Myanmar coup: China border trade could be disrupted if military conflict intensifies, analysts say

Cissy Zhou
·6-min read

Every day, e-commerce trader Mr Sun imports live crabs from Myanmar to Ruili, a major border crossing in the southwestern Chinese province of Yunnan. But all of his crabs were seized in Myanmar after the coup on Monday.

“The traffic was cut off. Telecommunication was cut off, too. I have no idea when I can get my crabs in,” Sun said.

Given that he has few crabs in stock, and the crabs survive for only a few days, Sun said he dramatically raised his prices on Tuesday.

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Myanmar’s military detained de facto leader Aung San Suu Kyi and other senior politicians from the National League for Democracy party on Monday and then declared a national emergency. The airport in Yangon, the largest city, will remain closed until April 30. Before the coup, the Myanmar government had already extended the suspension of international commercial flights and restricted visitors until the end of February in a move to control the coronavirus.

Ruili Port, the largest land port on the China-Myanmar border, was operating as normal on Tuesday, according to a local government official who declined to give his name over the phone. He added that the port was allowing only cargo, not people, to pass through, due to the pandemic.

And Mr Shen, who works at a logistics company based in Hong Kong and gave only his surname, said seaports were also operating normally on Tuesday, adding that he had not seen an immediate impact on shipping.

Phone and internet communications were said to have been disrupted in Myanmar on Monday, but had resumed by Tuesday morning.

The coup has not led to widespread protests nor military action, so the impact on physical infrastructure such as factories should be minimal, observers agreed. Trade and investment between China and Myanmar might be disrupted in the short term, but China should not worry too much about it in the long run, Chinese experts said.

The value of Myanmar’s trade with China via the maritime trade route and land border – with the majority being traded at the Ruili Port – topped US$12 billion in the 2019-20 financial year, according to Myanmar’s Ministry of Commerce.

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Myanmar mainly exports rice, peas, sesame seeds, corn, fruits, vegetables, dried tea leaves, fishery products, rubber, gems and animal products to China, while China mainly exports machinery, plastic raw materials, CMP (cut, make, pack) raw materials, consumer products and electronic tools to Myanmar.

Peng Nian, deputy director and associate fellow of the Research Centre of Maritime Silk Road at the National Institute for South China Sea Studies, was among those who said trade and investment along the Chinese-Myanmar border, which had already been severely disrupted by the pandemic, could be further affected following the coup.

“Myanmar’s military is expected to have a tougher stance in ethnicity issues, and the military conflict in northern Myanmar is likely to become more intense, which would further disrupt the passages alongside the border,” Peng said.

Anyone worried about China’s investment in Myanmar doesn’t understand China’s relationship with Myanmar

Zhu Feng

China is also Myanmar’s largest trading partner and its second-largest source of investment, after Singapore. Official data shows that China’s investment in Myanmar in 2020 reached US$133.5 million, accounting for more than 38 per cent of Myanmar’s total foreign investment.

Last year, China and Myanmar signed 33 agreements involving key infrastructure projects while agreeing to accelerate the implementation of the China-Myanmar Economic Corridor scheme, part of Beijing’s Belt and Road Initiative, during President Xi Jinping’s visit to the country.

Zhu Feng, executive director of the China Centre for Collaborative Studies of the South China Sea at Nanjing University, said there should be little concern for China’s investment in Myanmar after the military seized power.

“Anyone worried about China’s investment in Myanmar doesn’t understand China’s relationship with Myanmar. The military has been interfering with politics from time to time over the past 50 years, and if you look at the Myanmar economy over the past 30 years, you will see its fastest growth has been when the military was in power,” he said.

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Zhu added that China will adopt a wait-and-see approach until it gets a full picture of what the coup really means.

Following the coup, US President Joe Biden on Monday threatened to reimpose sanctions on Myanmar, which the US calls Burma. “The United States removed sanctions on Burma over the past decade based on progress toward democracy. The reversal of that progress will necessitate an immediate review of our sanction laws and authorities, followed by appropriate action,” Biden said in a statement.

The United Nations, the United Kingdom and the European Union have also condemned the military takeover amid fears of potential protests and unrest.

Japan’s deputy defence minister, Yasuhide Nakayama, warned on Tuesday that Japan should discuss a common strategy with its allies towards Myanmar. Otherwise, “Myanmar could move further away from politically free democratic nations and join the league of China,” the official told Reuters.

Any sanctions from the Biden administration may actually encourage Myanmar to further embrace Chinese investment

Peng Nian

Zhu Feng from Nanjing University expects the US sanctions to be very limited, and if there are any, they would be targeting the military but not Myanmar’s overall economy, so they would not affect China.

Zhu’s view was echoed by Peng Nian, who said Chinese investments in Myanmar would not be impacted if the US imposes sanctions on Myanmar, as such investments concern bilateral trade between the two countries and have nothing to do with the US.

“Instead, any sanctions from the Biden administration may actually encourage Myanmar to further embrace Chinese investment,” he said.

But Chris Rogers, a research analyst at Panjiva, the supply chain research unit of S&P Global Market Intelligence, said any sanctions by the US and the EU could pressure Chinese firms operating in Myanmar to relocate at least some of their production, particularly if the goods being produced are destined for buyers in the West.

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Total trade in goods between Myanmar and the United States amounted to nearly US$1.3 billion in the first 11 months of 2020, up from US$1.2 billion in all of 2019, according to US Census Bureau data.

Apparel and footwear accounted for 41.4 per cent of total US goods imports from Myanmar, followed by luggage at 30 per cent, and fish at 4.4 per cent, according to Panjiva. Among them, luggage maker Samsonite and apparel maker L.L.Bean are among big importers, along with sportswear manufacturer Adidas and retailer H&M, Panjiva said.

“It’s up to brand owners to decide whether they still want to source from Myanmar, given the potential reputational damage in Western markets associated with sourcing from countries operating under a military government,” Rogers said.

“Most of the names we identified have only ramped up production since US-Myanmar relations normalised. Again, Chinese firms supplying Western brands from Myanmar may need to relocate production.”

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