Corridors Through Conflict: China’s Strategic BRI Gamble in Myanmar
SRIc Insights By Sevil Khikmatova and Khant Eaint Hmoo
This article analyses the China-Myanmar Economic Corridor as a high-stakes geopolitical bypass, where Beijing’s pursuit of energy security through a fragmented Myanmar risks permanent regional instability.
Key Takeaways
The Strategic Bypass: The Kyaukphyu Deep Sea Port and the Muse-Mandalay railway provide China with a critical “back door” to the Indian Ocean, bypassing the naval vulnerabilities of the Straits of Malacca.
Institutional Dependency: Myanmar increasingly functions as a “sub-contractor” state, with the junta setting up special committees to expedite Chinese projects like the Muse-Mandalay railway despite a complete lack of territorial control.
Local Marginalisation: Large-scale infrastructure projects such as the Kyaukphyu SEZ threaten the livelihoods of over 5,000 fishing households and risk the relocation of 20,000 people, fuelling deep-seated local resentment.
The Strategic Imperative: Bypassing the Straits
For Beijing, Myanmar represents not merely a neighbouring state but a critical geographic solution to a persistent strategic vulnerability. China’s so-called “Malacca Dilemma”, its dependence on energy imports transiting the narrow and potentially contested Strait of Malacca, has compelled policymakers to conceptualize the Bay of Bengal as an alternative strategic corridor. Within this framework, the Kyaukphyu Deep Sea Port in Rakhine State functions as a central node.
The China–Myanmar Economic Corridor (CMEC) is designed to operate as a dedicated conduit for China’s economic and energy security. By linking the Rakhine coastline directly to Yunnan Province through operational oil and gas pipelines (established in 2013 and 2017, respectively) and the proposed Muse–Mandalay railway, China can circumvent contested maritime zones, particularly those in the South China Sea. This infrastructure significantly reduces geopolitical exposure while enhancing logistical efficiency.
The Role of the Junta: A Centralised Partner in a Fragmented State
Recent reporting indicates that Myanmar’s military government is actively attempting to demonstrate its strategic relevance to Beijing. The junta has established a dedicated administrative body to expedite the Muse–Mandalay railway project, which is intended to connect the Chinese border with central Myanmar. This initiative reflects a broader pattern in which military leadership emphasises the continuity of Chinese-backed infrastructure projects despite ongoing internal conflict.
However, China’s engagement in Myanmar is becoming increasingly fragmented. While Beijing traditionally favours a centralised, top-down governance model, the authority of the military government is progressively eroding. Of Myanmar’s total foreign investment stock of approximately $43 billion, China accounts for roughly 32% (approximately $14 billion). A transition toward a decentralized or federal political system could compel China to renegotiate existing agreements with multiple subnational actors, thereby increasing political and contractual complexity.
The “Subcontractor” Model and Labor Enclaves
The governance structure of major infrastructure projects in Myanmar reveals a pronounced asymmetry in power relations. Within the Kyaukphyu Special Economic Zone (SEZ), the China-based CITIC Consortium retains dominant decision-making authority. In contrast, the Myanmar state assumes a more limited role, functioning effectively as a “subcontractor” responsible for land acquisition and regulatory facilitation. At the same time, China provides capital investment, technological expertise, and, in many cases, labor.
This model has generated significant local contention, particularly because it relied on imported Chinese labor. By circumventing domestic labor markets, such practices restrict employment opportunities for local populations, thereby limiting the distribution of economic benefits. At the same time, local communities remain disproportionately exposed to environmental degradation and social disruption.
The Myitsone Dam project further exemplifies these dynamics. Situated at the headwaters of the Irrawaddy River, the country’s “spinal cord” was structured to export 90% of its electricity to China, fuelling concerns of resource extraction without domestic benefit. According to International Rivers, the venture was a lopsided partnership: the China Power Investment Corporation (CPI) was to retain 70% of the profits, leaving only 20% for the Myanmar government and 10% for the local firm Asia World as a service fee. This lopsided profit-sharing highlights Myanmar’s role as a junior partner in its own strategic development.
Community Concerns and Territorial Control
Residents in Kyaukphyu express deep dejection as the deep-sea port project, a 4,200-acre cornerstone of China’s “Belt and Road Initiative,” moves forward with little community transparency. Despite the port providing Beijing a critical strategic bypass to the Bay of Bengal for oil imports, the joint venture remains heavily asymmetric, with China controlling 70% of the project compared to Myanmar’s 30%. As the two governments prepare to begin construction on a 600-acre site this year, villagers face widespread job losses and remain marginalised from the decision-making process.
It is estimated that over 5,000 households may lose access to fishing grounds, while the International Commission of Jurists warns that up to 20,000 individuals could face displacement. These developments have contributed to rising local discontent.
The Conflict and Governance Focus
The current landscape of the China-Myanmar Economic Corridor is defined by a profound disconnect between official administrative authority and de facto territorial control. While the State Administration Council (SAC) in Naypyidaw acts as the formal gatekeeper, signing high-level addendums to revive the Kyaukphyu Deep-Sea Port and forming committees to expedite the Muse-Mandalay Railway, its actual power is increasingly confined to isolated urban centers. In a strategic shift to win local compliance in Myitkyina, the junta is now promising that the majority of the electricity generated will remain in Myanmar for domestic and residential use from the Myitsone Dam mega-project, which was suspended in 2011 over environmental and humanitarian concerns. By projecting a narrative of “business as usual,” the junta attempts to maintain the image of a stable investment partner despite losing significant ground to resistance forces.
In contrast, the physical security of these corridors is now dictated by Ethnic Armed Organisations (EAOs) and the National Unity Government (NUG). In Rakhine State, the Arakan Army (AA) has achieved what the Institute for Strategy and Policy- Myanmar describes as full or partial control over the majority of Chinese projects, effectively encircling the Kyaukphyu SEZ. Similarly, the Three Brotherhood Alliance maintains a stranglehold on the Northern Shan State transit routes due to China’s intervention in 2025. In total, the regime has reclaimed about 11.3% of the territory it lost in Northern Shan State, securing control over 44.4% of the Mandalay–Muse trade route. Meanwhile, the NUG challenges the SAC’s legal legitimacy by warning Beijing that agreements signed with an illegal junta may not be honoured by a future democratic government. Through its “10-Point Policy,” the NUG offers a tactical alternative, promising to safeguard legitimate Chinese investments while firmly rejecting “lifeblood“ sacrifices like the Myitsone Dam. This creates a fragmented reality where China must balance its long-term infrastructure goals against the shifting frontlines of a nation in revolt.
Historical Continuity: From 1988 to the Lancang–Mekong Fund
China’s relationship with Myanmar’s military establishment can be traced to the post-1988 period, during which Beijing emerged as a principal economic and political partner for a regime isolated by Western sanctions. Over time, this relationship has evolved into a multilayered framework encompassing both large-scale infrastructure investments and smaller development initiatives.
Between 2017 and 2025, Myanmar received 132 projects valued at approximately $38.6 million through the Lancang–Mekong Cooperation (LMC) Special Fund, with over 100 projects implemented. This funding mechanism enables China to extend its influence at the local level while simultaneously supporting the military government’s broader strategic infrastructure agenda.
Implications and Recommendations
1. The Risk of the “Stability Trap.”
China’s current approach reflects a strategic gamble predicated on the assumption that the military government can eventually restore stability and secure key economic corridors. However, continued support for the junta risks entrenching conflict dynamics by positioning Chinese investments as targets for resistance groups. Failure to address local grievances, particularly those related to environmental degradation and socioeconomic exclusion, may result in long-term instability that undermines the viability of these projects.
2. Navigating the “Civilian” Pivot
The anticipated shift to an “elected” government, likely generals in civilian attire, will mirror the Thein Sein era, where project suspensions are used as tactical “reform” signals to lift Western sanctions. To mitigate this, China must move beyond fragile military-to-military deals toward a legalised investment framework ratified by parliament. By insisting on multi-stakeholder oversight, Beijing can gain “political insurance,” ensuring projects aren’t used as bargaining chips by a pseudo-civilian regime desperate to prove its independence or legitimacy.
3. Engagement with Territorial Stakeholders
China should broaden its diplomatic engagement to include EAOs and the National Unity Government (NUG). Agreements concluded solely with a central authority lacking territorial control are inherently fragile, both legally and operationally.
4. Reform of the Labor Model
To reduce local opposition, the current subcontractor model should be restructured. Future project phases, including the Muse–Mandalay railway and Kyaukphyu SEZ, should incorporate mandatory local employment quotas alongside investments in vocational training to enhance workforce capacity.
5. Environmental Accountability
All major infrastructure initiatives should be subject to transparent and independent Environmental and Social Impact Assessments (ESIAs). These assessments must include enforceable provisions capable of halting projects if significant risks to ecosystems, such as mangrove forests or local water systems, are identified.
Sevil Khikmatova is a Junior Research Fellow at the Sustainability Lab of the Shwetaungthagathu Reform Initiative Centre (SRIc). She is also a Junior Research Fellow at the Institute for Security & Development Policy (ISDP) and a Policy Analyst at STEAR with a focus on climate governance and geopolitics in the Indo-Pacific region.
Khant Eaint Hmoo is a Research Assistant at the Sustainability Lab of the Shwetaungthagathu Reform Initiative Centre (SRIc) and a Bachelor of Economics (Hons) student from Albukhary International University, Malaysia.
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