The Yunnan Connection

By LARRY JAGAN
The Irrawaddy News
SEPTEMBER, 2009 - VOLUME 17 NO.6

Closer ties between Burma and China’s southwestern province raise concerns in Beijing

Yunnan, China’s southwestern province bordering Burma, has always taken the lead in forging closer relations with its neighbor, usually with Beijing’s blessing. But in recent years, this special relationship has caused some irritation among China’s political leaders in the north.

In the past, China’s political supremos were happy to leave trade to those based in the southwestern region, while taking responsibility for all political issues. This relationship between Burma and China’s border areas has a long history.

The Joint Check Centre of Ruili on the northern Sino-Burmese border is an important economic zone where trade is increasing. (Photo: Kyaw Zwa Moe/The Irrawaddy)

Long before becoming chairman of the Kachin Independence Organization in 1975, Brang Seng moved thousands of Kachins into Yunnan for safety after declaring war on the Burmese government.

The Wa leaders, who formed a significant section of the Burma Communist Party, were all trained in the Yunnan capital, Kunming, and fondly remember those times.

At the start of Mao Zedong’s disastrous “Great Leap Forward” in 1958, more than 100,000 Chinese fled across the border into Burma for safety, according to a senior Chinese official. Most of them may never have returned, he added. In the past 10 years more than 200,000 Chinese have crossed into northern Shan State in search of work and financial opportunities. In Panghsan, the Wa capital, the local authorities run a casino school which trains young Chinese from across the border how to become croupiers.

Around 50 pupils at a time pay the school 300 yuan (US $45) for one month’s training; they qualify for jobs on graduation in the casinos along the border and some even find work in Cambodian casinos along the border with Thailand.

A quarter of Panghsan’s population are Chinese who have settled in the Wa area since 1997, according to a senior Wa leader. An entire Chinese Wa village even relocated in Burma six years ago to take advantage of the UN’s rice cultivation scheme—part of the organization’s support for alternative crop programs intended to replace opium production. In Mong La, further along the border, more than one in eight residents within the city limits are recent Chinese arrivals, according to the city’s mayor.

The business life of hundreds of small towns and villages along the Burmese border with China is dominated by Chinese immigrants who migrated to the area in the last 10 years.

Families often send their children across the border to China for education, and many of the Wa leaders’ sons and daughters study in Kunming. The daughter of the former Mong La mayor recently graduated from a university in Shanghai. Many others are receiving higher education in Chengdu, Guilin and Kunming.

While traditional links have helped fuel this close cross-border relationship, in the past 25 years it has been trade that has been the main locomotive.

Since 1993, according to local Chinese officials, cross-border trade has mushroomed. Trade between Yunnan and Burma represents around half of the total bilateral trade between the two countries. Official Burmese government figures put this at $2.4 billion in the 2007-2008 fiscal year, almost double the previous year’s.

This trade, however, has primarily benefited the Chinese—almost all the increase has been the result of the massive rise in the volume of Chinese imports, as the value of Burmese exports has remained relatively constant since 1988.

As part of plans to further promote trade between the two countries, special economic or free trade areas are also being set up. The border crossing between Muse and Ruili is the biggest trade route at present. The Yunnan provincial government has recently proposed setting up a Ruili cross-border economic cooperation zone, while the Dehong zone county government, in which the area falls, proposes to construct a Ruili-Muse free trade area. The Burmese government is also in favor of the plans, so the project is expected to move ahead in the near future.

Burma agreed more than three years ago in principal to establish a tax-free trade area near Muse. Nearly 300 square kilometers have been designated for the zone, known now as “Muse 105 Ma.” Chinese exports are free to enter Burma through Muse, Jiugu and Nankang, and are processed in the zone. Although yet to be officially announced, according to Chinese officials, this has already made Muse and Jiugu a very special economic zone, which offers Chinese goods extremely preferential treatment.

A border export processing base has also been established at Kunming, Honghe, Dali, Baoshan and Dehong, forming the main trade hubs in the zone. Many enterprises which produce export products have set up offices and factories near the border areas to directly benefit from the growing border trade.

The Yunnan authorities understand that protecting the growing trade with their neighbor is extremely important to the province’s long-term economic future. The provincial government recently drew up detailed plans to further promote border trade with Burma. This has included favorable customs and visa procedures, and streamlined bureaucracy. But there are fears that because of the low level of trade, there may be central government interference in the future.

“The preferential policies protecting cross-border trade [which had been approved by Beijing in 1996] are vitally important to Yunnan Province, although the trade is relatively small,” a senior Kunming customs official told The Irrawaddy.

“Yunnan would be seriously affected should the preferential policies be removed by the central government,” he said.

The central authorities are currently concerned that the system may contravene World Trade Organization rules. But local officials at the Yunnan commerce department reject this view, pointing out that the US and Mexico, adjacent to each other, have preferential policies.

While Beijing may not be concerned about the official trade between the province and Burma, the central government there is more concerned about the unofficial and illegal trade that is taking place, in the form of drugs, timber, wildlife and human trafficking.

Local Chinese merchants once benefited from the abundant supply of high grade timber imported from Burma. “We love Myanmar [Burmese] timber because it is good quality,” a businessman in Fujian province, on China’s southeastern coast, told a Chinese academic. “We can process it into furniture and then sell it on to Japan and the US.”

Between 2001 and 2005, imports of timber represented around one-fifth of the volume of Burma’s bilateral trade with Yunnan. But that ended abruptly when Chinese President Hu Jintao intervened after several Chinese loggers were arrested in Burma. If Chinese lives are at risk, national and political considerations overrule local economic business interests. Illegal logging has been effectively banned by the Chinese and very little now makes its way across the border, timber merchants in Kunming told The Irrawaddy.

Fears that unofficial cross-border trade—especially in arms, drugs and people—was getting out of hand a few years ago also prompted the central authorities to intervene. In late 2003, in a move to tighten border controls, Beijing assigned the People’s Liberation Army (PLA) to replace the border police along the Sino-Burmese border. In December 2004, the Burmese junta’s No 3, Gen Thura Shwe Mann, and Gen Ge Zhenfeng, the PLA’s deputy chief of staff, signed a Memorandum of Understanding that established a mechanism of meetings, talks and contacts between the Chinese and Burmese armies to deal with border affairs.

This seems to be the new pattern. Yunnan and other border areas may be pushing for greater trade and contacts between Burma and China, but Beijing wants to limit anything that may be unintentionally promoting corruption and crime, including drugs smuggling and human trafficking.

The overall concern in Beijing is that Chinese policy in practice should not indirectly make the border areas unstable and insecure. The divergent interests of Kunming and Beijing may yet be put to the test if the Burmese military government’s attempts to disarm the ethnic rebel ceasefire groups, especially the United Wa State Army, and form a force of guards on the Burmese side of the border fail and the danger arises of renewed armed conflict.