Chinese President Xi Jinping’s historic visit to Myanmar this month did not attract much regional media buzz, with most reports portraying the trip as more well-worn official promotion of his signature US$1 trillion Belt and Road Initiative (BRI).
But if the four most important of 33 agreements Xi signed with his Myanmar hosts during his tour are actually implemented – a big if considering BRI’s spotty follow through on ballyhooed projects – they would have far-reaching economic, political and strategic implications for South and Southeast Asia.
The first of those big four are ambitious plans to build a high-speed railroad from Myanmar’s northern border with southern China down to the central city of Mandalay and eventually to Myanmar’s southern coast.
The second aims to push forward the stalled Kyaukphyu port project situated on the Bay of Bengal, an initiative that would give China de facto access to the Indian Ocean and shift that region’s strategic calculus, particularly vis-à-vis India.
The third is a proposed mega-project to build a “new city” opposite Myanmar’s former capital Yangon, a scheme that would effectively give China a unique hold on the nation’s commercial hub and underscore Beijing’s tightening grip on the country’s broad economy.
The last of the big four is the establishment of a so-called “Border Economic Cooperation Zone” encompassing land on both sides of the two sides’ border at Muse in northern Myanmar and Ruili in southern China.
Together those four mega-projects will tighten China’s economic and strategic hold on Myanmar while giving it direct access to the Indian Ocean for the first time in its national history.
It all fits neatly with Beijing’s broader scheme to link ports it built at Hambantota in Sri Lanka and Gwadar in Pakistan, secure influence in the strategically located island nations of Maldives and Seychelles, and oversee ship traffic from its first overseas military base in Djibouti on the Horn of Africa.
All of those facilities, military and commercial, provide China with strategic footholds across the Indian Ocean, which Beijing needs to protect its growing interests in the region and beyond.
Myanmar is arguably the key to realizing that sweeping vision. No other neighboring country can provide China with a secure outlet to the Indian Ocean, bypassing the contested South China Sea and congested Strait of Malacca through which most of its fuel imports travel.
Pakistan borders China in the west, with the latter’s Xinjiang province connected by highway down to Pakistan’s lowlands and on to the sea. But the road is often blocked by snow and ice in winter and climbs to a rugged and risky altitude of 4,714 meters that China can not rely upon for crucial fuel or other imports.
Moreover, Xinjiang is located in the far western part of China, far from fuel import-dependent major cities and industrial centers.
China’s strategic interest in what eventually became the China-Myanmar Economic Corridor predates Xi’s BRI by several decades. As early as September 2, 1985, the official mouthpiece the Beijing Review ran a commentary by Pan Qi, a former vice minister of communications, who argued that China would have to find an outlet for exports for its landlocked southwestern provinces through Myanmar.
At the time, it was mainly a question of enabling those provinces to catch up economically with those on China’s south coastal region. To transport goods produced in the southwest to Chinese ports would be too difficult, Pan argued.
A map accompanying his article showed Myanmar’s highways, railroads and waterways, which could be used to establish an outlet for Chinese exports.
In the early 1990s, border trade took off and China established a special economic zone at Jiegao opposite Muse in Myanmar. Consumer goods from China went in one direction and timber, ores and precious stones traveled in the other.
In 2008 and 2009, agreements were made to build oil and gas pipelines from the Myanmar coast to China’s southern province of Yunnan.
Myanmar had become not only an outlet for Chinese exports but an ‘inlet’ as well, making it possible for some of China’s oil and gas imports to bypass the South China Sea and the Malacca Strait, which could readily be choked in any conflict with the US.
Today, China’s interest in Myanmar has gone well beyond all that. Now its initiatives in Myanmar are more about geo-strategic dominance. And it is here that problems and potential conflicts are becoming more evident.
China’s grand schemes are bound to collide with those of existing Indian Ocean powers such as India, the US, which maintains an important military base on Diego Garcia, and even France, which controls a large swathe of maritime territory in the south.
Other countries which are dependent on Indian Ocean sea lanes to connect with the rest of the world also have reason to be concerned.
Four-fifths of the container traffic between Asia and the rest of the world, and three-fifths of the world’s oil supplies pass through the Indian Ocean. The BRI and its links through Myanmar, if successfully implemented, could soon establish China as the Indian Ocean region’s dominant power.
This is all easy to understand from China’s point of view. Given the importance of cross-ocean trade and oil supplies from the Middle East, China undeniably requires a “defense umbrella” to protect its interests.
Trade represents 60% of China’s gross domestic product (GDP) and roughly 85% of that trade is seaborne. Hence China’s move to establish a military base in Djibouti and its increasingly frequent deployment of submarines and even warships in the Indian Ocean.
In September last year, the Indian Navy tracked down the Chinese amphibious warship Xian and a missile frigate which were deployed close to India-claimed waters.
Another Chinese frigate was spotted as part of what was officially termed an “anti-pirate escort task force”, to provide security from Somali pirates for Chinese merchant vessels. But Somali pirates, once the scourge of the maritime region, are a rare sight today.
While the ports China has prioritized for BRI investment and development – including Myanmar’s Kyaukphyu – are not officially meant to serve as bases for the Chinese navy, the world’s largest, they clearly could in times of uncertainty or even conflict be used for more than just trade.
The 2008 Myanmar constitution states unequivocally that “no foreign troops shall be permitted to be deployed in the territory of the Union.” But that does not preclude possible logistics and maintenance services for Chinese vessels involved in a future regional conflict.
If Xi’s promised deals are delivered, Kyaukphyu may in the near future have a direct high-speed railroad connection with China which would be of utmost strategic importance and not purely a commercial venture, as it is stated to be.
The Economic Cooperation Zone straddling the China-Myanmar frontier gives China another advantage which should be seen as strategic, as it would open the two sides’ common border in a hitherto unseen way.
The “Yangon New City” project, with Yangon Region chief minister Phyo Min Thein and Sino-Myanmar tycoon Serge Pun backing the scheme, would meanwhile help to expand China’s commercial and economic influence deep into Myanmar’s heartland.
The first phase of the mega-project will reportedly cover 8,000 hectares of land west of the Yangon river and will be led by the New Yangon Development Company Limited (NYDC), of which Pun is a chief executive.
In May 2018, NYDC signed a $1.5 billion framework agreement with China’s state-owned China Communications Construction Company (CCCC), which has pledged to build bridges, roads, a power station, water treatment plants and an industrial estate for the new city.
China’s mega-projects in Myanmar are at the same time controversial, as many may result in heavy debt burdens for Myanmar’s already cash-strapped government which could undermine the nation’s economic sovereignty in the case of default.
Myanmar’s government has been able to leverage that rising “debt trap” narrative to negotiate down the Kyaukphyu port project’s cost, reducing it from more than $7 billion to $1.3 billion and with the Chinese stake lowered from 85% to 70%.
Debt traps and economic dependence aside, there is now little in the way to stop China’s hard push south to the Indian Ocean. And once China is there, the much-touted Myanmar-China Economic Corridor, arguably one of the BRI’s most important components, will inevitably tilt the balance of power in the entire region.