Conceptual image of melded Myanmar and Chinese flags. Image: iStock/Getty Images

Myanmar lawmakers have sounded alarm over the country’s high and rising debts owed to China, urging the National League for Democracy (NLD)-led government to pay back the loans as fast as possible to avoid a sovereignty-eroding debt trap.

With foreign exchange reserves at a meager US$6.35 billion in 2018 and the national debt estimated at US$10 billion, of which $4 billion is now owed to China, parliamentarian Than Soe recently suggested sending rice instead of dollars to China.

Whether China would accept such a deal remains to be seen. The interest rate on most Chinese loans is a whopping 4.5%, believed to be the highest rate among all the foreign government and financial institutions that Myanmar now owes.

Most of Myanmar’s foreign debt was accumulated between 1988 and 2011, a period when the country was subjected to Western sanctions imposed against the previous military regime’s poor rights record.

At the time, China was the only major foreign donor willing to lend generously to the ostracized regime. Myanmar’s over two decades of international isolation left it heavily indebted to Chinese monetary institutions.

That debt load, Western and Myanmar economists argue, aimed ultimately to facilitate China’s grand strategic designs for Myanmar, including a high-speed railroad connecting China’s landlocked southern region to a deep-sea port at Kyaukphyu that opens on to the Indian Ocean.

Local residents’ houses in front of buildings of a Chinese oil pipeline project on Myanmar’s Madae island in Kyaukphyu. Photo: Reuters/Soe Zeya Tun

Concerns of a potential sovereignty-eroding debt trap were aired in parliament last year over the China-backed $10 billion Kyaukphyu port project, which is now under government review and will likely be scaled back. The long-mooted railroad project, part of a so-called China-Myanmar Economic Corridor, is now back on the negotiating table.

As of 2011, the year the previous military regime started to loosen political restrictions to re-engage with the West, Myanmar had racked up some $6.7 billion in foreign debt, 97% of which was held by China, according to the government’s latest debt report cited in local media.

Another $3.1 billion was incurred between 2011 and 2016, when a quasi-civilian government led by Thein Sein, a former army general, was in power.

Chinese loans have gone mainly to pay for infrastructure projects, including hydropower dams, in joint venture agreements with mostly state-owned Chinese companies. Those projects, have not always gone as planned, sometimes to China’s chagrin.

In 2011, Thein Sein suspended the $3.6 billion Myitsone dam, a controversial project in the country’s northern Kachin state that was slated to block a major river’s upstream origin and export 90% of the power produced to southern China. Local groups had protested against the dam’s environmental impact.

Still, Myanmar may have to pay $800 million with interest to the state-owned China Power Investment Corporation, the amount it claims to have already spent on the dam. The NLD government is now grappling with whether to forfeit that amount or yield to new Chinese pressure to restart the project.

Myanmar State Counsellor Aung San Suu Kyi and Chinese President Xi Jinping at the Diaoyutai State Guesthouse, Beijing, August 19, 2016. Photo: AFP/Rolex Dela Pena

Another US$300 million owed to China was earmarked in 2013 to purchase agricultural machinery and implements. The government-to-government loan’s catch: all the equipment had to be procured and imported from China.

But “not a single dollar actually crossed the border and the equipment turned out to be useless” because it was of poor quality, according to a Myanmar-based economist familiar with the transaction told Asia Times.

Since the NLD came to power in 2016, Myanmar has endeavored to diversify its development assistance sources, apparently to mitigate its past dependence on China. In particular, it has turned to Japan and the Asian Development Bank, both of which offer lower interest rates and more favorable repayment terms than China.

Nick Freeman, an associate fellow at Singapore’s Institute of Southeast Asian Studies-Yusof Ishak Institute, questioned whether that diversification will be enough to lift the economy and improve the country’s ability to repay past debts.

In a 2018 report, Freeman wrote the NLD government “inherited a decidedly distorted economy… the profile of ‘Myanmar Inc’ has been one dominated by a relatively small number of family-owned conglomerates that leveraged their connections with the military leadership to enjoy unique business privileges.”

A fragile, illiquid and inefficient banking sector, controlled by a small number of so-called “cronies” — local businessmen with military connections —combined with high debts owed to Chinese financial institutions are part and parcel of that distortion.

Foreign investment, which many had anticipated would flow liberally into the country after it embraced a form of democracy and nominally opened up to the outside world, has so far been disappointing. As Freeman points out, “while numerous business delegations came and went, actual commitments and disbursements have been modest.”

Map of proposed China-Myanmar corridor. Image: Facebook

One major deterrent is that military rule, which began in 1962, left behind weak institutions to oversee and regulate the economy. Until 1988, Myanmar was a military-run socialist state where the only free-market activity occurred on ubiquitous black markets.

Limited free enterprise was allowed after 1988, but the military maintained a tight grip on the economy through its partnership with local entrepreneurs. While some liberalization was permitted beginning in 2011, the economy has yet to recover from decades of military mismanagement.

Recent abuses in Myanmar’s western Rakhine state, where more than 700,000 Muslim Rohingya have fled a harsh military crackdown into neighboring Bangladesh, has caused the West to re-impose limited sanctions and allowed China to reaffirm its financial leverage over the country.

While lawmakers may express concern about exposure to Chinese debts, new Western sanctions mean the government has few options outside of China for the loans and investment needed to develop one of Asia’s most backward economies.

While repaying loans with rice may seem like innovative thinking in Myanmar’s parliament, it is hardly a solution to the rising risk that the nation falls into a debt trap without the economic means to pay its way out.

China has leveraged debt defaults in other countries, including Sri Lanka, to push for sovereignty-eroding concessions. And in Myanmar there are plenty of economic areas where Beijing has expressed strategic interest in having more control.

Join the Conversation


  1. What’s up every one, here every person is sharing these kinds of familiarity, therefore it’s fastidious to read this weblog,
    and I used to pay a visit this blog every day.

  2. I like the valuable info you provide on your articles.

    I’ll bookmark your weblog and check again right here frequently.
    I am moderately sure I’ll be informed many new stuff right right here!
    Best of luck for the following!

  3. Today, while I was at work, my cousin stole my apple ipad and tested to see if it can survive a forty
    foot drop, just so she can be a youtube sensation. My iPad is now destroyed and she
    has 83 views. I know this is completely off topic
    but I had to share it with someone! plenty of fish natalielise

  4. Excellent post. Keep posting such kind of information on your site.

    Im really impressed by your site.
    Hello there, You have done a great job. I’ll certainly digg it and personally suggest to my
    friends. I’m sure they’ll be benefited from this web site.

  5. Link exchange is nothing else but it is simply placing the other person’s web
    site link on your page at appropriate place and other person will also do same in support of you.

  6. Good day! This is kind of off topic but I need
    some advice from an established blog. Is it difficult to set
    up your own blog? I’m not very techincal but I can figure things out pretty quick.
    I’m thinking about making my own but I’m not sure where to
    start. Do you have any ideas or suggestions?
    Appreciate it

  7. Have you ever thought about including a little bit more than just your articles?
    I mean, what you say is fundamental and everything. Nevertheless think of if you added some great images or
    videos to give your posts more, “pop”! Your content is
    excellent but with images and clips, this blog could undeniably be one of the most beneficial
    in its niche. Fantastic blog!

  8. What i do not understood is in fact how you are no longer really much more well-liked than you might be now.
    You’re so intelligent. You realize therefore significantly in relation to
    this topic, made me personally imagine it from
    numerous varied angles. Its like women and men don’t seem
    to be involved unless it is one thing to accomplish with Woman gaga!
    Your individual stuffs great. All the time take care of it up!

  9. Hi! I’ve been reading your web site for a long time now and finally got the courage to go ahead and give you a shout out from
    Porter Texas! Just wanted to say keep up the fantastic job!

  10. After going over a handful of the blog articles on your site, I really like your technique of writing a blog.
    I saved as a favorite it to my bookmark site list and
    will be checking back soon. Take a look at my website as well and tell me how you feel.

  11. Great post. I was checking constantly this blog and I am impressed!
    Extremely useful info particularly the last part 🙂 I care for such info much.
    I was looking for this certain information for a very long time.

    Thank you and best of luck.

  12. We’re a group of volunteers and opening a brand new scheme in our community.

    Your site offered us with useful information to work
    on. You have done a formidable job and our whole neighborhood will
    likely be grateful to you.

  13. Good day! Would you mind if I share your blog with my facebook group?
    There’s a lot of folks that I think would really enjoy your content.
    Please let me know. Cheers

  14. My brother suggested I might like this blog.
    He used to be totally right. This submit actually made my day.
    You can not consider simply how so much time I had spent for this info!

  15. Unquestionably believe that which you stated.
    Your favorite reason appeared to be on the net the easiest thing to be aware of.
    I say to you, I definitely get irked while
    people think about worries that they plainly do not
    know about. You managed to hit the nail upon the top and defined out the whole thing without having side-effects , people could take a signal.
    Will probably be back to get more. Thanks

Leave a comment

Your email address will not be published. Required fields are marked *