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Asiaweek May 22, 1999.
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
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

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.