. They formed the Non-Aligned Movement in 1961 and Myanmar is still one of its 120 members today. However, Myanmar's policy of neutrality precedes this membership. As early as 1949, the country's first prime minister, U Nu, declared that Myanmar must be on friendly terms with all foreign countries: "Our tiny nation must not have the audacity to argue with any power. Nu stressed that "a small, weak nation like ours, however we strengthen our defences, can never successfully defend itself alone”.

Such "precautions" have been taken since then, particularly against China, a country sixteen times larger than Myanmar, with which it shares a border of over 2,000 kilometres long. Mistrust and pragmatism therefore characterised relations between the two countries from an early stage. In 1954, Myanmar and China signed a joint declaration in which they reaffirmed the five Chinese principles of peaceful coexistence on which their relations were to be based, as a guarantee of non-aggression. In addition, the two countries settled border disputes between them through diplomatic channels in 1960, which further allayed Myanmar's fears of a Chinese violation. This period was called the Pauk-Phaw (or Brotherhood) era. However, in 1962, the military took power in Myanmar in a coup d'état. Relations between the military regime and the Chinese leadership deteriorated markedly in the years that followed. In 1967, anti-Chinese unrest sparked in Myanmar. The riots were caused by Sino-Burmese students who, influenced by the Cultural Revolution in China, refused to remove their Mao Tse-tung badges. During the riots, Chinese people were killed and their businesses looted. The Myanmar authorities did not stop the rioters. In fact, it is believed that they fomented the riots in order to divert the anger of the population about the weak economy and the crisis in rice production towards the Chinese in Myanmar. In any case, this event marked the end of the Pauk Phaw era between China and Myanmar and severely strained political and economic relations between the two countries for the following years.

 

Early reservations about the Chinese

However, anti-Chinese resentment arose much earlier in Myanmar, and is still widespread today. Throughout history there had been several waves of migration from China to Myanmar, especially in the 18th and 19th centuries. The migrants were mostly traders and merchants. When the Communist Party came to power in China, immigration increased further by Chinese fleeing political persecution or seeking better economic opportunities in Myanmar. It is estimated that citizens of Chinese ethnicity currently make up three percent of Myanmar's population. But the actual number could be much higher when considering the number of mixed ethnicities over several generations and those Chinese who sometimes falsely declare themselves as belonging to one of the 135 recognized ethnic groups within Myanmar. In fact, although the Chinese have been a well-integrated group within the population for several generations, they are not recognised as a separate ethnic group. An exception is the Kokang, originally Han Chinese, who emigrated to what is now Shan State in the 17th century. The lack of recognition could still be explained today by a latent (nationalistic) distrust of the Myanmar people to the Chinese in their own country, as well as of their influence, business activities and practices.

Thus, while Myanmar feared primarily a territorial invasion in the late 1940s and 1950s, the danger today is seen primarily through migration and economic activity. This leads to sometimes strong resentment among the natives. "I have the feeling that I am no longer resident in Mandalay [...] they [the Chinese people] look like the inhabitants. They have money, so they have power." However representative this statement may be, it is estimated that up to 50 percent of the population of Mandalay could be Chinese.

 

Changing relations since the 1990s

China's relations with Myanmar took another turn when the 1988 student uprising and pro-democracy demonstrations took place in Myanmar. The subsequent violent repression by the military led to worldwide condemnation. The USA imposed sanctions on the country, later followed by the EU. One year after Myanmar's demonstrations, China faced its own uprising in Tiananmen Square. As in Myanmar, the demonstrators were mainly students demanding a democratic regime change. A violent crackdown was also ordered by the government - with a corresponding echo from abroad. Myanmar, internationally ostracized and degraded to a "pariah state", subsequently redefined its relations with China. Border trade between the countries opened up in 1989, and in 1990 Myanmar also began to expand its military cooperation with China. This was the beginning of an ever-increasing dependence on China, which was further reinforced by Myanmar's weak economy.

Myanmar's heavy dependence on China was one of the main reasons why the military regime initiated a political change in 2008 with the announcement of the first general elections in 20 years. Regime change was intended to achieve one thing above all: to open the closed doors to Western countries, thus preventing Myanmar from becoming even more of a client state of China. In 2010, after almost 50 years of military rule, a semi-civilian government was finally elected to power. Its president, former General Thein Sein, initiated political and economic reforms aimed at opening Myanmar to a large extent. Myanmar also sought a return to its original foreign policy of neutrality. In any case, this regime change had a massive impact on the dynamics of relations with its neighbour China, as Western countries responded to the offer to restore relations with the former "pariah state". In 2011, the Myanmar government then suspended the Myitsone Dam project, which was China's largest and most controversial energy supply project in Myanmar at the time (mainly for the neighbouring Yunnan province in southwest China itself). This could be understood as a clear message of distancing oneself from China's leadership. The rapprochement between the Thein Sein government and the US administration under Barack Obama, who paid a historic visit to Myanmar in 2012, was another clear signal.

 

After the opening of the country in 2011, Myanmar's image in the eyes of the international community had initially improved considerably - Thein Sein's bill had paid off. However, this changed abruptly in 2017 with the humanitarian catastrophe in the Western part of the country, Rakhine State, one of Myanmar's 14 constituent states or regions. In August 2017, a militant group of the Rohingya (Arakan Rohingya Salvation Army), an unrecognized Muslim minority living in Rakhine State, attacked several police stations. Myanmar's military responded with sometimes excessive violence, leading to at least 700,000 Rohingya fleeing to Bangladesh. The UN High Commissioner for Human Rights, Zeid Ra'ad al-Hussein, described this crisis as a "textbook example of ethnic cleansing." Although China also condemned the attacks, "supports Myanmar in its efforts to secure peace and stability in Rakhine State. In 2018, it voted against the establishment by the UN Human Rights Council of an international body that should have investigated the case of a possible genocide in Rakhine.

 

China as mediator and promoter

Since independence, Myanmar has suffered from the longest civil war in the world, which has now lasted for 70 years. The causes of the conflicts with the Burmese army are manifold, but they mainly result in demands by the (partly armed) ethnic groups for independence or more autonomy, and in disputes over the distribution of the abundant natural resources from the ethnic areas. The conflict zones are mainly located in ethnic areas on the country's borders.

Although China's foreign policy is dictated by its principles of non-interference, it participated early in the newly initiated peace process as a mediator. The peace process in Myanmar, which was initially initiated after independence, was abruptly halted by the military coup in 1962 and was finally resumed under the Thein Sein government. China likely saw its border security and economic interests as the main threats. In 2009, Myanmar's military attacked the Myanmar National Democratic Alliance Army (MNDAA), the army of the Kokang ethnic group, for the first time, resulting in up to 30,000 Kokang and ethnic Chinese fleeing to the Chinese province of Yunnan. Then in 2015, the MNDAA army invaded Kokang territory in eastern Shan State of Myanmar and engaged in heavy fighting with the army. Many soldiers died, and the army still suspects that the rebels used Chinese soil for their preparation and attack. This and other ethnic conflicts were thus no longer a purely domestic Myanmar issue. In response to the Kachin Independence Organization (KIO), a state and ethnic group in north-eastern Myanmar in the border area with China, and the subsequent fighting of the Burmese army in this area, China organized peace talks between the two parties as early as 2013.

Since then, China has assumed the role of observer or participant in several peace talks between the army and ethnic armed organizations. However, the extent to which this role of China's can be compatible with the self-declared principle of non-interference is fundamentally questionable. It is generally assumed that China's incentives to help resolve these conflicts are to be sought in the protection of its national borders and its own economic interests in Myanmar. However, this strategy may also be aimed at avoiding US interference in the conflicts. The reality is probably even more complex: it is suspected that former Chinese soldiers of the People's Liberation Army, working as mercenaries, systematically supported the Kokang Army. The Chinese government, on the other hand, declared that it did not provide military aid. Regarding the Kachin conflict, the provincial government in Yunnan apparently would like to support the KIO, but Beijing still prefers to respect the principle of non-interference. Furthermore, trafficking in drugs and human beings in the border areas plays a major role in the conflicts. The trade in illegal goods across China's border has become a multi-billion-dollar business in recent years, and not only for the rebel armies.

 

Pragmatism instead of ideology under Aung San Suu Kyi

When the National League for Democracy (NLD) came to power after winning the 2015 parliamentary elections, China first had to carefully rebalance its relations with the new government. China's foreign minister travelled to Myanmar to congratulate NLD party leader Aung San Suu Kyi shortly after her victory. It initially remained to be seen what relations the NLD, a party that had fought for decades to establish democracy in the country, would develop with China. However, soon after the start of their term of office, it became clear that the NLD's intention was to deepen relations with China again. Aung San Suu Kyi has thus far not explicitly opposed Chinese mega-projects, which had been partially abandoned by the Thein Sein government. In 2019, she declared that the people of Myanmar must "keep their promises" regarding the most controversial Chinese project, Myitsone Dam. The NLD government thus decided early on to run the country with pragmatism rather than on the basis of ideologies. However, the development of these major projects will cost taxpayers many billions of US dollars. According to the Chinese side's original design, the deep-sea port of Kyaukphyu would swallow more than seven billion US dollars, the Muse-Mandalay section of the railway almost nine billion US dollars and the city of New Yangon City more than two billion US dollars. There are other proposed projects that will also require billions of dollars of investment. But the main problem is that Myanmar cannot afford to invest the money needed to develop these projects. Of course it could borrow from China, but then it would have to pay high interest rates or make other long-term commitments. Since these projects are part of China's Belt and Road Initiative, there are no real alternative sources of funding. The government is very cautious about falling back into too much dependence on China and, above all, into a debt trap, and has learned lessons from the experience of countries like Sri Lanka.

The position of the current government led by Aung San Suu Kyi is therefore clear. While it supports the Belt and Road Initiative in principle, it will only implement projects on Myanmar soil if they bring benefits to the people of Myanmar: The projects must give priority to national development, not harm the environment and support the social development of the people.

 

 On the way to the Silk Road

In 2020 Myanmar and China will celebrate the 70th anniversary of their countries' bilateral diplomatic relations. They adopted the bilateral cultural and tourism year between Myanmar and China and signed several economic agreements. However, Xi Jinping's visit in early 2020 fell far short of the leadership's expectations in Beijing, as few agreements related to large investments were actually signed. The only major investment agreement that was signed concerned the deep sea port of Kyaukphyu. The project size was reduced to US$1.3 billion, while Myanmar's share in the project increased from 15 percent to 30 percent. The feasibility study for the Muse-Mandalay Railway Project, which was carried out by the Chinese side, was handed over to the Myanmar side during the state visit. However, Myanmar has not promised to implement the project. Progress on the New Yangon City project has also been modest so far. A Chinese company has conducted a study, but construction has not yet begun. It is therefore unlikely that China will be satisfied with the results. Although Xi Jinping urged to speed up progress on the CMEC, it appears that during the visit he was unable to make real progress in bilateral talks.

Greater progress was made on the political front, where Xi Jinping was able to reach an agreement to define the bilateral relationship as the Sino-Myanmar Community of Common Destiny, the highest possible form of cooperation with China under Xi Jinping. This is an upgrade of the "comprehensive strategic cooperation partnership" already agreed in 2011. However, most Myanmar politicians are not familiar with the concept of the "Community of Common Destiny". In a joint statement during the visit, Myanmar at least pledged in this regard to support not only the One China policy, but also Chinese attempts to resolve the problems regarding Taiwan, Tibet and Xinjiang. China, on the other hand, reiterated its support for Myanmar's efforts to resolve the problems concerning Rakhine State. Xi Jinping also pledged that China would provide economic aid of US$570 million to Myanmar over the next three years. And then there are the military relations. Xi Jinping met with Supreme Commander General Min Aung Hlaing. In the talks behind closed doors, they may have mainly talked about ethnic armed groups active along the Chinese border. Xi Jinping is said to have denied supplying arms and allowing these groups to use Chinese soil to harm Myanmar's interests.

 

Favourable prospects for cooperation

Overall, Xi Jinping was unable to negotiate significant results for China during his two-day state visit, apart from a few investment commitments and an agreement to build a "community of destiny". Nevertheless, Myanmar-Chinese relations are likely to develop rather favourably in the coming years. After all, Myanmar and China can count on each other's support even when difficult internal issues are raised on the international stage. More importantly, Myanmar is of outstanding geostrategic importance to China. In the long term, China hopes to secure a passage from Yunnan Province through Myanmar to the Indian Ocean to better open up the Chinese hinterland to the West. In addition, security experts suspect that the military presence could be expanded via a future naval base in the Bay of Bengal. This could at least reduce China's dependence on having to run a large part of its imports and exports via the conflict-laden sea trade route through the South China Sea and the Strait of Malacca. The most important thing for China, however, will probably be to avoid falling behind India and the USA, since both powers are also competing for influence in the Bay of Bengal.

However, Myanmar is not just a pawn in the game of the big rival nations. In fact, Myanmar is cleverly using the geostrategic interests of rival countries as a diplomatic tool to gain equal advantages from all parties. For example, high-ranking government officials on the one hand welcome Chinese investment, while at the same time expressing concerns to other foreign dignitaries about China's interests in Myanmar.

During the COVID 19 pandemic, Myanmar's big neighbour is showing itself to be a "helper in time of need". Chinese state media reported in early April 2020 that a medical team had been sent to Myanmar along with test kits, 60,000 masks and 5,500 sets of personal protective equipment. Toward the end of the month, medical personnel from the People's Liberation Army helped Myanmar's military build and equip a COVID-19 testing laboratory. This pandemic gives China a chance to further demonstrate its commitment to Myanmar: China can help Myanmar to save lives, while other countries such as Japan and India, which want to balance China's influence in Myanmar, are currently facing challenges of their own. On the other hand, many Chinese companies, mainly in the growing textile industry with over 400,000 jobs, have closed their production facilities and laid off many employees as a result of the COVID 19 pandemic. This has led to large protests outside the factory gates and calls for strikes by the trade unions. The anti-Chinese mood in the country is more likely to have been promoted again as a result.

 

The relations between Myanmar and China will remain a balancing act between foreign and one’s own interests, pragmatism and realism, proximity and distance - a difficult dance with the dragon. As Aung San Suu Kyi explained during her meeting with Xi Jinping this year, "it goes without saying that a neighbouring country has no choice but to stand together until the end of the world."