"Chinese Investment in Myanmar After the Coup" May 2023

As a major investor and Myanmar’s biggest trade partner, China’s willingness to do business with the junta could be crucial for the survival of the military regime. Many Chinese projects, given their large scale and proximity to conflict areas, already raised serious concerns before the coup. Under the current military regime, with violence and instability spread nationwide, concerns around the accountability and potential human and environmental impacts of these projects have only increased. This is especially true given that none of the projects have shown any signs of conducting adequate assessments for conflict-affected and high-risk circumstances to inform decision-making.  

This edition of the China Global Newsletter assesses the status of high-profile Chinese investment projects (excluding contracting and aid projects such as those under the Lancang-Mekong Cooperation Mechanism) in post-coup Myanmar, finding that most have struggled to move forward even with high-level political support from both sides. It examines the issues that have hindered Chinese projects, and how their potential environmental, social and human rights risks could be exacerbated in the current context. It also raises the possibility that this confluence of factors presents a potentially valuable opportunity for strengthening China’s regulations for doing business in conflict-affected and high-risk contexts, which could improve outcomes in Myanmar and elsewhere—wherever Chinese firms invest in these types of difficult environments. 

Contents:

• To Leave, or Not to Leave: The Business Dilemma in Post-coup Myanmar
• Behind the Smoke Screen: Chinese Investment in Myanmar Struggles to Move Forward
• Chinese Projects Under Fire
• Putting Oil on the Fire: Heightened Social, Environmental and Human Rights Risks
• Conclusion

Within this extremely volatile context, the social, environmental and human rights risks of the major Chinese projects in Myanmar call for urgent reexamination, in line with the UN Guiding Principles on Business and Human Rights (UNGPs).

Conclusion

In the late 2010s, Chinese officials and policy documents began to stress the need for “high quality” and “sustainable” overseas projects. However, the approach adopted in major Chinese projects in Myanmar casts doubt on this commitment. The practices of many developers contrast starkly with the official goal of establishing a “new model of international relations based on mutual respect, equity, justice and win-win cooperation” and the building of “an open, inclusive, clean and beautiful world that enjoys lasting peace, universal security and common prosperity,” as articulated in the State Council’s 2019 white paper China and the World in the New Era. This discrepancy threatens to further fuel the widespread cynicism among the Burmese population about Chinese investment.

While China has strengthened policies and guidelines related to the social and environmental responsibilities of Chinese overseas projects, implementing frameworks are still lacking, and there is a significant gap regarding conflict-sensitive investment. To date, non-binding guidelines issued by the mining industry association CCCMC, mentioned above, are the only document providing guidance on doing business in conflict-affected areas. China’s policies impose stricter standards for approval of investment in “sensitive countries and regions,” including those experiencing war or civil disturbance, and instruct state institutions to “guide companies to invest in a prudent manner, and give the necessary guidance and reminders based on the specific situation,” but the meaning of “prudent manner” is not defined, nor are there any clear requirements for heightened due diligence in conflict-affected areas. 

The issues raised here demonstrate the extreme risk associated with major projects moving forward in post-coup Myanmar. These risks will have repercussions for Chinese enterprises and their financiers, with the chance of delays, protest and violence likely to slow projects and increase costs. They will come with reputational and political risks for the Chinese state, which is seen by many as propping up, whether intentionally or not, a brutal and unpopular regime in Myanmar. Most importantly, the weight of unaddressed conflict, environmental and social impacts will be borne most heavily by the Myanmar people. With the current situation showing no sign of abating, this presents a potentially valuable opportunity to strengthen China’s regulations for doing business in conflict-affected and high-risk contexts. With Chinese firms active in numerous global conflict zones, this could have positive ripple-effects on a wider scale, wherever Chinese firms invest in these types of difficult environments.