China's policy towards Myanmar: Yunnan’s commitment to Sino-Myanmar oil and gas pipelines and Border Economic Cooperation Zone

ABSTRACT

This paper examines how China has conducted its diplomacy with Myanmar through the efforts of the Chinese central government and the local government of Yunnan Province, which borders Myanmar. China has defined Myanmar as a country of strategic importance in the implementation of the Belt and Road Initiative (BRI) and is deepening its economic cooperation with Myanmar. China’s most important project in Myanmar is the oil and gas pipelines from ports in Myanmar to Yunnan Province. The construction of the energy pipelines was drafted and proposed by Yunnan Province and was submitted to the State Council. Due to the strong support of the state-owned enterprise, the proposal was adopted as a national project within two years since its proposal. In addition, Yunnan continued to propose to the central government for the construction of a Border Economic Cooperation Zone. The government of Dehong State in Yunnan proposed the plan to the Yunnan local government. Then, Yunnan continuously proposed it to the State Council. Yunnan could not get the strong support of Chinese major state-owned enterprises and the Myanmar government. It took nearly two decades for the proposal to be approved as one of the national projects by Beijing. In China, local governments can be involved in foreign economic relations within their capacity and responsibility for local socio-economic development. In the context of Beijing’s emphasis on strengthening relations with Southeast Asian countries, there are fair chances that Chinese local government proposals will be directly incorporated into the central government’s strategy.

KEYWORDS:

• The Belt and Road initiative (BRI)
• Yunnan province
• Chinese central government
• Myanmar
• Sino-Myanmar oil and gas pipelines
• Border Economic Cooperation Zone

1 Introduction

China and Myanmar share a border of nearly 2,200 kilometers and have had a long relationship. Since Myanmar became a military regime in 1988 and therefore isolated from the international community, China has supported the military government. After the civilian government took over in 2011, the Chinese government lost its privileged relationship. While keeping a close eye on the changing domestic political situation in Myanmar, Beijing had tried to build good relations with the officials of the National League for Democracy (NLD). China has defined Myanmar as a strategically important country in the Belt and Road Initiative (BRI) and has implemented economic projects in Myanmar.

About China’s foreign policy with Myanmar, previous studies have discussed China’s foreign policy with Myanmar as one of the constituent parts of its “China’s peripheral diplomacy”¹. In recent years, an increasing number of studies have discussed the importance of Myanmar in China’s national strategic project, the BRI. Zhao has focuses on the energy security strategy of the Chinese government and its implementation. He argues that Myanmar has occupied an important position in China’s strategy of securing access to energy resources in Southeast Asia and that the sectorial ties between the two countries have been strengthened since Myanmar’s transition². Li of Yunnan University positively points out that the BRI has paved the way for Myanmar’s economic development³.

Other previous studies emphasize numerous problems in China’s strategy in Myanmar. Peng argues that there are many problems, such as Myanmar’s anti-China sentiments, armed forces of the ethnic minority, religious issues, and the deteriorating political situation. It will take a long time for China to achieve its aims in Myanmar⁴. Xie emphasizes the impact of the changing international environment, pointing out that in addition to instability factors such as Myanmar’s concerns about China and further political changes, international factors such as Myanmar’s relationship with the Association of South-East Asian Nations (ASEAN), the United States and Japan will also affect the realization of the BRI in Myanmar⁵.

These previous studies are in common by focusing mainly on the central government and discussing its strategies and objectives. Foreign policy has often been viewed and analyzed by taking it for granted that strategies and policies are decided and implemented solely by central governments. However, various actors like the military, state-owned enterprises (SOEs), and local governments, have gained economic power and become more involved in foreign policy by China’s economic growth⁶. It has become difficult to assume China as a firm single entity. Local governments in particular aim to maximize their profits and are eager to increase their economic growth. Their commitment to foreign policy has been more prominent.

According to Mori, local governments have become the strongest interest group in China’s diplomacy, in which local governments are increasingly behaving like large corporations seeking huge profits⁷. Li points out that various stakeholders have been increasing as a result of the reform and opening up, in particular the involvement of local governments. Starting from the local governments of coastal regions, the circle of participation has increased and reached out to the inner-central region⁸. It is worth emphasizing that the local governments in the frontier regions are also playing an important and unique role in sub-regional foreign cooperation.

This paper examines how China’s foreign policy toward Myanmar has been implemented, not only by the Chinese central government but also by local governments. I analyze the regional government of Yunnan Province which is located in the inland of China and is the sole province that borders Myanmar. Yunnan is actively involved in the construction of energy pipelines and foreign trade, seeking further economic growth by strengthening its economic ties with Myanmar. Contrary to the known phenomenon that local governments have been “subordinate” to central governments in determining and implementing Chinese foreign policy, I will try to reveal that local governments are conducting their foreign economic activities to maximize their economic interests toward South-East Asian countries. This paper examines China’s diplomacy with Myanmar and its economic diplomacy mainly by referring to research by academics in China and Yunnan Province, yearbooks published by Yunnan Province, and official reports issued in China.

Following Chapter 2 provides an overview of China’s diplomacy with Myanmar before and after the transfer of Myanmar’s civilian government, mainly from the perspective of China’s central government. Chapter 3 looks into Yunnan Province’s involvement in the construction of the Sino-Myanmar energy pipelines. Chapter 4 deals with Yunnan’s approach to Myanmar regarding the formation of the Border Economic Cooperation Zone. Chapter 5 discusses the problems of Sino-Myanmar economic cooperation. Finally, I will summarize the changes in China’s foreign policy toward Myanmar.

2 China’s foreign policy toward Myanmar

2.1 Before and after the transfer to civil administration in Myanmar

In this chapter, I will summarize the foreign relations between China and Myanmar. The relationship has been friendly, described as “Pauk Phaw.” This is a Myanmar phrase meaning “blood brothers” and refers to China or Chinese people in a friendly way. When Myanmar gained independence in 1948 and the People’s Republic of China was established in 1949, both countries established diplomatic relations on June 8, 1950⁹. China signed a border treaty with Myanmar in 1960 on a border of over 2,200 km. This was the first case China had demarcated a border with a neighboring country. In addition, China had abandoned 82% of its disputed land with Myanmar¹⁰.

The relationship began to improve in the late 1970s after Deng Xiaoping was back in power. The Chinese government adopted the policy of “good-neighbor diplomacy” with Asian countries, joined with policies of reform and opening up. Deng Xiaoping visited Myanmar as his first official foreign visit¹¹. In 1988, Myanmar military regime suppressed the pro-democracy movement and placed Aung San Suu Kyi, the symbol of the pro-democracy movement, under house arrest. Still, the Chinese government maintained its relations with the military regime by supplying arms and continuing exchanges of senior-level officials¹².

During the millennium years, Western countries imposed economic sanctions on Myanmar’s military government for human rights issues, which made the latter more dependent on China. As China continued its high economic growth, it expanded investments in Myanmar. Many projects driven by Chinese funds and technology have been implemented in Myanmar, mainly in the fields of the energy industry and infrastructure development. However, many of China’s investments and infrastructure construction projects often failed to shoddy planning. Myanmar’s economy did not grow and was left with its massive debt. Many of the project contracts were unilaterally in better terms for China, with the condition that most of the deliverables be exported to China. Myanmar’s military regime was becoming increasingly concerned about the country’s excessive dependence on China. Therefore, under the leadership of Prime Minister Thein Sein, Myanmar enacted a new constitution in 2008 and held a general election in November 2010. In the following year, Thein Sein was inaugurated as the President of Myanmar.

Under the Thein Sein administration from 2011 to 2015, China-Myanmar relations changed from “highly dependent on China” to “more normal relations.” In May 2011, President Thein Sein chose Beijing for his first foreign visit and met with President Hu Jintao (Xinhua, May 27 2011). At the beginning of the new administration, it seemed that the relationship between China and Myanmar would maintain its status quo. Contrary to such observation, the new administration made significant changes in its policies, both in domestic affairs and foreign policy. On the domestic front, the new Myanmar government reconciled with the NLD. On the diplomatic front, the new government drastically revised its stance, shifting away from the China-dominated relation and turning toward improved relations with Western countries. In particular, the cancellation of the Myitsone Dam construction announced in 2011 was viewed as a symbolic event of Myanmar’s shift away from China.

The Myitsone project was agreed upon by China and the military government in 2009 and was planned as a large-scale dam upstream of the Ayeyarwady River, a large river running north-south through Myanmar. Its impact on Myanmar’s society and the environment was overwhelming, including environmental destruction and forced resettlement of habitats. If completed in 2017 as planned, it was to become the largest power plant in Myanmar. The project was mainly funded by Chinese SOEs to transmit most of the generated electricity to China. It was a typical pattern of cooperation between the two countries during the military era¹³. In September 2011, President Thein Sein announced in the parliament that the project would be frozen during his term of office. This decision had a huge impact on the Chinese side. Beijing strongly expressed its disappointment against Myanmar’s decision. Myanmar’s government officials visited China one after another to rebuild a common understanding with the Chinese side¹⁴. Moreover, the Thein Sein administration has asked China to renegotiate the previous construction plans to achieve better terms for Myanmar. The Chinese side reluctantly acceded to Myanmar’s request.

However, such a shift did not mean that China-Myanmar relations have deteriorated. President Thein Sein frequently visited China during his term. In addition, Chinese SOEs continued to receive many orders and undertook construction works for various natural resource development projects in Myanmar. For instance, the Letpadaung copper mine has been run primarily by a Chinese state-own company, Wanbao Mining company, regardless of the opposition by Myanmar’s residents¹⁵. Although the construction of the Myitsone Dam was frozen, China and Chinese SOEs retain a strong presence in Myanmar.

2.2 China’s changing approach toward Myanmar’s civilian government

This section looks into China’s approach toward Myanmar from February 2016, when the NLD took power, to the end of January 2021. Led by Aung San Suu Kyi, the NLD won the general election and came to power in February 2016. At the beginning of the transition to civilian rule in 2016, the international community considered the relationship between China and Myanmar would deteriorate. The Chinese Communist Party (CCP) had been a strong supporter of Myanmar’s military regime which had placed Suu Kyi under house arrest for a long period. The Chinese government acted pragmatically after observing the political change in Myanmar and sought to maintain good foreign relations.

During Myanmar’s military regime, China was able to maintain good foreign relations and economic cooperation by making contact only with the Myanmar national army and its officials. After the transition to civilian rule, China expanded contacts with various Myanmar political and business circles and tried to build new human networks. The Chinese side frequently invited and entertained the NLD officials and executives to China, promoting networks between both sides¹⁶. China has invited a wide range of senior officials and policymakers not only from the NLD but also from other parties and made them visit China to observe China’s high-speed railroad¹⁷. China has also contacted Myanmar NGOs to build good relationships, provided support to Chinese businessmen living in Myanmar, and increased Myanmar’s foreign students in Beijing¹⁸. After the transfer to the civilian government, the actors involved in policymaking in Myanmar have become more diverse. There are more opportunities for Myanmar’s pro-democracy forces, NGOs, and the voices of the people to influence foreign policy. For this reason, the Chinese government has been trying to build good relations with new actors in Myanmar.

After 2017, Myanmar started to re-approach China. As Myanmar was severely criticized by the international community for its Rohingya issue, the NLD government turned toward Beijing for cooperation¹⁹. In 2017, Aung San Suu Kyi herself visited China to attend the first “The Belt and Road Forum for International Cooperation” in Beijing. She expressed her cooperation and support for the BRI. Later in February 2018, the new “Belt and Road Implementation Committee” was established within the Myanmar government to take charge of the China-Myanmar Economic Corridor (CMEC). Suu Kyi herself assumed the Chair of the committee (Xinhua, December 8 2018). In 2019, Suu Kyi visited China to attend the second “The Belt and Road Forum for International Cooperation” where she repeatedly expressed her support for the BRI. China responded to Myanmar’s cooperation. In January 2020, at the 70th anniversary of the establishment of diplomatic relations between China and Myanmar, Chinese President Xi Jinping visited Myanmar as his first foreign visit in 2020. During Xi’s visit, China and Myanmar pledged to strengthen relations and further economic cooperation under the BRI.

Even after the transfer of Myanmar’s civil administration, Myanmar remains geopolitically and strategically important to China. In recent years, the Chinese government has been trying to build cooperative relations between the two countries through the implementation of the BRI. Several economic cooperation projects have been ongoing in Myanmar. Among them, the Chinese government attaches great importance to Myanmar on two fronts. One is from the perspective of energy security. China tried to build the energy pipelines from Yunnan Province to the Indian Ocean via Myanmar, thus solidifying the Indian Ocean route. The second is economic cooperation. The further expansion of cross-border trade and the development of Myanmar’s market as an outlet for Chinese SOEs are important to both the Chinese government and the bordering Yunnan Province. In the following chapter, we will look into these cases in detail.

3 Local government’s involvement in Sino-Myanmar oil and gas pipelines

One of the most important aspects of the Chinese government’s relationship with Myanmar is the construction and operation of energy pipelines. The natural gas pipeline was built under the initiative of China’s state-owned China National Petroleum and Natural Gas Corporation (CNPC) and entered into operation in 2013. The gas produced off the coast of Rakhine State in western Myanmar is transported to China. The crude oil pipeline has been in service since 2017, running parallel to the gas pipeline. It carries crude oil brought in by tankers from the Middle East and Africa, which are unloaded at Myanmar’s Chao Pyu port and transported to Yunnan Province and finally to Chongqing City. These two pipelines are important routes for China to import energy resources while avoiding the South China Sea where U.S. military vessels are on alert. There is also a China-led plan to develop a large port in Chao Pyu, making it an important base for the Belt and Road initiative. In addition, the Chinese government has proposed the construction of an expressway and a high-speed railroad running parallel to the two energy pipelines, a part of the expressway has already been completed. These two energy pipelines were originally proposed to Beijing by Yunnan Province. Yunnan’s proposal was in line with the central government’s strategy of diversifying energy acquisition and was upgraded to a national project within two years of its proposal. In the following, we will take a look at Yunnan’s initiative, the state-owned enterprise’s promotion of the project, and its relationship with Yunnan Province.

3.1 Yunnan province’s commitment to the construction of energy pipelines

Unlike China’s coastal cities, the government of Yunnan Province has been relatively slow to develop its economy. Before the construction of the energy pipelines, Yunnan’s main industries were primary industries such as the tobacco industry. There were no large-scale refineries, and Yunnan relied on refineries in southern and northern China. To change this situation, Yunnan Province sought to establish itself as the “petrochemical base” of southwest China through the construction of the Sino-Myanmar energy pipelines, taking advantage of its geographical proximity to Southeast Asian countries²⁰.

The construction of oil and gas pipelines between China and Myanmar was first proposed in the 1990s. Due to the low price of crude oil at the time, many officials were not interested in the idea, believing the investment cost was too high and far from profitable. In July 2004, Li Lianzhong, Director of the Economic Bureau of the Central Policy Research Institute, started to discuss the importance of opening up a new route for energy imports from Myanmar²¹. In August 2004, scholars from Yunnan University, including Wu Lei and Li Chenyang, submitted the proposal to the State Council to build an oil pipeline from Myanmar to Kunming. The proposal stressed the benefits of building a Sino-Myanmar oil pipeline, stating that it would be able to solve the so-called “Malacca dilemma”²².

The Yunnan provincial government also held several study meetings within the province to examine the prospects of realizing Sino-Myanmar pipelines. In late 2004 and 2005, the Yunnan provincial government submitted a report to the State Council proposing the construction of a Sino-Myanmar pipeline²³. At the National People’s Congress in Beijing in March 2006, the 91 members of the Yunnan provincial delegates made a joint proposal on the construction of Sino-Myanmar pipelines and the construction of an oil refinery based in Yunnan²⁴. In the following April, the National Development and Reform Commission formally approved the construction of the Sino-Myanmar pipelines²⁵. Within only two years, Yunnan’s proposal was upgraded to a national project.

There was also competition among the local governments for the construction of the Energy pipeline. Yunnan Province and Chongqing City made their proposals to the State Council on how far the crude oil pipeline should be extended. Chongqing is the central city of southwest China but suffered a disadvantaged situation in terms of energy supply like Yunnan. Aiming to become a petrochemical base for southwest China, Chongqing also insisted on the need to extend the Sino-Myanmar oil pipeline to Chongqing and to build a large-scale oil refinery. Huang Qifan, vice mayor of Chongqing, had publicly stated that the Chongqing municipal government, together with Sinopec which is CNPC’s rival, had continuously proposed to the State Council for the Sino-Myanmar oil pipeline to be extended to Chongqing²⁶. In the end, CNPC took the lead in the construction of the pipeline, but the oil pipeline was extended through Kunming in Yunnan Province to Chongqing City. This route was taken into account the interests of Yunnan and Chongqing.

3.2 Yunnan province and state-owned enterprises

One of the reasons why Yunnan’s pipeline proposal was approved as a national project in less than two years was that major state-owned enterprises strongly supported the plan. Yunnan Province worked close with CNPC to build the Sino-Myanmar energy pipelines. In this section, we will take a look at the major state-owned enterprises and their relationship with Yunnan Province.

Major state-owned oil companies such as CNPC and Sinopec have much influence on China’s foreign policymaking. In terms of personnel, many high-ranking officials in the CCP had worked for oil-related companies. They are called the “oil faction.” The most famous “oil faction” politician is Zhou Yongkang. He worked at CNPC for 32 years and had a strong influence on policymaking in the Hu Jintao administration. CNPC and Sinopec are both dominant players in China’s onshore oil extraction and have been in fierce competition. CNPC has been planning to build a network of natural gas pipelines in South China and other regions to create a network of pipelines onshore China. Although the southwestern part of China including Yunnan Province was originally a Sinopec-dominant region, CNPC seemingly aimed to suppress Sinopec’s influence by strongly supporting the construction of the Sino-Myanmar pipelines²⁷. CNPC’s active support for the construction of the Sino-Myanmar pipelines was rooted in the rivalry between the two companies.

In December 2007, CNPC and the Yunnan Provincial Government signed an agreement in Beijing. The contents of the agreement included preliminary work on the construction of the Sino-Myanmar pipelines, joint promotion of the construction of a 10-million-ton-per-year oil refinery construction in Kunming, and CNPC’s undertaking to fully develop Yunnan’s gas network and gas station network (Xinhua, January 18 2008). CNPC has been responsible for the entire energy network of gas and oil in Yunnan Province. In addition, local state-owned enterprises in Yunnan Province also participated in this project. Yunnan Tianhua Group, a leading company in Yunnan Province, has been involved in the construction of Yunnan’s natural gas transportation pipeline network and the gas business in urban areas²⁸. Yunnan Provincial Government and CNPC established a strong cooperative relationship, paving the way for the province’s economic development.

The cooperative relationship between Yunnan Province and CNPC was also evident in CCP’s appointments. Li Xinhua, the deputy director of Yunnan Province, was appointed as the deputy director of CNPC in 2007. Li’s career was mostly built up in the energy sector, starting from the Yunnan Natural Gas Chemical Plant²⁹. After serving as the president of Yunnan Tianhua Group Corporation, Li became the deputy governor of Yunnan Province in 2003. In May 2007, when the plan of Sino-Myanmar energy pipelines was upgraded to a national project, the State-owned Assets Supervision and Administration Commission (SASAC) appointed Li Xinhua as deputy general manager of CNPC’s Beijing headquarters. Li had rich experience in the natural gas chemical field and was most likely to be in charge of a similar job at CNPC³⁰. In the case of Li, it was common for such large state-owned enterprises and government departments to exchange personnel. For example, after serving as deputy director of Qinghai Province, Jiang Jiemin became general manager of CNPC and then director of the SASAC³¹.

3.3 Problems with energy pipeline construction

There are several problems in the construction and operation of energy pipelines. One of the problems on the Chinese side is the risk of seeking profitability. China has invested more than 1.5 billion dollars in the construction of the crude oil pipeline, but the maximum transportation capacity is around 22 million tons per year. This amount only reaches about 6% of China’s total crude oil imports as of 2017 (Nikkei, April 13 2017). One-third of the crude oil consumed by China goes through the Strait of Malacca, which remains under the influence of the US Navy. Myanmar’s crude oil pipeline currently falls far short of serving as an alternative route to the Strait of Malacca. In addition, the cost of managing the pipelines is also heavy. Although China paid a large amount of money for the construction and management, the pipelines are far from profitable, nor is it expected to recover the investments shortly.

When the proposal was submitted to Beijing, there were arguments in China that the pipelines was not worth the cost. Some questioned whether it was necessary to spend billions of dollars to build the pipeline, even in the event of the sea lanes through the Strait of Malacca being threatened. If an attack on the sea lanes occurs, the pipeline through Myanmar will also be targeted³². The risk of an attack on the pipelines by a small number of armed groups within Myanmar is also high. Recently, there has been a decline in the number of reports in Chinese media and posts on social networking sites against Beijing’s policies. Under the Xi Jinping administration, China tightens control of media and internet speech. This also occurred after the pipeline project was treated as one of the national projects of the BRI. When the decision was made to build a crude oil refinery in Kunming of Yunnan Province, residents in the vicinity campaigned against the construction of a new refinery due to environmental concerns (Reuter, May 4 2013). Yet, there was no Chinese media coverage of the movement.

Although many problems have been pointed out, the Chinese government has invested heavily in the pipelines. It seems that the Chinese government believes that constructing and operating pipelines would be a highly valuable investment in terms of energy security which would help acquire a route to the Indian Ocean. Li Chengyang of Yunnan University discussed the advantages of developing China-Myanmar relations. He insisted that China’s development model had become more mature and had achieved great results, many people in Myanmar felt that there was no need to seek the development models of distant Western countries³³.

The construction of the pipelines plays a significant role in the economic development of Yunnan Province. The construction of the pipelines connecting China and Myanmar was based on Yunnan’s continuous proposals to Beijing. Within two years, Yunnan’s proposal was recognized by Beijing as a national project and received massive economic support. This was due to two major factors: Yunnan’s ability to anticipate the central government’s intentions and seize the right moment, and the strong support of major state-owned enterprises. The millennium years were a period of China’s rapid economic growth, when it imported and consumed large amounts of energy from Africa and Central Asia. Yunnan Province continuously proposed the pipeline project to the State Council, keeping an eye on the trends and policy directions of Beijing. At the same time, the support of state-owned enterprises led to the early realization of the project, as CNPC was already well experienced in the construction and operation of energy pipelines. It was only with the support and encouragement of CNPC that the Sino-Myanmar pipeline was realized. This case shows how local governments and SOEs actively support and complement the Chinese government’s energy policy.

4 Yunnan province’s involvement in the “Border Economic Cooperation Zone”

4.1 The struggle of Dehong and Yunnan local governments

This chapter looks into the process of which Yunnan Province proposed to Beijing the construction of a Border Economic Cooperation Zone with Myanmar. It took a long time to be upgraded into a national project. In January 2020, China and Myanmar announced a Memorandum of Understanding (MOU) on the construction of the China-Myanmar Economic Corridor (CMEC). The MOU lists 33 areas of cooperation, including the construction of a China-Myanmar Border Economic Cooperation Zone which aims to develop logistics, manufacturing and processing bases, and tourism, and further develop border trade. Yunnan Province has been trying to elevate the local government’s regional development strategy up to the level of a national strategy to draw financial support from the state. Originally, the plan was developed by the officials of Dehong Province which is one of the administrative regions of Yunnan Province. The plan is aimed at the economic development of Dehong province. It was proposed to the Yunnan Province government, then, Yunnan Province strives to approve from the State Council in Beijing.

The administrative region of Yunnan Province consists of eight “cities” and eight “autonomous provinces,” which includes Ruili in Dehong Province with its China-Myanmar borders. In 1978 Ruili was approved at the national level as a test zone for China’s reform and opening up. In December 1990, Ruili’s border trade with Myanmar was approved and began to open to the outside world³⁴. However, more than 90% of Yunnan Province is mountainous, and to develop an economic exchange with neighboring countries, the development of transportation infrastructure has been a major task. Due to the inconvenience, Yunnan and Ruili were unable to develop economic relations with Myanmar.

The government of Yunnan’s Dehong Province has been planning to build a Border Economic Cooperation Zone for many years. When the report of the 17th CPC Congress in November 2007 indicated China’s policy of further opening up border areas to the outside world. Dehong Province government stepped up its efforts to lobby the Yunnan Provincial Government. The report by Dehong stated that the construction of the Sino-Myanmar Economic Cooperation Zone was in line with the intentions of the Beijing government and that it was a meaningful project that would promote China-Myanmar relations³⁵.

Dehong Province government also launched a full-scale investigation team and submitted its report. The plan was approved by Dehong provincial assembly and submitted to the Yunnan Provincial Government and the Yunnan Provincial Party Committee in December 2007. The report strongly appealed to the importance and necessity of the Border Economic Cooperation Zone, conditions of its construction, the overall plan, and specific measures to be taken to win the support of the state and Yunnan province. It recommended that the State Council should approve the following three points; Provide Yunnan province with the authority to implement the Border Economic Cooperation Zone; The Chinese government should hold consultations with Myanmar as a matter of state; Seek the state’s support like other local government which already got the support from Beijing. To achieve these goals, the report suggested that a study team for the construction of an economic zone should be formed within the Yunnan provincial government and that the people in charge of Dehong and Ruili should participate in this study team which would enable them to lobby the state³⁶. An official of Dehong Province stated, “Xinjiang, Heilongjiang, Guangxi and other border provinces and autonomous regions were already building cross-border economic cooperation zones. Yunnan province should also continue its efforts to get the state council to approve the plan.”³⁷

The Dehong provincial government itself has been trying to build good relations with Myanmar. The Dehong provincial government held regular meetings with the Ministry of Commerce of Myanmar. In addition, Dehong Province held consultations with the Ministry of Tourism, and other relevant departments of Myanmar to promote the cooperation zone³⁸. In 2014, officials of Dehong Province and the Minister of Commerce of Myanmar held a meeting and exchanged views on the development of the Border Economic Cooperation Zone³⁹.

The Yunnan provincial government continued to appeal to Beijing, requesting the State Council to include Ruili and other border trade points as national test zones. The Yunnan Provincial Government kept close contact with and held meetings with the Chinese Ministry of Commerce (MOFCOM). In November 2008, MOFCOM and the Yunnan Provincial Bureau of Commerce co-hosted the “Border Economic Cooperation Zone Development Seminar” in Ruili, where they clarified the goal of further developing the Border Economic Cooperation Zone⁴⁰. In this way, the Dehong provincial government and the Yunnan Provincial government developed a plan and continued to lobby the Myanmar side and Beijing. In 2009, President Hu Jintao stated, “Yunnan would be a bridgehead for opening up to the southwest,” and the status of Yunnan Province in China’s national strategy increased. In May 2011, the State Council announced that Yunnan Province would be an important base for China’s opening up of the southwest region to the outside world⁴¹. Ruili had also been designated by the State Council as a pilot zone for development and opening up⁴².

Myanmar’s NLD government began to make economic overtures to China. In May 2017, the director of China’s Ministry of Commerce and the director of Myanmar’s Ministry of Transport and Communications formally exchanged documents on the development of a Border Economic Cooperation Zone in the presence of Premier Li Keqiang and State Counselor Aung San Suu Kyi⁴³. And in January 2020, when President Xi Jinping visited Myanmar, it became one of the national projects.

As described above, its geographical location had urged Yunnan province to focus on the idea of “opening up to the outside world” and formulate a cross-border regional economic promotion policy with Myanmar. To realize the policy, infrastructure development was necessary, yet Yunnan’s finances alone were insufficient. Yunnan took action actively to extract financial support from Beijing. In 2011, the central government approved the policy, and the project was launched shortly after. Finally, the Economic Cooperation Development Zone was nominated as one of the projects in 2020.

In China, local governments have begun to involve themselves in substantive foreign relations, especially foreign economic relations, within their capacity and responsibility of local socio-economic development. In the course of Beijing’s increasing emphasis on strengthening relations with Southeastern Asian countries, Chinese local government advocacy has fair chances to be directly incorporated into the central government’s strategies. In the case of Yunnan Province, although taking considerable time, local government plans and recommendations were elevated to form a part of the national foreign strategy.

4.2 The long road to realize the construction plan

It took nearly two decades for the construction plan to be approved by the central government with financial support. There will be two reasons. Firstly, the foreign policy coordination between the central and Yunnan provincial governments does not always go hand in hand, and policy decisions were time-consuming. There are contradictions and conflicts between China’s central government and local governments, as each pursues its interests in China’s foreign policy. Local governments and local state-owned enterprises often pursue short-term economic interests. Because of the difference in emphasis between national plans and local understandings, local governments often implement conflicting and contradictory policies in pursuing their interests. This trend has led to problems such as indiscriminate logging of forest resources and environmental destruction in northern Myanmar.

Foreign policy coordination between China’s central government and Yunnan’s local governments is not always successful. As for the construction of an economic cooperation zone for cross-border trade, among the 16 administrative regions bordering Myanmar, three governments of Yunnan’s administrative regions had submitted different proposals. These were the governments of Ruili in Dehong Province, Houqiao in Baoshan City, and Mengding in linking City, each creating a draft plan and submitting proposals to Yunnan Province and Beijing⁴⁴. In the end, Ruili in Dehong and Muse in Myanmar were chosen as the economic cooperation zones. Beijing had to make a difficult choice and it took a long time to realize the plan. Various actors involved in policymaking complicated the central government’s decision-making process.

Secondly, the construction of the Sino-Myanmar Border Economic Cooperation Zone took a long time to realize because it was difficult to gain supporters outside Yunnan’s local government. In China, the policymaking authority on policymaking is dispersed among several government departments, making it difficult to unify and coordinate policymaking. Therefore, even if an issue is on the policy agenda, the lack of a strong support group may end up in low priority⁴⁵. The construction of the Economic Cooperation Zone could not have the strong support of Chinese major state-owned enterprises, nor was it supported by the Myanmar government. Myanmar was under military rule during the millennium years, which increased the uncertainty of Chinese investment in Myanmar. There were also doubts in Myanmar toward the construction of the Economic Cooperation Zone which was mainly promoted by China⁴⁶. In addition, Myanmar’s domestic security situation is unstable, and the China-Myanmar border falls under the sphere of a few armed groups. Although the Myanmar government controls Muse, the security situation remains unstable⁴⁷.

Local governments outside Yunnan were also planning many projects and submitted proposals to Beijing. Provinces and cities along the border, such as Xinjiang, Heilongjiang, and Guangxi, were accelerating the construction of cross-border economic cooperation zone. The economic cooperation zone in Xinjiang was a focus of Beijing for stabilizing the region. In Heilongjiang, there was Russian support. In Guangxi, there was cooperation from Vietnam, which continued to develop its economy⁴⁸. Compared to the other regions, the domestic political situation in Myanmar has been unstable, and Myanmar’s distrust of China has been increasing. Even among neighboring countries, there are differences in attitude toward economic cooperation with China. The promotion of the Border Economic Cooperation Zone in Yunnan does not advance as far as Yunnan had initially expected.

Myanmar began to approach China again in 2017, as criticism from the international community intensified over the Rohingya issue. Beijing’s intention to improve Myanmar’s relations in implementing the BRI coincided with the timing of improving Sino-Myanmar relations, and the plan to build an economic cooperation zone was able to be adopted as a national project by Beijing. Thus, a locally prepared Border Economic Cooperation Zone required persistent proposal and negotiation with Beijing and the encouragement of cooperation and support from neighboring countries.

5 Points for discussion

There are many obstacles to China’s diplomatic progress in Myanmar. The instability of Myanmar’s domestic situation poses several risks to China. Firstly, Myanmar’s security situation has been unstable. Conflicts between Myanmar’s ethnic minorities and the national army have been a risk. A clash between the two sides halts the Sino-Myanmar economic cooperation projects. Such conflicts have been ongoing from the time immediately after independence to the present. The China-Myanmar border region is largely under the control of Myanmar’s ethnic minority armed forces, and some areas are not controlled by the Myanmar government. Ruili-Muse, where the pipeline runs nearby and is the center of cross-border trade, is the only border gate among the four that is in an area controlled by the Myanmar government. The Sino-Myanmar pipelines and the Border Economic Cooperation Zone were essentially set up in areas controlled by Myanmar’s national army, but there have been incidents of attacks here as well. In August 2019, Myanmar’s ethnic minority militants attacked a military college and a police station near Mandalay, resulting in casualties. The worsening security situation has forced cross-border trade with China and its construction of highways to halt for a while (Reuter, August 15 2019). In Kachin State, northern Myanmar where the pipelines run through, clashes between ethnic minority armed forces and the Myanmar national army have continued intermittently.

Secondly, the political situation in Myanmar is on the verge of crisis due to the coup d’état. The coup d’état by the Myanmar national army occurred in February 2021, Myanmar is in turmoil. China has taken a quiet stance on the coup, based on its stance of noninterference in other countries’ internal affairs, but investment agreements and construction projects between China and Myanmar are forced to be halted and suspended. After the coup d’état, there was growing opposition among Myanmar citizens against China, which has been known to have close ties with the military. In May 2021, in the suburbs of Mandalay, the facilities related to Sino-Myanmar pipelines were attacked. Myanmar’s local media “The Irrawaddy” reported that the Chinese government had held an emergency meeting with the national military authorities and asked them to strengthen security at the pipeline facilities in March 2021. Nonetheless, the pipeline-related facilities were attacked by forces opposing the Myanmar national army (The Irrawaddy, May 6 2021). The Chinese government needs to increase security guards to ensure the operation of the Sino-Myanmar pipelines. China which has undertaken the largest number of economic projects has suffered enormous economic losses.

Thirdly, Myanmar’s distrust against China leads to suspension or even renegotiation of economic cooperation projects. Myanmar had received a large number of investments from China during the military era to develop its infrastructure, but the conditions were often favorable to China and the plans themselves were sloppy, making Myanmar’s economic development a bitter experience. Since the transition to civilian rule, the Myanmar government has increased its bargaining power and renegotiated the terms with China. As a result, the full-scale operation of the Sino-Myanmar oil pipeline was significantly delayed. Test operations in January 2015 were suspended until April 2017. It is said that Myanmar pressed China to renegotiate the terms on tolls and taxes (Reuters, August 2 2018). The construction of the Border Economic Cooperation Zone between Yunnan Province’s Ruili and Myanmar’s Muse has also taken a long time to be realized due to Myanmar’s distrust against China. There is growing concern about China’s “debt trap” in emerging economies, where countries receive financial assistance from China but fall into over-investment and are unable to repay their debts. The scale of the Chau Pyu port, which is an important project of the Economic Corridor, has been reduced because the Myanmar government is concerned about China’s “debt trap.”

China has responded to Myanmar’s concern on China’s “debt-trap diplomacy.” President Xi himself was present at the Second “One Belt One Road International Forum” in April 2019 and emphasized that the Belt and Road initiative should be shared by all the world and should be looked upon as public goods. Zou Chunmeng and Wang Haoyuan of Yunnan University respond to the concerns on the debt trap. They argue that the debate about China’s debt trap has been heated up throughout the world, yet the argument about the debt trap in China-Myanmar economic cooperation is baseless. It will be better to stay with the plan to realize economic projects which lead to coexistence and co-prosperity between China and Myanmar⁴⁹.

Under the BRI, China is pursuing several economic projects in Myanmar, including the operation of energy pipelines and the development of a Border Economic Cooperation Zone. In many of these projects, China has invested heavily in Myanmar. China still has deeper roots in Myanmar than any other country, providing Myanmar with much-needed funds, infrastructure development, and supplies of cheap Chinese-made products. However, China faces several risks, including instability of Myanmar’s domestic situation and mistrust of China by the Myanmar regime and the people. The economic cooperation relationship between the two countries has not progressed as originally planned.

6 Conclusion

This paper examined how China has conducted its diplomacy with Myanmar through the efforts of the Chinese central government and the local government of Yunnan Province, which borders Myanmar. After the transfer to civilian rule in Myanmar in 2011, the relationship between China and Myanmar shifted from a “China-only” relationship to a more “normal relationship between nations.” China lost its privileged position in Myanmar, but the economic cooperative relationship continued. After 2016, when Myanmar came under severe criticism from the international community for its handling of the Rohingya issue, the Myanmar government reapproached China, and the political and economic relations were once again strengthened.

China considers Myanmar to be strategically important in the implementation of the Belt and Road Initiative. China’s most important project in Myanmar is the Sino-Myanmar oil and gas pipelines. The construction of the energy pipelines was drafted and proposed by Yunnan Province and was submitted to the State Council. Yunnan’s proposal was in line with Beijing’s energy strategy and was upgraded to a national project within two years since its proposal. Due to the strong support of CNPC, a major state-owned enterprise, the proposal was quickly adopted as a national project, paving the way for its construction. After negotiations between Beijing and the Myanmar government, the natural gas and oil pipelines connecting Myanmar’s Chao Pyu port and Yunnan province were completed. With the support of the central government and CNPC, the Sino-Myanmar energy pipelines entered into operation, a large petroleum oil refinery was built in the province. Yunnan was able to develop economically as a petrochemical base in southwest China. In this way, local governments actively support and complement the Chinese government’s energy policy.

Yunnan also continued to propose to the State Council for the construction of a Border Economic Cooperation Zone, which was drafted as a regional development measure. Yunnan is largely mountainous and lacked effective transportation infrastructure. Yunnan tried to expand its border trade with Myanmar by getting financial support from the central government. The government of Dehong State proposed to Yunnan provincial government a draft plan to build a cooperation zone between Yunnan’s Ruili and Myanmar’s Muse. Then, Yunnan Province continued to propose the construction plan to the State Council and other central governments for nearly two decades. Finally, the proposal was upgraded to one of the national projects in January 2020. It took a long time for the proposal to be approved by Beijing because it was difficult for Yunnan to gain other supporters of the proposal. The construction of the Border Economic Cooperation Zone could not get the strong support of Chinese major state-owned enterprises and Myanmar’s government. In Myanmar, there is a strong distrust of Chinese investment projects. There was no strong support or push from Myanmar to launch the Border Economic Cooperation Zone.

Unfortunately, a military coup took place in Myanmar in February 2021, a lot of investment agreements and ongoing economic projects between China and Myanmar came to a halt. The pipelines’ related facilities had been attacked. Border trade was also forced to decline. Sino-Myanmar economic cooperation has not progressed as far as originally planned by Yunnan province. For China, economic cooperation with Myanmar remains a high risk where domestic security and political situations are unstable and unpredictable.

When the situation in Myanmar calms down, economic cooperation between China and Myanmar will resume, and the governments of Yunnan Province and Beijing will swiftly act to improve Sino-Myanmar relations. Yunnan Province has been deeply involved in economic cooperation with Myanmar. In China, local governments can be involved in foreign economic relations within their capacity and responsibility for local socio-economic development. In the context of Beijing’s emphasis on strengthening relations with Southeast Asian countries, there are fair chances that Chinese local government proposals will be directly incorporated into the central government’s strategy. For Beijing and Yunnan local governments, Myanmar remains important in terms of geopolitics, economics, and energy security.

Acknowledgements

The author is grateful to two peer reviewers whose insightful comments were of great help and the managing editor.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Correction Statement

This article has been republished with minor changes. These changes do not impact the academic content of the article.

Additional information

Funding

This work was supported by the Japan society for the promotion of science [16K02015]; [22K01380].This work was also funded by Senshu University research grant in 2021 and is based on the result of a project entitled 'China's diplomacy in Africa'.

Notes on contributors

Sumie Yoshikawa

Sumie Yoshikawa is an associate professor of the School of Law at Senshu University. Her research focuses on International Relations in East Asia and Chinese Diplomacy. She holds M.A. in Law from Peking University and a Ph.D. in Political Science from Waseda University. Her Publications in English include “China’s Maritime Silk Road Initiative and Local Government,” Journal of Contemporary China Studies, 2016, and in Japanese including China’s Path to Great Power Diplomacy (Keisou Shobo, 2017).

Notes

1. Cao and Liu, “Zhongguo de zhoubianwaijiao kunnan yu chulu”; Zhang, “Miandian zai Zhongguo zhoubian waijiao de diwei yu Zhongmian guanxi de xinfazhan”; Wang, “Zhiheng Zhongguo?”

2. Zhao, “Myanmar.” In addition, some previous studies have mainly discussed China’s energy strategy toward Myanmar. Miller, China’s Asian Dream; United States Institute of Peace, “China’s Role in Myanmar’s Internal Conflicts.”

3. Li and Song, “Miandian dui Yidaiyilu de renzhi he fanying”; Li, “Miandian yu Zhongguo de Yidaiyilu changyi.”

4. Peng, “Yidaiyilu changyi zai Miandian de shishi.”

5. Xie, “Yidaiyilu yu Zhongguo dui Mian zhengce xuanze.”

6. Jakobson and Knox, “New Foreign Policy Actors in China.”

7. Mori, Gendai Chugoku gaiko.

8. Li, “Central-local Interactions in Foreign Affairs.”

9. Miller, China’s Asian Dream, 127.

10. Fravel, “Regime Insecurity and International Cooperation,” 56.

11. Zhonghua Renmin Gongheguo zhu Miandian Lianbang Gongheguo Dashiguan. “Zhongguo tong Miandian de guanxi.”

12. Nakanishi, “Paaria Kokka no Jikokaikaku,” 88.

13. Chan, “Asymmetric Bargaining Between Myanmar and China in the Myitsone Dam Controversy,” 679-680.

14. “Misong dianzhan shoucuo.”

15. Chan and Pun, “Renegotiating Belt and Road Cooperation” 2218-2120; Zhao,“Myanmar,”118-119.

16. Cao and Liu, “Zhongguo de zhoubianwaijiao kunnan yu chulu,” 16-17.

17. Kudo,“Post gunjiseikenki no Cyuumen kankei,” 220.

18. Li, “2010nian Daxuan zhihou de Zhongmian guanxi,” 32-33.

19. Hiebert, Under Beijing’s Shadow,76.

20. Liu and Yamaguchi, “Chugoku Myanmar sekiyu tennengasu paipulain no kensetsu nitaisuru kosatsu,” 36.

21. Ma, “Xingjian Zhongmian youqi guandao de yiyi hezai.”

22. He, “Zhongmian guandao daqiju.”

23. Li, Wang and Yang, “Zhuanjia cheng Zhongmian youqi guandao kuguo yixian.”

24. See above 21.

25. Wen, “Zhongmian youqi guandao zhengshi qidong.”

26. “Chongqing lizheng Zhongmian shiyou guandao ruyu.”

27. Liu and Yamaguchi, “Chugoku Myanmar sekiyu tennengasu paipurline no kensetsu nitaisuru kosatsu,” 37-38.

28. See above 21.

29. Yuan, “Sanlianguan de aomiao hezai,” 25-26.

30. Liu, “Li Xinhua de huagong yuan.”

31. Thereafter, Li Xinhua and Jiang Jiemin both were jailed for corruption.

32. See above 23.

33. Li, “Zhongmian guanxi de mailuo he luoji,” 18-19.

34. Li, “Kuojing Jingji Hezuoqu jianshe,” 73.

35. Liu, “Jianli Dehong-Muse Bianjing Jingji Hezuoqu,” 1-5.

36. Dehong Yearbook, 2008, 501-511.

37. Liu, “Zhongmian Kuajing Jingji Hezuoqu zhengqu jingkuai lixiang.”

38. Dehong Yearbook, 2013, 258.

39. Dehong Yearbook, 2015, 265.

40. Liu, “Zhongmian Kuajing Jingji Hezuoqu zhengqu jingkuai; lixiang.”

41. Guowuyuan, “Guowuyuan guanyu zhichi Yunnansheng jiakuai jianshe mianxiang xinan kaifang

zhongyao qiaotoubao de yijian.”

42. Li and Wu, “Yunnan xiang xinan kaifang de qiaotoubao shangsheng wei guojia zhanlüe guihua.”

43. Dehong Yearbook, 2018, 92.

44. Peng, “Yidaiyilu changyi zai Miandian de shishi,” 118.

45. See above 20. 35.

46. Kyaw, “China’s influence on Myanmar,” 136-141.

47. Song, Chahine, and Sun, “Ruili, China,” 7-8.

48. Aoyama, Chugoku no Ajia gaiko,148-167, 178-181.

49. Zou and Wang, “Zhongmian Jingji Zoulang jianshe shi Zaiwu Xianjing ma,” 77-90.