A decade after Xi Jinping’s first visit to Myanmar in 2009, Naypyidaw is planning a banquet for another Xi visit, expected to be on January 17, 2020. As part of the preparation, shuttle diplomacy is already underway, with China’s State Councilor and Foreign Minister Wang Yi meeting with Myanmar State Counsellor Aung San Suu Kyi on December 9, 2019. The agenda is loud and clear: to speed up the construction of the projects within the China-Myanmar Economic Corridor (CMEC) and realization of the Belt and Road Initiative (BRI). In particular, speeding up the Kyaukphyu Special Economic Zone (SEZ), Beijing’s strategic window to the India Ocean, is on the short list.
Originating as one of 16 MoUs signed during then-Vice President Xi’s 2009 visit, the Kyaukphyu SEZ is the capstone of all China’s investments in Myanmar and was Beijing’s strategic offset in the Indian Ocean prior to the launch of the BRI. However, Chinese projects in Myanmar stalled after the suspension of controversial Myitsone Dam, which created uneasy relations with Beijing for the first time in 20 years and caused BRI capital injections to fall short of the hype. Kyaukphyu was not an exception. The project was significantly trimmed down with the fear of a debt trap.
Beijing’s response was swift as well — it put other Chinese investments on hold and CMEC was held in limbo. Shuttle negotiations were conducted prior to each of the BRI summits to initiate early harvest projects but the priority is crystal clear: Kyaukphyu. Without a full scale operational deep sea port in Kyaukphyu, there is no incentive for the Chinese to invest in Myanmar amid political instability and anti-Chinese sentiments. Myanmar has already missed the train of “early harvest projects.” Beijing is no longer interested to pour in funds as a favor for its friends; economic feasibility along with strategic benefits are now the prioritized factors. Beijing will not bless the Chinese business community and release the funds without the fulfillment of its geopolitical strategic needs.
Meanwhile, Myanmar needs capital inflows to keep the economy afloat ahead of the upcoming election. Realizing and speeding up CMEC is the only feasible choice. Myanmar’s waltz with the West ended with the advent of the Rohingya crisis. Naypyitaw has been courting Beijing again in recent months in order to seek quick cash and keep the back door secure. This puts Kyaukphyu back on the table, along with other projects, as a bargaining chip.
Amid the Rohingya crisis, the ongoing Arakan insurgency, and political wrangling resuming, investing in Rakhine state is a long shot. However, with the realization of the Indo-Pacific strategy in recent years, China needs to secure a back door to the Indian Ocean. With a longstanding good relationship with the Northern Alliance, the Arakan Army is actually comforting for Chinese investments. And Beijing will follow Naypyidaw’s blueprint for Rohingya issues, no matter where it leads. Plus, the assessment for the Kyaukphyu-Yunnan highspeed railway is already conducted and everything is ready to lay the first brick. Beijing’s decade-long plan is now set and with the green light from Xi’s upcoming visit, it will be in full swing.
Indeed, the upcoming visit goes far beyond the Pauk-Phaw relationship, BRI, and CMEC. It will be Beijing’s final push for a strategic projection 10 years in the making. The handshakes with Xi in Naypyitaw may not only impact the political economy of Myanmar for the upcoming decades but also herald the beginning of a new chapter for the geopolitical landscape of the Indian Ocean. Now it is time to review and evaluate the implications for the Indo-Pacific strategy.
Amara Thiha is the Senior Research Manager and head of China Research Desk at Myanmar Institute for Peace and Security (MIPS). The views and opinions expressed here do not necessarily reflect the policies or positions of MIPS and Stimson Center.