Nearly 15 months have passed since the military’s coup and China’s desire to step up its relationship with the junta is warming up with increased diplomatic exchanges. China has pledged to support the military regime “no matter how the situation changes” in Myanmar over the coming months and years.
Beijing affirmed also that it has always placed Myanmar in an important position in its diplomacy and wants to “deepen exchanges and cooperation to forge a China-Myanmar community with a shared future.”
China’s statement marks the most unambiguous signal of support for Myanmar’s military, which continues to face fierce resistance from a broad coalition of resistance groups, pro-democracy activists and ethnic armed organizations (EAO).
Beijing’s declaration of unequivocal support for the junta reflects its calculation that the regime will eventually prevail over the anti-coup resistance, that outside support for the resistance movement will only prolong the inevitable, and that the regime offers the most likely route towards the stability necessary for the advancement of China’s substantial economic and strategic interests in the country.
Stability is essential for the creation of an overland transport and communications corridor running from China’s Yunnan province to Myanmar’s Indian Ocean coast, which is part of the China-Myanmar Economic Corridor (CMEC), a sub-pillar of Beijing’s controversial Belt and Road Initiative.
Both China and Myanmar are venturing beyond the conventional paradigm of infrastructure-oriented engagement. There are basically three strategic areas of collaboration and cooperation between the two countries that will influence the reorienting of the CMEC and China-Myanmar relations in the coming months.
First, although it is still in its incipient stage, the Chinese digital renminbi (RMB) has already taken a lead in the central bank digital currency game. This is a technology that could be of great use to Myanmar. Along with the recent agreement establishing the RMB as the official settlement currency for trade with China, the digital RMB could help Myanmar in its attempts to reduce its dependence on the US dollar in trade and mitigate against potential restrictions of its access to the SWIFT international payments system. In addition, a direct settlement between the digital RMB and digital Myanmar kyat is a strategic projection for Myanmar, as well as being advantageous for Beijing in terms of trade efficiency and potential financing for upcoming projects. Of course, the digital kyat still requires infrastructure to be rolled out at the retail level, which could take some time.
Second, Myanmar’s retail sector is now a strategic front of the Chinese private sector and seems potentially lucrative. The e-Commerce platform shop.com.mm, which is owned by China’s Alibaba, has already captured the lion’s share of the Myanmar market, particularly by allowing digital payments during the 2021 cash crisis. Although e-Commerce is still in its early stages in Myanmar, it will reach its full potential with the establishment of direct RMB-kyat exchange and an expanded logistics network.
Third, alongside its vaccine diplomacy, Beijing has transferred to Myanmar the technology to manufacture a China-made COVID-19 vaccine under the brand name Myancopharm. With few competitors, Beijing’s COVID-19 diplomacy in Myanmar has been a relative success that has opened the way for newly-established Chinese pharmaceutical companies to invest in Myanmar’s generic drugs market, which is still dominated by imports from India.
Although it may take some time to gain market share, entrepreneurs in Myanmar are already looking for an alternative source of generic drugs. Myanmar has a very high demand for generic drugs but the steep US dollar-kyat exchange rate had made imports more expensive. Of course, with Beijing’s political support, fierce competition in the local market is only a matter of time.
It is important to note that China was reluctant to get behind the military regime and its leader Senior General Min Aung Hlaing immediately after the coup. But attacks on Chinese companies and investment, including factories in Yangon’s industrial zone, marked a major turning point for Beijing, raising concerns about instability in the country. Protests outside China’s Yangon embassy and a rise in anti-China sentiment in the wake of the military takeover have only increased Beijing’s concerns. China has called for dialogue between the junta and the resistance, but it has cited its traditional policy of non-interference as justification for not putting more pressure on the generals, a position that puts it at odds with Japan, South Korea, and the West. That indicates China’s distrust of the resistance movement since the early days of the coup.
Since the coup, Chinese officials and business lobby groups in Yangon have begun to engage publicly with junta officials and to promote commercial opportunities. Since the early 2000s, Myanmar has sought to acquire a fleet of submarines to keep up with its Southeast Asian neighbors, but it has few options to buy them due to its atrocious human rights record and the arms embargo imposed by the European Union.
However, in December 2021 China transferred a refurbished Ming-class submarine to the junta, who renamed it the UMS Minye Kyaw Htin, making Myanmar the first country in South and Southeast Asia to take delivery of a China-manufactured submarine. Along with Russia, China has also provided the military regime with fighter jets and armored vehicles. China is continuing to pursue what it calls an independent foreign policy of peace that generally prioritizes its own narrow interests, with little or no consideration for a country’s human rights record or other internal controversies.
Furthermore, the junta has approved a US$2.5 billion China-financed liquefied natural gas power project in Mee Lin Gyaing in Ayeyarwady Region. The regime has also reorganized three committees that are instrumental to CMEC projects, replacing them with its own appointees. The investment projects, which include economic cooperation zones in Kachin and Shan states and a special economic zone in Rakhine State, are part of a corridor connecting Yunnan Province to Yangon, Mandalay and the Indian Ocean port of Kyaukphyu in Rakhine State.
China has also inked a deal to provide US$6.1 million to Myanmar for 21 development projects. In the fiscal year that ended on September 30, 2021, Myanmar’s economy contracted by an estimated 18 per cent. With most foreign companies pulling out of the country, investment from China could provide a facade of legitimacy to the junta.
Myanmar’s shadow National Unity Government (NUG) has warned Beijing that its engagement with the regime could seriously damage China’s international reputation, “no matter how the situation changes”. The NUG has said that it is committed to good relations with China, but that this can only be achieved on the basis of the NUG being accepted as the legitimate government of Myanmar.
“Any effort to build a ‘Community of Shared Future’ with an illegitimate and genocidal regime risks serious damage to the international repute of the People’s Republic of China,” the NUG stated. “Equally important, the people of Myanmar will soundly reject any efforts by foreign governments to establish such a partnership with the illegitimate military regime.”
The NUG added that the best way for China to build good relations with Myanmar is “to immediately compel the military junta to stop all violence, restore civilian governance, and to work with the NUG and Myanmar’s diverse ethnic nationalities to deliver humanitarian assistance to end the suffering of the Myanmar people.” The NUG stated that it “stands ready to work with China’s government towards repairing this damage and building a new type of ‘pauk-phaw’ (relationship) in the future.”
Meanwhile, China and the West have refused to engage with the NUG, which has sought official recognition from foreign governments, although there are unofficial contacts between the NUG and some western countries such as the United States. The NUG has challenged the junta by disrupting the government machinery through its support for the Civil Disobedience Movement, by pressuring companies to cut ties with military-owned firms and allying with some EAOs. At the same time, the NUG’s army – the People’s Defense Forces (PDF) – has mounted targeted attacks against military personnel and regime officials.
While the coup has boosted China’s presence in Myanmar, it has significantly undermined India’s economic and security interests in Southeast Asia. The multi-dimensional civil war in Myanmar has made progress on India’s economic and logistics projects in the country, which are central to India’s Act East policy, all but impossible. Furthermore, fighting between the Myanmar military and PDFs has brought intense conflict to western and northwestern Myanmar, which border India.
Geography imposes natural limits to how far the NUG can and will go in proscribing China’s engagement with the military administration. The NUG still has incentives to ensure that serious attacks on Beijing-backed infrastructure projects do not escalate. Beijing sees a difference between supporting the National League for Democracy (NLD) and supporting the NUG, which seeks to overthrow the junta and upend the pre-coup status quo. Although the NUG is stacked with former NLD ministers and members, to China it appears a force of instability.
Beijing is now operating under the assumption that the junta will eventually establish effective control over Myanmar and so has moved towards de facto recognition of the regime. China has already returned to business as usual in Myanmar with firm determination and is ramping up its support for the junta to go further into debt with Beijing, which will allow it to take even greater advantage of Myanmar’s natural resources and geostrategic location.
But China’s blind support for the brutal and autocratic junta will only aggravate the situation in Myanmar further. Beijing’s self-aggrandizing ambition will prove to be pernicious for the innocent Myanmar people and their democratic aspirations.
Yan Naing is a pseudonym for a political analyst on Myanmar and China.
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