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Web-only Exclusives
November 30, 2000

From Our Correspondent: Hirohito and the War
A conversation with biographer Herbert Bix

From Our Correspondent: A Rough Road Ahead
Bad news for the Philippines - and some others

From Our Correspondent: Making Enemies
Indonesia needs friends. So why is it picking fights?

Asiaweek Time Asia Now Asiaweek story

CHINA'S SHADOW

A growing presence from next door spurs a rethink in Yangon

Dermot Tatlow


WHEN THE SUN SETS in Mandalay, northern Myanmar, the money heads to the intersection of 30th and 66th streets. Bright lights, loud music and a lively crowd attest to the popularity of new Chinese restaurants serving grilled meat, fish and beer. Many of the entrepreneurs and customers there are not traditional Mandalay Chinese. They are Mandarin-speaking "new Chinese" - from across the China border or the city's emerging suburbs. Indeed, the presence of ethnic Chinese in Mandalay has been growing rapidly. By some estimates, they now constitute up to 30% of the local population. "Chinatown used to be just around 80th Street," recalls a local Burmese. "Now the whole town is Chinatown. The Chinese have bought property all over."

Nor are the new arrivals just an urban phenomenon. After two years of flooding in southern China, many farmers there have moved across the ill-controlled border into northern Myanmar. Estimates run from hundreds of thousands to well over a million during the period. The virtually unreported influx is, as one Thailand-based foreign expert puts it, "changing the whole demographic balance in north Burma." It has also made locals increasingly unhappy with both the migrants and the ruling junta in Yangon. "The military leaders have opened the door because without Chinese support, they couldn't have lasted," says one dissident Burmese intellectual. "For that, the Burmese people can never forgive them."

Even so, the influx is occurring in border areas Yangon scarcely controls. Most affected are Kokang district and regions of northern Shan state run by former insurgents now in fragile ceasefire accords with the junta. The guerrillas include ethnic Chinese of the ex-Burma Communist Party and the larger and well-armed United Wa State Army - both active in the narcotics trade. "The Chinese government was paying flood relief of RMB 20,000 a family," says a diplomatic source. "The going rate for a Wa guard to look the other way is RMB 5,000, while another 5,000 can buy identity documents." Typically, ID cards can be purchased from Burmese families in which someone just died, then altered and resold to a new migrant. In the border area, whole Chinese villages are springing up.

The human influx is but one facet of a wider expansion of Chinese influence into a strategic Southeast Asian nation, which has stirred concern in Myanmar and beyond. Following the 1988 and 1989 crackdowns on democracy movements in both Myanmar and China, close ties - military, economic and political - developed between two authoritarian regimes facing international hostility. Attracting most attention have been Chinese military sales to Yangon, involving jet fighters, armored vehicles and naval vessels. Estimated at $1 billion to $2 billion in the past decade, the sales enabled the Myanmar Army to expand from 180,000 men to 450,000 today.

But Chinese aid and investment have also gone into infrastructure and industrial projects, ranging from dams, bridges and roads to factories and ports. And China is interested in opening an Irrawaddy River trade route from its Yunnan province to the Bay of Bengal, as cheap consumer goods from the Chinese southwest flood markets in northern Myanmar. "Myanmar is close to being a Chinese satellite," says an Asian diplomat in Bangkok.

Well, not quite. Yangon, worried by its dependency on China and a groundswell of popular discontent over Chinese penetration, is trying to pull back from the embrace of its giant neighbor. What was a virtual strategic alliance in the mid-1990s is now infused with a new wariness. The junta, says an Asian intelligence source, "wants to diversify into other areas."

The first signs of a rethink came in late 1997, when the junta, renamed the State Peace and Development Council, instituted a new regime for border trade with its neighbors. Prompted by Yangon's widening trade deficit and a loss of hard currency and natural resources, the scheme sought to bring booming frontier commerce under government control. Among Myanmar's neighbors, China was the hardest hit. From November 1997 to mid-1998, the frontier was officially closed to much of the trade between Muse in Myanmar and Ruili in Yunnan. "Ruili almost died," says one observer. "A boom town suddenly went bust." The Chinese pressed the generals to reopen the border - which they did in June last year. But with new controls in place, trade declined from $659 million in 1996 and $749 million in 1997 to $400 million last year.

The row heralded a new prickliness in bilateral ties. High-level visits dropped off. When intelligence chief Khin Nyunt goes to Beijing next month, he will be the first Burmese leader to do so since October 1996. Nor has Yangon shown much interest in the touted Irrawaddy route from China to the Bay of Bengal. Floated in 1996, the scheme would allow Chinese goods to bypass the port of Yangon - long plagued by silting and shallow draft - and give southwest China a key commercial outlet into the Indian Ocean region. It would also give Beijing a strategic foothold there. "By early 1998, talks on river access had come to a grinding halt," says a diplomat. "Right now there's nothing happening." The projected development of a deep-sea port at Kyaukphyu, in which a Singapore company was interested, also seems on the back burner.

Military sales have leveled off as well. In the past year, new Chinese tanks have been delivered and Myanmar has bought some Karakorum trainer aircraft, co-produced by China and Pakistan. But significantly, says a senior diplomatic source, the junta turned down a Chinese offer of a $100-million credit for military purchases late last year. Yangon not only wants to diversify its supply sources, says an analyst, but is "unhappy about the quality of some Chinese systems."

The new skepticism is not one-sided. The Chinese themselves are increasingly frustrated with Myanmar's inability to sort out its international relationships or kick-start its floundering economy. Chinese companies and businessmen have been badly burned by their investments in an economy bedeviled by rising prices for essentials and an urban inflation rate of up to 80%. "The Bank of China refuses to lend any more capital to Chinese firms that want to invest," says one diplomat. Beijing was also miffed when Yangon recently considered giving the lease on domestic routes to Taiwan's EVA Air, which wanted to buy into Myanmar Airways.

India has benefited from the new tensions between Myanmar and China. Since 1996, New Delhi has been trying to improve its relations with Yangon to counter Chinese influence and curb insurgents from its own troubled northeast, who find sanctuary inside Myanmar. India's Border Roads Organization has been upgrading a route on the Burmese side of the frontier. And in late February, Indian Foreign Secretary K. Raghunath visited Yangon - the first such trip in six years.

Still, there is only so much that India can bring to the table. And ASEAN, which Myanmar joined in 1997, has been beset by the Crisis and unable to provide investments that could have lifted the Burmese economy. Yangon may well be able to attenuate Chinese penetration, but for the foreseeable future, China's economic embrace will remain a fact of life. Equally inevitable but far more difficult to temper will be the continuing flow of Chinese migrants into northern Myanmar. Soon, that influx will be measured not in the thousands but in the millions.


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