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The China-Myanmar Economic Corridor and China’s Determination to See It Through

A photo of Lucas Myers speaking at a conference with the Wilson Center logo in the background.
The entry port of the China-Myanmar border.
The quiet entry port of China-Myanmar border in Ruili, Yunnan, China.

Over the past decade, Chinese infrastructure investments under the umbrella of the Belt and Road Initiative (BRI) in Myanmar experienced a rocky history of stops and starts, as have other BRI projects in Southeast Asia. Despite setbacks, the infrastructure route in Myanmar—labeled the “China-Myanmar Economic Corridor (CMEC)”—promises to connect the Indian Ocean oil trade to China’s Yunnan Province and pay dividends for China by addressing internal development priorities, the strategic vulnerabilities of China’s oil supply, and its competition with India. A successful CMEC would therefore substantially improve China’s overall geopolitical fortunes in the region and further tie Southeast Asia into its orbit. Ultimately, the depth of China’s domestic and foreign policy interests in Myanmar and its significant influence and history of involvement in the country suggest that China’s escalated efforts to jumpstart the project will likely lead to CMEC’s success over the medium- to long-term. On a broader level, CMEC represents how BRI in Southeast Asia often operates in support of core Chinese interests and that these interests will remain and incentivize Chinese policy commitment even amidst global pushback and criticism of the initiative.

This year marks 70 years of diplomatic relations between the People’s Republic of China and Myanmar, which was recently celebrated with a formal visit by President Xi Jinping to Naypyidaw in January 2020. More than just a symbolic show of closeness, the visit signaled renewed Chinese interest in the country. Xi strongly reaffirmed China’s commitment to revive the stalled multibillion-dollar BRI projects in Myanmar by signing 33 new memoranda of understanding, some of which the Chinese highlighted as restarted even amidst the COVID-19 pandemic.

These BRI projects aim to provide alternative access to the Indian Ocean for the remote and underdeveloped Yunnan Province in southeast China, but remain troubled by slowdowns. Theoretically designed to upgrade the deep-water port at Kyaukphyu and connect it to Yunnan with an extensive infrastructure network, as well as several large-scale energy projects, CMEC bears most resemblance to the China-Pakistan Economic Corridor (CPEC). Although the exact price tag of China’s BRI investments in Myanmar is difficult to ascertain based on publicly-available information, the government-appointed Myanmar Investment Commission’s Directorate of Investment and Company Administration reports over $21 billion dollars in approved Chinese foreign direct investment as of March 2020.

However, the need for Xi’s personal intervention underscores significant ongoing implementation problems for China’s investments in Myanmar, issues that lead some analysts to consider the CMEC initiative unlikely to ever meet Chinese expectations.

However, the need for Xi’s personal intervention underscores significant ongoing implementation problems for China’s investments in Myanmar, issues that lead some analysts to consider the CMEC initiative unlikely to ever meet Chinese expectations. As reported by the Transnational Initiative, only 9 of the 40 previously proposed projects were underway prior to Xi’s January visit while 51 similar projects in Pakistan have been launched.

Although this poor state of affairs for CMEC serves as a microcosm of the lofty promises but continued uncertainties still dogging recently rejuvenated China-Myanmar relations, Xi’s recent injection of confidence and attention from the highest-levels of the Chinese government indicates China’s firm intention to resurrect CMEC amidst international blowback against BRI. The question thus emerges: can China’s renewed attention successfully turn CMEC into a flagship for global BRI or will the project—and China’s wider relationship with Myanmar—remain on life support? Accounting for the weight of China’s intensifying interests in Myanmar and new opportunities for engagement, the answer appears to be yes, CMEC is likely to become viable over the medium- to long-term after the conclusion of the 2020 elections in Myanmar—if Beijing remains determined to apply its policy levers to incentivize Naypyidaw’s acquiescence and overcome concerns among local populations and elites.

Myanmar Remains Wary of China

CMEC largely remains an idea on the drawing board rather than a reality, as efforts to get it off the ground have met with repeated challenges. Amidst fears of “debt traps,” CMEC had until Xi’s recent Chinese effort been replaced by smaller, less ambitious projects. In the first sign of trouble for China, Naypyidaw canceled the $3.6 billion dollar hydroelectric Myitsone Dam project in 2011. Myanmar’s subsequent National League for Democracy (NLD)-led civilian government first questioned and then reduced several high-profile Chinese projects worth billions of dollars. In 2018, the NLD favorably amended Myanmar’s ownership agreement with China for the crucial deep-water port at Kyaukphyu from a 15% stake to 30% for Myanmar and cut project costs by 80%. Furthermore, much of the local human rights community remains wary of sustainability issues and threats to local livelihoods, and even Myanmar’s military distrusts Chinese involvement due to China’s history of supporting ethnic minority rebels. Although this backlash has been tempered by the Myanmar government’s occasional signals of support for the project, such as State Counsellor Aung San Suu Kyi’s visit to the Belt and Road Forum in 2019, a climate of wariness remains a hindrance to CMEC.

This wariness stems from a long, surprisingly intimate, and sometimes-troubled history between China and Myanmar. In medieval times prior to Chinese conquest of Yunnan Province, the region was home to the Kingdoms of Nanzhao and Dali whose borders and ethnic ties extended into what is now northern Myanmar. In a manner reminiscent of CMEC's role as an infrastructure route to China, the Burma and Ledo Roads provided the Allies logistical access to Yunnan and Nationalist China during World War II. After the Chinese Civil War, thousands of Nationalist Chinese troops fled across this frontier to wage a cross-border guerilla struggle from bases in Myanmar’s loosely-controlled jungle regions before establishing a narcotics empire in the “Golden Triangle” border regions. Shortly after 1949, China began backing the insurgent Communist Party of Burma and continued to do so throughout the Cold War. The remnants of the Nationalists and Communist-supported groups still operate today in Yunnan-bordering Wa State and Shan State, while ethnically-Chinese Kokang rebels present an active nuisance to Naypyidaw. As a result of this history, China still exerts a strong influence over the ongoing peace process it now supports out of concern that Myanmar’s instability presents a threat. CMEC’s troubles can be at least partially explained by the fundamental distrust that exists between China and Myanmar, primarily as a result of Beijing’s past support for insurgent groups inside Myanmar beginning almost 70 years ago.

China’s Significant Interests in CMEC and Myanmar

Despite these limitations, however, CMEC is not doomed to fail. From a strategic perspective, China’s domestic and foreign policy interests tied to Myanmar indicate that China has both the wherewithal and intention to invest the significant energy and policy efforts necessary to ensure CMEC follows the path of Pakistan’s CPEC. China cannot easily allow CMEC to completely stall in the manner of some other BRI projects, as CMEC’s strategic significance is simply too important.

Domestically, Myanmar’s close ties with one of China’s most underdeveloped and ethnically diverse provinces, Yunnan, are one factor that draws the two countries together. Described by Chinese state media as the “major gateway to Southeast Asia and South Asia,” Yunnan Province shares a long and intertwined history with Myanmar. In a symbolic reminder of Yunnan’s ongoing issues with crime, many rural buildings along rough mountain tracks not far from the Myanmar border near Lijiang bare sharp glass shards to ward off intruders. Still one of China’s poorest provinces, Yunnan remains riddled with drug smuggling routes branching out of the Golden Triangle and suffers from occasional cross-border violence. In 2015, a clash between Myanmar’s military and local ethnic insurgents resulted in an airstrike that accidentally killed four Chinese citizens on China’s side of the border, and in 2011 a drug trafficking gang murdered 13 Chinese sailors in Thailand. The stability-minded Chinese authorities have demonstrated a desire to curtail this cross-border drug trade. However, this effort is complicated by the fact that the Chinese government has at times supported—and, according to Myanmar’s military, may still support—ethnic armed organizations (EAOs) in Myanmar’s outlying provinces funded by the narcotics trade. With Chinese authorities publicly promising to eliminate the province’s poverty by 2020, stabilizing Myanmar’s border and ensuring healthy international trade via CMEC to Yunnan can be considered a domestic interest of note for China.

Since the early days of the Cold War, India and China have been mired in a simmering competition exacerbated by China’s avid support for Pakistan.

Beyond domestic political concerns, Myanmar’s CMEC serves a similar purpose for China as Pakistan’s CPEC—an avenue for strategic advantage. 80% of China’s oil imported by sea travels along Indian Ocean routes through the vulnerable Malacca Straits, a geographic weakness concerning to Chinese policymakers. The importance of this trade route is demonstrated in part by the choice of Djibouti for China’s first overseas military facility on the basis of its closeness to the sea-lines of communication carrying Chinese oil. However, opening CPEC’s Gwadar Port to Middle Eastern oil only partially solves the problem because it creates another vulnerable chokepoint for blockade. Thus, diversifying energy shipping routes with investments in Myanmar’s CMEC becomes necessary policy for China’s leadership. Additionally, China also hopes to strategically surround India. Since the early days of the Cold War, India and China have been mired in a simmering competition exacerbated by China’s avid support for Pakistan. With CPEC flanking India to the west, CMEC could similarly isolate India from the east. The Indian government is well-aware of the China threat emanating from Myanmar: China claims much of India’s Myanmar-bordering state of Arunachal Pradesh and the dispute remains an open wound. To address these vulnerabilities, India invested heavily in establishing naval bases in the Andaman and Nicobar Islands offshore of Myanmar as a means of monitoring Chinese activity in the Indian Ocean. Considering this ongoing strategic rivalry, China’s involvement in Myanmar also represents a chess move against India.

CMEC’s Future Outlook

With its considerable interests in mind, the Chinese government recently launched several initiatives to reassure Myanmar’s people, and more importantly, its ruling elites about their activities in the country. Throughout the international opprobrium over Myanmar’s genocidal campaign against the Rohingya, China has unwaveringly supported the civilian government on the international stage and provided cover in the United Nations Security Council. On the issue of Myanmar’s internal insurgencies, China aims to advance peace efforts—albeit while allegations remain of Chinese support for some rebel groups along the border. On the public diplomacy front, China’s preferred narratives about CMEC and their most prominent concerns about relations with Myanmar emerge most clearly in Chinese state media as some articles extoll the economic benefits of CMEC and others highlight how CMEC could resolve Myanmar’s ongoing internal conflicts. In a possible sign of these Chinese initiatives, the ethnic Chinese-led United Wa State Army plans to participate in national elections for the first time ever this year.

However, despite China’s best efforts to expedite CMEC’s timeline and reduce Myanmar’s wariness, the 2020 elections likely mean that CMEC will remain slow-going until after 2021. From the NLD government’s perspective, the primary goal in 2020 will be to minimize electoral losses, a goal that necessitates careful handling of CMEC due to the prevalence of anti-China feelings in Myanmar. On the other hand, however, the government’s failure to force the military to accept anti-military constitutional reforms in early 2020—as well as stinging by-election losses in 2018—means the NLD must publicly promise to generally anti-NLD ethnic minorities that advancing peace talks will be a priority should the NLD win the election. Considering China’s continued influence amongst some of the larger rebel groups, an opportunity arises for the Chinese government to work with the NLD to ensure CMEC progresses during and especially after the elections. Looking past the next year, it is therefore likely that more space will open up for China to expand CMEC over the next several years should the NLD government successfully survive the coming elections.

China’s investments under CMEC promise to satisfy several of Beijing’s domestic and foreign policy interests, and the recent visit by Xi demonstrates his strong desire to jumpstart a stalled process.

China’s investments under CMEC promise to satisfy several of Beijing’s domestic and foreign policy interests, and the recent visit by Xi demonstrates his strong desire to jumpstart a stalled process. Thus, although far behind CPEC, CMEC’s associated projects will likely expand over the next decade. Furthermore, with the ongoing Rohingya crisis and the subsequently growing Western aversion to partnership with Myanmar, the Chinese are increasingly the primary international backer for the Myanmar government. Thus, Myanmar’s soft opposition to growing Chinese involvement in the country can be viewed as trending positively in favor of China. In the end, the likely outlook for CMEC in the immediate term remains “slow going,” but China’s deep interest ensures the initiative is unlikely to fail and will potentially result in a functioning infrastructure route over the medium- to long-term. Like Pakistan’s CPEC, an open and functional CMEC could substantially shift the strategic outlook for the region and China by countering India and addressing the Malacca Dilemma. For the region as a whole, CMEC exemplifies the strategic and domestic interests at play in China’s BRI projects, as well as its determination to see them through.

The views expressed are the author's alone, and do not represent the views of the U.S. Government or the Wilson Center. Copyright 2020, Asia Program. All rights reserved.

About the Author

A photo of Lucas Myers speaking at a conference with the Wilson Center logo in the background.

Lucas Myers

Senior Associate for Southeast Asia, Indo-Pacific Program
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Indo-Pacific Program

The Indo-Pacific Program promotes policy debate and intellectual discussions on US interests in the Asia-Pacific as well as political, economic, security, and social issues relating to the world’s most populous and economically dynamic region.   Read more