RUILI, China—This remote southwestern Chinese city of about 140,000 nestled in a river valley on the Myanmar border amassed huge wealth over decades of trade and smuggling of drugs, timber and jade. Now, China’s main trading gateway to its long-isolated neighbor is waiting for a new boom that may never come.
Along the river, lush golf courses and luxury villas evince gold-rush expectations. A sprawling 16 billion yuan ($2.5 billion), five-star resort is rising above the city, the showcase of a local tycoon.
In fields along a still-uncompleted expressway stand stacks of big black pipes for a 770-km (480 mile) pipeline to carry Middle East gas and oil shipped through the Indian Ocean from Myanmar to thirsty Chinese industries far to the east.
But the legions of gem and jewelry, electronics and household goods shops in Ruili’s export zone are almost deserted. Cars and trucks with black Myanmar plates trickle through the border checkpoint, hauling televisions and computers, construction materials and household goods for which there are few buyers.
“Business is not going so well. The rent is getting higher and higher and there are more and more business people, but not so many customers,” said Li Qingsan, manager of Sanxing Trading, which sells bicycles and bike parts.
The malaise stretching from crisis-stricken Europe all the way to the remotest corners of China is partly to blame. Fierce fighting between Myanmar forces and the Kachin ethnic minority in the north of the country, which was known as Burma until 1989, is also putting a damper on their border trade.
The robust trade with China that brought wealth to Ruili is also bringing a backlash. As Myanmar’s government reaches out to foreign investors, and tentatively opens its markets, it is also reassessing ties with the Chinese, who for years provided succor to Myanmar’s reviled generals while amassing ever greater economic influence.
“The whole relationship is very difficult right now. For decades China was the only country Burma could do business with, and the Burmese people are very unhappy with their treatment,” said Sean Turnell, an economist at Australia’s Macquarie University. “The Burmese are anxious to reassert their sovereignty.”
That desire was evident in Myanmar’s decision to cancel the Myitsone hydropower dam on the Irrawaddy River, which the project’s contractor, China Power International Corp., is lobbying to have resurrected.
Beijing has invested billions in the impoverished country, building mines and dams, roads and pipelines and making deep inroads into restive northern areas. Chinese trade with Myanmar hit $6.5 billion in 2011, according to International Monetary Fund figures, up almost 50 percent from a year earlier, with China running a surplus of $3.1 billion.
But dislocation and environmental damage from those projects has helped fuel renewed fierce fighting between government forces and ethnic Kachin insurgents, analysts say.
Recent protests over chronic power shortages, and over the gas pipeline, highlighted resentment in Myanmar over energy and infrastructure deals that have earmarked big shares of the country’s abundant natural gas and hydroelectric power for use in China while failing to redress Myanmar’s own energy crisis.
In Ruili’s market, jade trader Huang Shishou, bored and eager for conversation, enthusiastically sprayed water on several football-sized stones brought in from Myanmar, holding a flashlight against their dull surfaces to show the emerald translucence within.
“Here, have a seat! Take a look! You don’t have to buy,” Huang said.
In the city’s dusty, ramshackle industrial zones, the yards of timber mills large and small are stacked high with rosewood and teak from Myanmar’s dwindling forests.
“It used to be that we had so much work, we had trouble finding people to do it,” said Xie Wenhua, manager of a workshop that turns blocks of rosewood from Myanmar into intricately carved chairs, tables and bookshelves.
“Now, it’s just a bit of work at a time. Only rich people can afford to buy this, and people don’t seem to want to spend money right now.”
Many still expect that the lifting of US and European Union economic sanctions against Myanmar will boost trade from China’s industrial regions through Ruili and other border areas in Yunnan, a mostly mountainous province that has close ties with all its Southeast Asian neighbors.
For centuries, commerce thrived along this southwestern Silk Road, helped by ties between indigenous ethnic groups and Chinese on both sides trading opium and heroin, jade, rubies and timber.
The Yang family’s car parts and hardware store, in the frontier town of Houqiao, once did a booming business, in the days when trucks loaded with precious teak from Myanmar rolled through, often breaking down along the winding old Burma Road.
These days, the cross-border timber trade in these parts is mostly clandestine, and the renewed fighting with the Kachins is disrupting trading, local residents say.
“When they cracked down on the logging trade, the trucks stopped coming. These days, there’s almost no traffic because of fighting across the border,” said Yang Shihan, 20-year-old grandson of the business’s owner.
Houqiao, whose name means “monkey bridge” in Chinese, is just 155 kilometers from the Myanmar city Myitkyina and vital rail and water links to the rest of the country. It’s 550 kilometers to the Indian city Ledo.
During World War II, the town’s strategic location lent it a critical role, as Allied and Chinese forces fought the invading Japanese. Families like the Yangs are scattered across the borders: several of Yang’s grandfather’s siblings fled to Myanmar during the tumultuous 1966-76 Cultural Revolution, and an elder brother to India.
The region’s abundant minerals and other resources could make it a hub for growth, but only if the fighting is brought under control, says Macquaire University’s Turnell.
“Those are all areas of immense potential, but they must reach a broader political settlement,” he said.
Like Ruili and other border towns, for now it is an outpost in limbo.
Unfinished streets lead to a future industrial park and warehousing, trading and exhibition zone. Up the road lie checkpoints and an army base tasked with keeping Myanmar’s conflict within its own borders.
Myanmar is renewing efforts to seek a cease-fire with the Kachin rebels. Without peace, any new infrastructure in the region would be prone to attack, said Jan Zalewski, an analyst with IHS Global Insight.
Yang, who opted to join the family business instead of seeking work further inland, has pinned his hopes on an expressway, under construction 50 kilometers (30 miles) away, which could eventually link Houqiao and the rest of China to northern Myanmar, India and Bangladesh.
“Once they build the road we will be able to sell much more than we can now, even to India,” said Yang.