Insight: As Myanmar opens, China alliance starts to fray

MANDALAY, Myanmar- When officials first turned up demanding Chen Ching-feng remove the Chinese sign above her clothing shop in Myanmar’s biggest northern city, she ignored them.

People drive on a moped at the construction site for a pipeline which will transport Myanmar gas into China, outside of the northeastern Myanmar town of Pyin Oo Lwin January 23, 2012. REUTERS/Staff

“When they came back a few days later and asked why the Chinese was still there, I said I had been busy,” the ethnic Chinese resident of Mandalay said, speaking in Mandarin. “They made me take them down immediately and sign an undertaking not to put them back.”

Other ethnic Chinese shop-owners report similar requests, though enforcement is patchy.

Government officials in Myanmar’s capital, Naypyitaw, say there is no official ban on Chinese advertisements, but demands to pull them down in Mandalay, a city dominated by Chinese merchants, illustrate mounting unease over Beijing’s expanding influence.

As Myanmar pursues dramatic reforms, its relationship with China -- the Southeast Asian nation’s biggest investor and second-biggest trade partner -- is changing. In some cases, long-festering resentment is flaring into the open.

During decades of isolation, the former Burma relied on China as its closest diplomatic and military ally. Wide-reaching Western sanctions put in place after a bloody crackdown on pro-democracy demonstrations in 1988 forced Myanmar to deepen economic ties with China.

But as Myanmar embarks on the road back to democracy, a once-muffled debate about China’s role is growing louder. The reforms are also taking place as the geopolitical rivalry between the United States and China has sharpened since the Obama administration’s “pivot” toward Asia after preoccupation with wars in Iraq and Afghanistan the past decade.


China’s expanding economic influence was never that popular anyway in a country historically suspicious of foreign powers -- memories linger of Beijing’s alleged support for the Communist Party of Burma in the 1960s and ‘70s. China has its grievances, too. Clashes between Myanmar soldiers and various insurgent groups dotting the border with China have killed innocent Chinese and sent refugees streaming across the frontier.

“The government has tried to ban foreign influences before. It seems to be happening again,” said Hu Chieh-chi, a restaurateur in Mandalay, who is an ethnic Chinese and a Myanmar citizen, just like clothes store owner Chen.

A two-hour drive away, a grass-roots campaign is forming to halt China’s most strategic investment in Myanmar: twin pipelines that will stretch from the Bay of Bengal to China’s energy-hungry western provinces, bringing oil and natural gas to one of China’s most undeveloped regions.

In interviews with Reuters, the activists say they were emboldened by Myanmar’s surprise decision on September 30 to shelve the $3.6 billion Chinese-funded Myitsone dam under public pressure. U.S. officials told Reuters that responsiveness to a public demand was a crucial factor in Washington’s historic rapprochement with Myanmar late last year.

Much is at stake. Myanmar provides populous and landlocked southwestern China a crucial outlet to the sea. A friendly Myanmar helps reassure Beijing, which is increasingly worried about being “encircled” by the United States and its allies, from Japan to Australia and India.


From his home overlooking a colonial-era golf course, Kyaw Thiha is clear about what he sees holding back reforms: China.

“This is a democracy. The Chinese ordering us around is not democratic,” said the former political prisoner who will contest an April 1 parliamentary by-election as a candidate for the opposition National League for Democracy, the party of Nobel Peace Prize-winner Aung San Suu Kyi.

The soft-spoken university history tutor, jailed during the failed 1988 uprising, wants the government to stop the 790-km (490-mile) pipeline project that will cut across the country, including near his town in the old British hill station of Pyin Oo Lwin.

Human rights groups say the pipelines will displace thousands, damage livelihoods of farmers and fishermen, and benefit China more than Myanmar, where power outages are chronic.

To Beijing, the pipelines are a vital energy security asset that will reduce its reliance on shipping through the narrow choke-point of the Malacca Strait. Thousands of Chinese workers have been enlisted to build them.

“We want parliament to stop the pipeline. It was not given permission by the people,” Kyaw Thiha said in an interview.

A year ago, such talk was dangerous in a country whose critics were regularly locked up by generals who had ruled since a 1962 coup. But reforms led by a year-old nominally civilian government have begun to unwind years of authoritarianism and self-imposed isolation.

The government has relaxed some media censorship, allowed trade unions, begun peace talks with ethnic rebels, freed hundreds of dissidents and showed signs of pulling back from the powerful economic and political orbit of China. It was rewarded in December when Hillary Clinton made the first visit to the country by a U.S. secretary of state since 1955.


Myanmar Energy Minister Than Htay acknowledged public concerns over the pipelines but said they would be completed on schedule next year.

“We solved each and every problem along that pipeline route, and we give compensation for land use much more than previously,” he said in a recent interview. “I consider all the potential issues that will be raised by the anti-government groups. I see every day on the Internet many groups raise the problems and the issues to disturb our project.”

For many in Myanmar, the pipelines embody all that is rotten about China’s influence: environmental destruction, land grabs, cronyism and accusations of corruption.

Thant Lwin is one of many farmers who simmer with resentment when asked about them. Chinese bulldozers have sliced his rice-paddy field in half to make way for the pipeline and service road in his small village.

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“We are facing real hardship because of the Chinese,” he said from his farm in the countryside near Pyin Oo Lwin, known in colonial times as Maymyo.

“I would be extremely happy if the pipeline gets canceled. But I don’t think that will happen,” he said. “It is not a matter of hating China. I can only accept the situation. I have no power. Most people are scared to talk out against the project as it is a government project.”

Venerable Candobhasa, a Buddhist monk whose land was bisected by one pipeline outside of Pyin Oo Lwin, scoffed at claims that the project, led by China National Petroleum Corp, parent of PetroChina Co Ltd, would bring much-needed money and development to affected villages.

“These are our natural resources. We should keep it for ourselves to help us develop, not sell it to China. We don’t have enough power,” he said, sitting cross-legged on a sparse floor in his monastery.

“The government does not share the money from the pipeline with us. We want to know where it has gone.”

Others appear to be almost chafing for a confrontation with China.

“China is going to be shocked as we alone among the Southeast Asia countries are going to stand up to them,” said Khon Ja, a human rights campaigner from northern Myanmar who likes showing visitors a map on her computer outlining exactly why Myanmar is coveted by China, detailing potential road and rail links that could connect southwestern China to the world.

“We have lots of natural resources, are in a very strategic location, and have a long border with China, more than 2,000 km,” she said in a Yangon café.


China’s pervasive influence will not be easy to roll back.

Though rich in natural resources, Myanmar is one of Asia’s poorest countries. Its new entrepreneurs need the booming border trade and China’s investment money. And the army needs China’s help in ending the unrest along their shared border.

China and its companies pledged more than $14 billion of investment in Myanmar’s 2010/11 (April-March) fiscal year, taking total foreign direct investment pledges to $20 billion from $300 million a year before, according to official data.

“Myanmar really cannot afford to damage its good relations with China,” said Lin Xixing, a Myanmar expert at Guangzhou’s Jinan University.

Ethnic Chinese are not the only ones who have prospered from China’s largesse.

In Lashio, a town four hours by car from the Chinese border, the matriarch of a large Indian family beamed with pride as she showed a reporter her large, well-appointed house, and then presented a faded picture of a thatched shack where they lived a decade ago.

She explains the change with a single word: “China.”

“They give us very good business,” she said of her auto repair shop. “Lots of trucks go to trade with China. We repair them. Business is very good.”

Lashio’s markets heave with Chinese-made goods, and Chinese is the dominant language of commerce thanks to decades of Chinese immigration, mostly from neighbouring Yunnan province.

With almost no industry of its own, even the most basic goods are usually imported in Myanmar from China or Thailand -- from laundry powder to soy sauce. Competing local products are often more expensive.

A large bottle of China’s Dali brand beer costs 500-600 kyat in Lashio, for instance, more than half the price of a similar bottle of Myanmar brew. China’s massive economy of scale and well-oiled logistics mean its products can easily overwhelm their local rivals.


On Lashio’s main road to China, trucks rumble by all day. Those from China are packed with refrigerators, televisions, and other consumer goods. Those leaving are clogged with timber, bags of cheap coal and other resources. Smugglers run drugs, jade, and gems into China and beyond.

Many wonder whether this will change if Western sanctions are lifted. Could trade with Europe and the United States elbow out China?

That’s unlikely, said Aung Zaw Win, who builds machinery in Mandalay and who does most of his business with China and Chinese people.

“China will remain an important market for us. China has well-established supply chains and infrastructure. We cannot substitute for them within the space of only a few years,” he said from his office in central Mandalay.

But he is making preparations just in case. An American diplomat stopped by recently to ask Zaw Win about the impact of sanctions on his business. A Japanese company inquired about doing business together.

“I am ready for the sanctions to go. I am building a new factory to export to the United States and Europe. I cannot buy directly some U.S.-made components. I have to go to China and get them from street vendors.”

His friend, Sein Win, believes the market will decide who is better for business in Myanmar: China, Europe or the United States.

“Everyone knows that U.S. and European products are expensive compared with those made in China. Market forces will talk and we will still trade with China as Chinese goods are cheap,” he said in pitch-perfect Mandarin.

Manoj Vohra, an Asia analyst at the Economist Intelligence Unit (EIU) in Singapore, agrees that easing sanctions won’t make much of a difference initially. “We’re not going to see an huge flow of investments by American and European companies immediately, so Myanmar’s dependence on China as a regional ally for economic development and investment will continue.”

However, shoddy treatment of local workers by Chinese companies has caused “huge resentment and discontent,” said Vohra, who thought stiffer competition from Western countries would eventually encourage China to “make the deal sweeter” when doing business on Myanmar. Post-Myitsone, he added, the message to Chinese investors had changed slightly: “Yes, we welcome you -- but you have to do more.”


Chinese have been a formidable presence in Myanmar for centuries.

Immigration swelled during British colonial rule from 1842 to 1948. The end of China’s civil war in 1949 brought another wave of migrants. When Chinese Communists expelled the Kuomintang, many fled to Myanmar and Thailand, and then fought with the Burmese government before settling in Taiwan.

Those who stayed behind faced brutal discrimination under the rule of General Ne Win who barred ethnic Chinese and other foreigners from owning land, banned Chinese-language education and stoked anti-Chinese violence.

In Myanmar’s commercial capital Yangon, memories are still vivid of bloody anti-Chinese riots in 1967. Deadly flames engulfed a school. Chinese shops were looted.

“It was a terrible time. Everything changed for us after then,” said shop owner Wu Yan-shun, whose father arrived in Yangon in 1949. Wu fears the recent political changes could weaken the government’s ties with China, making him and other Chinese vulnerable.

“You can’t rule out that some of the anger people feel against the Chinese will be turned on us again. Relations with China are not so bad now. That could change as Myanmar opens up and there is more debate about ties with China and its influence here.”

Backlashes against Chinese have flared before in Southeast Asia, most notably in Malaysia in 1969 and in Indonesia in 1998 before the fall of former President Suharto.

Perhaps with this in mind, the Chinese community in Yangon seems strangely un-Chinese, especially when compared with other Southeast Asian cities. Its “Chinatown” has almost no Chinese restaurants, no Chinese pop music blaring from shops, few Chinese bookstores and limited use of the Chinese script.

There are no government-approved Chinese schools, unlike in Malaysia or Thailand. The city has a few privately run “bu xi ban,” a Taiwanese expression meaning “cram” school, but are actually just language academies.

Teacher Lin Lee, 30, born in northern Myanmar to Chinese parents, said it was hard just to get text books.

“The government is very strict about imports of Chinese text books,” she said from her classroom above an old shop-house. “We have to use photocopies. We ask people who are going to China to try and sneak back in a few copies of new books.”

Many feel deeply attached to Myanmar.

“I have made great efforts to get on with my neighbours,” said Tsai Tun-heng, the owner of a cluttered convenience store. “If anyone comes to burn down my store I want them to know that they will also be destroying the Burmese-owned businesses all around me.”

In Mandalay, the ban on Chinese advertising also revived memories of anti-Chinese violence during the Ne Win-era.

It also recalls a similar ban on Chinese signage and publications in Indonesia that remained in effect for years after an abortive 1965 coup blamed on the China-backed Indonesian Communist Party. Myanmar’s new government has sent officials to Indonesia to study its road to democracy.

“What can you do about it? It’s their country,” said café owner Liu Kui-you, a Myanmar citizen who can trace his ancestry to Yunnan province.

Bein Nei Tha, a Burmese motorbike dealership worker, laughed when asked why his company also comes under the ban, despite having no Chinese ownership and had previously used just a few small Chinese characters next to an otherwise English-only sign.

“It seems a little silly,” he said. “I suppose the government wants to limit foreign influence, but then why leave the English?”