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CHINA'

S MYANMAR DILEMMA Asia Report N°177 C

14 September

2009 TABLE OF CONTENTS EXECUTIVE SUMMARY i I.

INTRODUCTION

1 II. BEIJING NAVIGATES MYANMAR'

S POLITICS

2 A. BILATERAL RELATIONS

2 B. UNITED NATIONS.4 1. The Security Council veto

4 2. Beijing'

s reaction to the Saffron Revolution

6 3. Ensuring aid after Cyclone Nargis.8 4. Detention and trial of Aung San Suu Kyi

9 C. CHINA AND THE OPPOSITION.9 D. CHINA AND THE ETHNIC GROUPS.10 III. DRIVERS OF CHINESE POLICY.14 A. BORDER STABILITY

14 1. Narcotics

14 2. HIV/AIDS.15 3. Gambling

16 B. ECONOMIC CALCULATIONS.17 1. Chinese investment and economic assistance.17 2. Yunnan and the Go West campaign

18 C. STRATEGIC INTERESTS.19 1. The Malacca dilemma and the Indian Ocean

19 2. Arms sales and technical assistance.21 IV. RISKS OF CHINESE POLICY.22 A. WEAK GOVERNANCE IN MYANMAR.22 B. THE COST OF INVOLVEMENT IN EXTRACTIVE RESOURCES

23 C. RESENTMENT TOWARDS CHINA

24 D. BEIJING POLICY UNDERCUT BY LOCAL ACTORS

25 V. LIMITS TO CHINESE INFLUENCE

26 A. HISTORICAL DISTRUST.26 B. EXPLOITING BILATERAL COMPETITION.28 C. CHARACTERISTICS OF THE MYANMAR GOVERNMENT.30 D. ASEAN.31 VI. IMPLICATIONS FOR INTERNATIONAL APPROACHES.33 VII.CONCLUSION

35 APPENDICES A. MAP OF MYANMAR

37 B. HIGH-LEVEL OFFICIAL VISITS BETWEEN MYANMAR AND CHINA

38 C. FOREIGN DIRECT INVESTMENT FLOWS

39 D. LOCAL INTERESTS: LOGGING AND CROP SUBSTITUTION

40 E. ABOUT THE INTERNATIONAL CRISIS GROUP

42 F. CRISIS GROUP REPORTS AND BRIEFINGS ON ASIA.43 G. CRISIS GROUP BOARD OF TRUSTEES.46 Asia Report N°177

14 September

2009 CHINA'

S MYANMAR DILEMMA EXECUTIVE SUMMARY Each time global attention is focused on events in Myan- mar, concerned stakeholders turn to China to influence the military government to undertake reforms. Yet sim- ply calling on Beijing to apply more pressure is unlikely to result in change. While China has substantial political, economic and strategic stakes in Myanmar, its influence is overstated. The insular and nationalistic leaders in the military government do not take orders from anyone, including Beijing. China also diverges from the West in the goals for which it is prepared to use its influence. By continuing to simply expect China to take the lead in solving the problem, a workable international approach will remain elusive as Myanmar continues to play China and the West against each other. After two decades of failed international approaches to Myanmar, Western countries and Beijing must find better ways to work to- gether to pursue a wide array of issues that reflect the concerns of both sides. The relationship between China and Myanmar is best characterised as a marriage of convenience rather than a love match. The dependence is asymmetric C Myan- mar has more to lose should the relationship sour: a protector in the Security Council, support from a large neighbour amid international isolation, a key economic partner and a source of investment. While China sees major problems with the status quo, particularly with re- gards to Myanmar'

s economic policy and ethnic relations, its preferred solution is gradual adjustment of policy by a strong central government, not federalism or liberal democracy and certainly not regime change. In this way, it can continue to protect its economic and strategic inter- ests in the country. In addition to energy and other invest- ments, Myanmar'

s strategic location allows China access to the Indian Ocean and South East Asia. But Beijing'

s policy might ultimately have an adverse effect on Myanmar'

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