6: Myanmar’s economic relations with China: who benefits and who pays?

Toshihiro Kudo

Table of Contents

Historical and political background
Trade relations
China as an important but unbalanced trading partner
Exports: weak impacts on the economic development of Chinese trade
Imports: China as a major supply source
Border trade: the main artery of the Myanmar economy
Economic and business cooperation
State-owned economic enterprises
Energy development
Conclusion: who benefits and who pays?


Against the background of closer diplomatic, political and security ties between Myanmar and China since 1988, their economic relations have also become stronger throughout the 1990s and up to the present. China is now a major supplier of consumer and capital goods to Myanmar, in particular through border trade. China also provides a large amount of economic cooperation in the areas of infrastructure, state-owned economic enterprises (SEEs) and energy. Nevertheless, Myanmar’s trade with China has failed to have a substantial impact on its broad-based economic and industrial development. China’s economic cooperation apparently supports the present regime, but its effects on the whole economy are limited. At worst, bad loans might need to be paid off by Myanmar and Chinese stakeholders, including taxpayers. Strengthened economic ties with China will be instrumental in regime survival, but will not be a powerful force affecting the process of economic development in Myanmar.

Myanmar and China call each other ‘paukphaw’, a Myanmar word for siblings. Paukphaw is not used for any other foreign country, reflecting Myanmar and China’s close and cordial relationship.[1] For Myanmar, China has historically been by far its most important neighbour, sharing the longest border, of 2227 kilometres. Myanmar regained its independence in 1948 and quickly welcomed the birth of the People’s Republic of China in the next year. The Sino–Myanmar relationship has always been premised on five principles of peaceful coexistence, which include mutual respect for each other’s territorial integrity and sovereignty and mutual non-aggression (Than 2003).

Nevertheless, independent Myanmar has been cautious about its relationship with China. In reality, Sino–Myanmar relations have undergone a series of ups and downs and China has occasionally posed a real threat to Myanmar’s security, such as the incursion of defeated Chinese Nationalist (Kuomintang or KMT) troops into the northern Shan State in 1949, overt and covert Chinese support for the Burmese Communist Party’s insurgency against Yangon up until 1988 and confrontations between Burmese and resident overseas Chinese, including militant Maoist students in 1967. Indeed, the Myanmar leadership, always extremely sensitive about the country’s sovereignty, independence and territorial integrity, had long observed strict neutrality during the Cold War, avoiding obtaining military and economic aid from the superpowers.

Dramatic changes have emerged since the birth in 1988 of the present government, the State Peace and Development Council (SPDC), originally called the State Law and Order Restoration Council (SLORC). The United States, the European Union, Japan and multilateral aid organisations all withheld official development assistance and some Western countries imposed political sanctions and weapons embargoes after 1990. Under mounting international pressure, the military regime in Yangon had no choice but to approach Beijing for help. As diplomatic, political and security ties between the two countries grew closer, economic relations also strengthened.

The purpose of this chapter is to examine the development of and changes in Myanmar–China economic relations since 1988 and to evaluate China’s growing influence on the Myanmar economy. It seeks to answer the question of whether or not the Myanmar economy can survive and grow with reinforced economic ties with China. In other words, can China support the Myanmar economy against the imposition of economic sanctions by Western countries? This question is relevant to assess the impact and effectiveness of sanctions. The chapter also tries to answer another question—namely, who benefits in what ways and who pays what costs as the two countries strengthen their ties, in spite of Myanmar’s isolation from the mainstream of the international community.

The second section introduces a brief history of how the two countries have become the closest of allies since 1988. The third section examines trade relations between Myanmar and China, while the fourth section describes Chinese economic and business cooperation with Myanmar. The last section summarises the author’s arguments and answers the research questions.

[1] According to DMLC (1993:266), paukphaw means ‘1. sibling, 2. intimate, and is an affectionate term conferred upon the Chinese by the Myanmar people’.