China made a huge mistake by supporting Myanmar coup

China is angry at its southern neighbor Myanmar (Burma) because a February 1 st military coup put the Burmese army back in charge of the government and unleashed a lot of popular anti-China anger. The Burmese generals had been persuaded to allow democracy to return in 2010 with the understanding that the generals would not be punished for misdeeds during decades of military rule. The generals continue to misbehave after 2020.

Chinese officials met with their Burmese counterparts three weeks after the coup and were assured that the substantial Chinese economic investments in Burma would be protected. The coup put an unpopular military government in control. China thought this would make Burma a more compliant and cooperative neighbor. Within a week of the military takeover anti-military demonstrations began and continued despite police and soldiers ordered to fire on the crowds. That killed or wounded a growing number of Burmese but did not stop the demonstrations. After late February meeting, in which the generals assured China that they would be cooperative, the military government quietly ordered media and diplomatic efforts to play down any cooperation between the military government and China.

By March China was aware that the Burmese generals were playing down any cooperation with China and not doing all they could to protect Chinese factories and infrastructure facilities. So far at least 30 Chinese factories have been attacked and damaged and at least two Chinese injured. The anti-China aspect of the demonstrations continues to grow and the Burmese military seems to be agreeing with the anti-China anger, if only out of a sense of self-preservation.

Right after the coup China and Russia used their veto powers to block UN actions against the new military rulers. The military move was a reaction to recent parliamentary elections that put into power, with over 70 percent of the vote, a political party that pledged to reorganize the military to prevent another military takeover. The response of the military was not unexpected, because the civilian government knew that the Burmese generals had maintained their business connections with China after 2010 and that included China has selling $1.4 billion worth of military equipment to Burma since 2010. Russia sold $800 million worth. Together China and Russia accounted for over 90 percent Burmese spending on imports of military gear. If the elected government were allowed to take power there would be no more future sales and some of the incomplete (not yet delivered) sales would be cancelled. Billions in Chinese transportation and infrastructure investments were also in danger because most Burmese had become very anti-China during the last few decades.

Before giving up power in 2010 Burmese army officers made a lot of money allowing China to do business in the tribal north, often at the expense of local civilians, most of them tribal people. After the return of democracy in 2011, China no longer had as much freedom in the north. China tried to maintain many of these endangered economic projects by including them in the new CMEC (China-Myanmar Economic Corridor) agreement China and Burma signed in late 2018. That agreement called for both countries to begin detailed negotiations on where a 1,700-kilometer-long transportation corridor from southern China (Yunan province) to central Burma (Mandalay) and then west to the coast at the Kyaukpyu SEZ (Special Economic Zone) will be built and what it will consist of. The corridor would improve roads, railroads and build, as needed, pipelines and electrical transmission lines. This would be financed by China and built mainly by Chinese construction firms. During the February meeting China demanded that the army provide more security for the Kyaukpyu facility. Most Burmese not only hate their own military but also new Chinese facilities like Kyaukpyu. The Burmese generals apparently concluded that China had become more of a liability than asset.

Popular hostility to CMEC forced the Chinese to allow provisions in the treaty to minimize the risk of a “debt trap” where Burma might find itself with debt it could not repay unless it turned over new facilities to Chinese ownership or control. This has happened in other nations, most obviously in nearby Sri Lanka. Burma needs the investment and since 1988 China has been the major foreign investor in Burma with projects totaling $20 billion so far. Burma told China it was working on special “debt trap” provisions and the main one is for China to allow foreign nations to provide some of the loans needed for the CMEC work. Details of this deal are still being negotiated. This explains why only a few of the 38 projects that comprise CMEC have so far been approved by Burma. Reaching agreement on the rest of those projects gave Burma some leverage over China.

CMEC is the Burma component of the massive Chinese BRI (Belt and Road Initiative) effort. Also called OBOR (One Belt, One Road), BRI is all about China building roads, railroads, pipelines and ports to make it easier for Chinese imports and exports to move around, from East Asia to Europe, Africa and beyond. Pakistan, Nepal, Thailand, Sri Lanka and Burma are all BRI participants that are seeing billions of dollars in Chinese construction projects taking place and the terms of these deal tend to favor China, not the country where the construction takes place. Not surprisingly many people in these BRI countries see the Chinese investments as another form of colonialism. China prefers not to call it colonialism but rather seeking to expand its commercial activities.

All the Burmese disagreements over border security and CMEC have not slowed down the growth in trade with China. In 2019 that trade increased 38.5 percent over 2018 to $17.7 billion. That is huge considering that the Burmese GDP is $67 billion. That trend continued in 2020, despite covid19 problems.

In early 2020 t he Chinese leader made a two-day state visit to Myanmar. This was mainly about discussing matters of mutual interest with elected Burmese leaders. There were many things to discuss, including the Rohingya refugees, tribal rebel violence on the Chinese border and Chinese investments in Burma. China has been protecting Burma in the UN, where there are calls for punishing Burma over the Rohingya mess. The tribal rebels are largely an internal Burmese matter. Burmese negotiations with the tribal rebels have been heavily influenced by China. That is because China is part of the problem. This state visit was to try and get Burmese leaders to be more cooperative with Chinese investors. That did not happen. There were some token concessions but Burma remains wary of Chinese investments. For that reason, the quick Chinese moves to protect the new military government were not a surprise. The question for Burma is whether there will be a civil war. That threat played a major role in persuading the military to allow democracy to return in 2010. Now the anti-coup demonstrations are growing in size and intensity despite soldiers and police ordered to open fire. Dozens of demonstrators have died and over a hundred have been wounded. Desertions from the army and national police are beginning, with some of the deserters showing up in neighboring countries seeking asylum.

Burgeoning BRI Blues

Burma is one of many nations China has targeted for BRI investments. Burma was not alone in being wary of what China offered with BRI. In fact, only 26 percent of the 122 BRI projects announced so far are assured, with signed contracts and treaties, of completion. Part of the problem is Chinese economic problems. The American-led trade war is causing more problems than expected and various internal problems have slowed economic growth. One of those internal problems is a financial system weakened by years of reckless lending that led to trillions of dollars of bad debt that will take years of tight credit and careful bank management to deal with. That means much less money for BRI projects and “diplomatic loans and investments”.

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