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BREAKINGVIEWS - Myanmar coup does China more harm than good

Myanmar State Counselor Aung San Suu Kyi waits for arrival of Chinese President Xi Jinping (not pictured) at the Presidential Palace in Naypyitaw, Myanmar, January 18, 2020. Nyein Chan Naing/Pool via REUTERS

HONG KONG (Reuters Breakingviews) - The overthrow of Myanmar’s elected government is nothing for China to gloat over. President Xi Jinping may not have joined other world leaders in condemning Monday’s coup, in which Nobel laureate Aung San Suu Kyi and other democratic political leaders were arrested. But while Chinese influence may increase by default, there’s little else to celebrate.

Back when Myanmar’s military government was an international pariah, Chinese capital was for the most part the only money in town. But opportunities were limited to extractive projects and hydropower. When the junta began stepping back in 2011, foreign investment into the country rose to account for more than a third of output by 2019. One quarter of that was from China, and growth also drove demand for Chinese goods. Total monthly trade volume between the two countries, although small at $1.6 billion, has quadrupled since liberalisation began. Beijing also hopes the country will become an important link in Xi’s Belt and Road Initiative.

Myanmar’s military has an uneven economic record, though. In 1987 General Ne Win re-denominated the currency to suit his numerological superstitions. Now his successors are back in charge, declaring a state of emergency that will last a year.

The army is suspicious of China, given Beijing’s meddling in ethnic insurgencies near the border. The junta’s commitment to further liberalise foreign direct investment is in doubt. Oxford Economics estimates the coup could halve this fiscal year’s GDP growth to 2%.

Xi’s regime could find it easier to push through contentious transactions with Naypyidaw; less transparency and more force might allow the stalled $3.6 billion Myitsone Hydropower Dam to resume, for example. China will also be able to export its internal security technologies to help the government chase down dissidents.

But executives running companies in the less creepy parts of China’s new economy – think smartphone apps, e-commerce and financial services – will see little reason to invest. Nor will Myanmar be a good place for outsourcing manufacturing.

The Chinese Communist Party argues that its authoritarian model can deliver superior economic growth, and to be sure Myanmar’s system was riddled with flaws – not least what the United Nations has described as ethnic cleansing. But Beijing might come to miss this particular democracy nevertheless.

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