China’s Stakes in the Myanmar Coup

Three questions to Yun Sun

INTERVIEW - 19 February 2021

Yun Sun

Senior Fellow and Co-Director at the Stimson Center.

Myanmar is again under military rule, and a year-long state of emergency has been declared in early February. It is tempting to jump to the conclusion that the return of a military government in Myanmar will benefit China in the US-China competition in the Indo-Pacific, but this is a misperception argues Yun Sun, Senior Fellow, Co-Director of the East Asia Program and Director of the China Program at the Stimson Center.

Is the coup in the interest of China? To what extent is it perceived in China as part of a competition between democracies and authoritarian regimes?

China does not want an isolated Myanmar. The country is of strategic interest to China, given the connectivity Myanmar can provide - access to the Indian Ocean, connectivity link to South Asia and to Southeast Asia. With the military coup, and international sanctions as the next stage, Myanmar will be put back to its prior status. This goes against China’s interest. From a more sectoral perspective, China cooperates with Myanmar on natural resources and many mining and energy companies in Myanmar are managed by the military. If these companies are subject to international sanctions, Chinese interests will be directly affected.

There is a factor that people usually do not quite understand: China has had no problem working with the National League for Democracy (NLD) government. The relationship between China and Aung San Suu Kyi has been more stable than the relationship with her predecessor, the Thein Sein government, a junta-civilian government backed by the military, under which several Chinese projects were canceled or suspended. Aung San Suu Kyi’s domestic and international popularity worked in favour of China. "The Lady" has helped China tremendously in repairing the country’s reputation in Myanmar, with China being regarded as a supporter of Aung San Suu Kyi since the beginning of the Rohingya issue and the peace process. It was believed that China would thrive in an isolated Myanmar and enjoy a monopoly, but this has proven untrue. And China is not the only country adopting this relatively neutral status: multiple ASEAN countries, Russia and India have adopted a similar approach.

Before 2010, Myanmar was almost completely dependent on China for international support. The Chinese veto at the UN Security Council in 2007, which the military government was supremely grateful for, was an important milestone. But even under these circumstances, the military government did not give the Chinese what they wanted in terms of integration of the two economies. This mirrors the situation in Iran: although China is one of Iran’s few choices as an international partner, the Iranians do not give the Chinese all the projects they want. These countries are wary of China exploiting their isolation. They aim to preserve their projects and economic potential for the day when their economy is back to a relatively normal state again, enabling them to cooperate with other countries, especially from the West, and on better terms.

Many Chinese perceive the democratic practice in Myanmar as a failure, as a result of the coup. This will reinforce their narrative that democracy is not a universal value and that democratization does not lead to the outcomes portrayed in the West. What is currently happening in Myanmar actually serves the Chinese argument that in a lot of countries where the conditions are not met, imposing democracy does not lead to either peace, stability or prosperity. But it should not be forgotten that Myanmar remained a "disciplined flourishing democracy", whose structure and direction were still controlled and guided by the military leadership. According to the 2008 Constitution, the Burmese democracy was under the authority of the military, not above it.

Many Chinese perceive the democratic practice in Myanmar as a failure, as a result of the coup. This will reinforce their narrative that democracy is not a universal value and that democratization does not lead to the outcomes portrayed in the West.

China has a long history of interactions with the Burmese military. What is the legacy of that history and how can we think about its impact on the China-Myanmar relationship going forward?

In comparison with Western countries, China indeed has contacts and an ability to work with the military. But it does not mean that if China had the choice, it would prefer for the military to run the country. In other words, the Chinese believe that they can work with the military leadership in Myanmar, but the quality of this partnership is not necessarily going to be high and its cost is not necessarily going to be low.

One of the main reasons for this is that the Burmese military is notorious for failing to implement public policies in the country - the five decades during which it has been in power in Myanmar, from 1962 to 2011, illustrate this point rather well. See for example the Belt and Road Initiative (BRI): the Chinese would like to rely on a government that they could cooperate with, not only in terms of willingness to work with China, but also in terms of capacity to work with China.

In the short term, the Burmese military will be willing to support the Chinese agenda in Myanmar and might become open to Chinese economic projects, as in the middle of this intense period of international condemnation, the military wants to gather as much international support as possible. The military will depend on China and Russia to secure protection at the UN Security Council. However, China will have an increasingly cautious approach. Myanmar today is no longer what Myanmar used to be ten years ago. Social norms, social perceptions and what people now find acceptable have changed over the years. There will be a political cost for China to really dive into a partnership with the military government: the Burmese people are already saying that China is, once again, supporting the "evil military" and that it is, once again, abandoning the democratically elected leaders of the country. By working with the military, China will have made a choice, which will not be a popular one among the population. But let us keep in mind that the military coup is not over and that we are not seeing the end of it yet.

Chinese large-scale projects in Myanmar have either been canceled or scaled down (the Myitsone Dam, the Kyaukpyu deep-sea port…). Where do you see the dynamics of the Chinese projects in Myanmar going forward?

Most Western companies have already been deterred from entering the country and the investment coming from the West is already low. China has tried to push megaprojects in the country, but the government has been rejecting them. One example is the Kyaukpyu deep-sea port, whose original price tag amounted to USD 7.2 billion, with China having 85% of the stake. After years of negotiations, both parties agreed to cut the size of the project, from USD 7.2 billion to USD 1.3 billion, and to reduce China’s stake from 85% to 70%.

Another slightly different example is the Sino-Myanmar railway project: a memorandum of understanding (MoU) was first signed in 2011. But Myanmar then realized that the official development assistance (ODA) from Japan offered interest rates that were far better than the Chinese terms. The MoU with China was aborted in 2014. Under new negotiations with the NLD government, the feasibility study covering the first section of the project - from Muse to Mandalay - began in 2018 but took a lot of time. During the Chinese foreign minister’s trip to Myanmar’s capital last January, both parties agreed to carry out a feasibility for the second section of the project, from Mandalay to Kyaukphyu. The project is moving forward slowly but surely.

Huge projects with China mean more financial liabilities for the recipient countries. The bigger the projects are, the more likely China is to have a controlling stake, because local governments are not able to afford it.

Huge projects with China mean more financial liabilities for the recipient countries. The bigger the projects are, the more likely China is to have a controlling stake, because local governments are not able to afford it. This is viewed by some as a potential debt trap. But the notion of trap suggests intentionality, and I do not think China intended to trap these countries. Aung San Suu Kyi would work with China, but only in the format that she felt comfortable with. She was very aware of the danger from the very beginning, and her economic advisers’ recommendations could be worded as follows: we Burmese accept Chinese projects, but only on our own terms, and according to the scale that we are comfortable with. This explains why in the past five years, no Chinese megaproject was successfully implemented in Myanmar.

In comparison with the situation in Laos, Aung San Suu Kyi did a good job at managing the Chinese projects in the country. But at the same time, because of how close Aung San Suu Kyi was to China, the Chinese used a lot of micro-projects to assert their influence in Myanmar, through what they name as "welfare projects" (macrofinance, wind farms, etc.). To sum up, no megaproject in Myanmar does not mean that China’s influence is smaller. It just means China is willing to adapt to the local demand and local approach.

It will be interesting to see whether the military government will approve the railway project quickly. If the military leaders do, it will mean that they are really desperate for China’s support.

Copyright: Ye Aung THU / AFP

China’s Stakes in the Myanmar Coup

Three questions to Yun Sun

Yun Sun

Is the coup in the interest of China? To what extent is it perceived in China as part of a competition between democracies and authoritarian regimes?

China has a long history of interactions with the Burmese military. What is the legacy of that history and how can we think about its impact on the China-Myanmar relationship going forward?

Chinese large-scale projects in Myanmar have either been canceled or scaled down (the Myitsone Dam, the Kyaukpyu deep-sea port…). Where do you see the dynamics of the Chinese projects in Myanmar going forward?

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