Myanmar occupies a critical space on China’s southwestern flank: Burma is next to China’s densest concentration of ethnic minorities in Yunnan and policy towards Burma has been dictated first and foremost by these province economical interests.

Yunnan has always been China’s backwater. Its remote location, harsh terrain and diverse ethnic make-up have made it a difficult province to govern. For centuries it was considered a backward place inhabited by barbarians. It remained an isolated frontier with scattered Chinese garrisons and settlements in the valleys and basins, a mixed aboriginal population in the highlands and various minorities along the Mekong River. This has changed a decade ago.

For the Chinese government strategic thinkers, the need to narrow the gap between rich and poor, east coast and interior became a top priority in the beginning of 2000s. The goal was to make sure that local minority groups stayed happy and felt they were benefiting from China’s economical progress. This would prevent the worst Communists Party’s nightmare: China that goes the way of the Soviet Union, splintering along ethnic lines. The answer to this threat was to bring capital and it worked. The massive development – investments in infrastructure and commerce – followed. Yunnan is important as a source of hydroelectricity, it’s China’s biggest producer of tobacco and flowers, as well as aluminum, lead, zinc and tin; its’ famous for its’ silver and tea. Yunnan’s economy has benefited considerably, quadrupling in size from approximately $ 24 billion at the beginning of the decade to $ 91billion in 2009.

When I was first time in Yunnan several years ago, it looked much different. Now, with highways cutting remote mountain ranges and new investments seen everywhere, this province gives a good example how China differs from its southern neighbors. Contrast with Laos and Burma is particularly striking. Travelling in Yunnan’s Xishuabanna region – “China’s mini Southeast Asia” – is now as straightforward as anywhere in China. Getting there is no longer a challenge. Here, in “Banna”, one can see that Yunnan follows general Chinese pattern of all-out development.

The external goal of Yunnan’s development was to make Yunnan China’s gateway to South Asia and Southeast Asia – a new regional hub. It was within the framework of “zou chu qu” (going out) policy that China started to invest in Myanmar. The PRC sees Myanmar as an outlet market that may improve the trade volume of Yunnan province (Myanmar is Yunnan’s largest trading partner). Moreover, when Chinese policy makers looked at the map, they concluded a big reason for the southwest’s poverty was its distance from the sea and lack of easy access to international trade. Thant Myint-U summarized: “What China is lacking is its California, another coast that would provide its remote interior provinces with an outlet to the sea”. There lies the origin of ‘Two Oceans’ policy which was to make China a ‘bi-coastal’ nation. The first Ocean is Pacific. The second would be Indian Ocean. “Western Development Strategy” (Xibu Da Kaifa) was officially inaugurated in 1999 and related to this was the idea of a connection through Myanmar to the Indian Ocean. Burma clearly been seen as the Chinese bridge do the Bay of Bengal. Therefore Yunnan’s and Beijing’s Burma policy has been dictated first and foremost by what will help Yunnan’s economy move forward.

The first steps have been taken in the 1990s. In the beginning of 1990s after decades of shut-down, the border trade reopened. First was the influx of cheap goods. Then the loggings with thousands of Burmese forests being cut and transported to China. After came the jade mines (and heroin). In early 1990s Beijing provided credit for military (tanks and planes) and other purchases estimated at well over a billion of dollars in total. Official figures place bilateral trade at over 2 billion USD a year, but the real figure is doubtless far greater. Burmese economy is today tied more closely to China’s than at any other time in modern history. The figures are clear: According to Myanmar, in 2011 the PRC became the country’s largest trading partner and investor (overtaking Thailand). In fiscal year 2010– 2011, trade volume was $5.3 billion. Myanmar data from 2011 shows that total Chinese investments in Myanmar were about $14 billion (accounting for about 35% of the foreign investments in Myanmar), which was greater than the FDI inflows to Myanmar from Thailand ($9.5 billion), Hong Kong ($6.3 billion), South Korea ($2.9 billion), the UK ($2.6 billion) or Singapore ($ 1.8 billion).

The Chinese built roads linking Yunnan’s border towns with Irrawaddy valley – for the first time in history since famous “Burma road” during WW II. The Chinese want to connect Yunnan with the Burmese coast by high speed railways so that the Chinese product could be shipped from new factories in the Chinese interior to the Indian Ocean. By early 2010 construction had begun on the oil and gas pipelines that would connect China’s southwest across Burma to the Bay of Bengal (Burma gas fields make it the 10th largest in the world with 10 trillion cubic meters reserves). They would run from Mandalay past Ruili first to Yunnan and then onwards to the Guanxi Autonomous Region and city of Chingqing. China is to build oil pipeline, gas pipeline, a wharf for oil tankers (on an island Kyaukpyu in Arakan State). These pipelines, estimated to be put into use in 2013, would reduce by over 1820 sea miles the present journey to Canton from the Middle East. Southeast China is vastly underserved by international gas and oil distribution networks in particular, but project in Myanmar could change that. They will generate the boom of infrastructure, particularly roads and therefore are important for Yunnan and other Southwestern provinces of China.

Moreover, massive hydroelectric dams are being built in Burma that will provide as much electricity as China’s famous Three Gorges Dam. The Salween river dam 7,1 gigawatt hydropower station worth 9 billion USD; another project in general are to produce 20 gigawatts of electricity (it is the amount of electricity consumption of Thailand). As David Steinberg and Hongwei Fan write in the well researched book “Modern China-Myanmar Relations. Dilemmas of Mutual Dependence”, the Chinese are well aware of Burma’s lack of energy. A common Chinese pun on Myanmar’s name plays with its Chinese transcription, Mian dian, replacing it with a homophone that means “no power” (mei dian). Chinese companies have been involved in the construction of 25 massive dams on the Irrawaddy, Salween, and Sittang Rivers and their tributaries. The dams will produce an estimated capacity of 30,000 megawatts and cost a total of more than US$ 30 billion to construct ( China’s involvement, however, is extremely unpopular and being targeted as a source of Burma’s lack of energy). The pipelines along the hydroelectric powers would ensure the energy needed for ever faster industrialization.

The Myitsone dam failure will not change these plans (the Myitsone dam was being built at the confluence of the Maykha and Malihka Rivers that form the Irrawaddy River – Burma’s essential lifeline; causing great popular unrest, it was suspended on September 30th 2011 by Myanmar president Thein Sein). The cancellations of this dam have been seen as a one of the steps on Myanmar’s path to lessen its dependence on China and rapprochement with the West. Yes, but not tu such extend as it was seen: I agree with Steinberg and Fan that the Mitsone dam was a lesson to Beijing and in the future it will try to minimize the risk of similar incidents by improving public image in the Burmese society (before China ignored the Burmese popular dimension, it simply bargained with the junta and got projects approval regardless of the opinion of Burmese people, now it will need to promote its soft power more). The Chinese to ease relations with Myanmar have newly changed the status of the project from one of a bilateral government project to a commercial enterprise, thus easing diplomatic tensions. It was only a tactical failure.

For China Burma is of strategic importance (which is said implicite – since Thein Sein’s visit to Beijing in May 2012 Burma became China’s “strategic partner”). Whoever obtains the power in Burma, the bottom line of China’s Burma policy is that its core interests should be protected because of geopolitical realities – and Yunnan’s future. Myanmar occupies a critical space on China’s southwestern flank, right next to its densest concentration of ethnic minorities. For Beijing leaders, securing markets has been of critical importance. But even greater importance has been ensuring internal stability, especially in ethnic minority areas. The most important task regard the issue of Yunnan’s development is to engage with anyone in power in Burma, be it Thein Sein, Thura Shwe Mann or Aung San Suu Kyi. Myanmar domestic stability is within China’s key strategic interests.

This article by Michal Lubina also appeared on the website of the EU-Asia Centre and CSPA.

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