Sanctions with Chinese Characteristics
The Case of Myanmar
The recap memo of the 30 Minutes with the ISP live event discussing China’s sanctions on Myanmar and their impacts.
Greetings to all the Gabyin members attending today’s 30 Minutes with the ISP event. I’m Yee Mon, your host for today’s program. This is the fifth episode of 30 Minutes with the ISP, entitled; “Sanctions with Chinese Characteristics: The Case of Myanmar.” Today’s program features the Lead Panelist Miss Nan Lwin, Program Head of the China Studies Program at ISP-Myanmar, alongside Co-Panelist Mr. Kaung San, Program Assistant at the China Studies Program, and Mr. Htet Shein, Program Associate at the Conflict, Peace, and Security Program (CPSP). After the panelists’ presentations, we will address Gabyin members’ questions received in advance and live webinar attendees’ questions and comments. You can ask questions live, via the chat and Q&A function. For the questions and comments we could not address live today, we will respond to them via email later. The session will be recorded and later aired on DVB, as well as posted on the ISP-Myanmar website and social media channels.
I’d like to invite panelists for the discussion. Our Lead panelist, Nan Lwin, please begin your discussion.
Sanctions with Chinese Characteristics
The Case of Myanmar
Greetings to all the Gabyin attendees of today’s event. We’ll discuss today’s topic in three parts: the objectives behind China’s sanctions targeting ethnic armed groups on the Myanmar-China border, the push factors for these sanctions, and their impacts. Firstly, I’d like to discuss China’s sanctions on ethnic armed groups at the Myanmar-China border. When we talk about economic sanctions, it’s widely understood that Western nations levied them against authoritarian regimes, their business cronies, closely linked organizations, and key individuals. In general, the objectives of these sanctions are to topple the authoritarian regimes. But, China’s approach differs from the West.
As far as we’ve analyzed, China rarely engages in formal sanctions. It acts discreetly, out of the public eye. This tactic satisfies two needs. On the one hand, Chinese leaders employ this strategy to project an image of maintaining stable development. On the other hand, they are simultaneously exerting economic pressure to secure their favorable outcomes. Especially when China views its nation’s sovereignty and national interests as being compromised, if they feel their political system is being threatened, they use these sanctions as retaliatory or countermeasures. Chinese sanctions usually include comprehensive and effective trade restrictions, investment restrictions, or travel bans. The primary aim is to change the behavior of the target nation or group, steering it towards conditions favored by China.
So, it is crucial to explore why China has imposed sanctions on the northern EAOs. Following Operation 1027, the offensives led by the Three Brotherhood Alliance (3BHA)in northern Shan State have not only shaken up the local power dynamics but also handed the SAC’s military forces unprecedented humiliations in its history. China perceives this situation as a threat to its economic and strategic interests. Therefore, in Beijing’s strategic thinking, various forms of sanctions are added to the pressures, in addition to playing the role of facilitator in the negotiations.
We can clearly see the standpoint and objectives of China in the meeting minutes of the UWSA leaders and the Chinese Special Envoy. Most importantly, China does not want the Myanmar Armed Forces to collapse. China wants to curb the growing power and military victories of EAOs and their alliances. China wants Kokang Forces to withdraw from Lashio as a bargaining chip in negotiations with SAC. Another crucial point to note here is that China views the military actions of the northern EAOs, especially that of the Kokang forces, pose a significant threat to China’s strategic Belt and Road Initiative (BRI). China is also very cautious as it feels the ongoing warfare could open a window of opportunities for Western nations to interfere. So, it closed its border gates with northern Shan and imposed restrictions. Moreover, in line with its style, China has issued a stern warning on Wa leaders, who are the strongest in northern Shan, giving them an ultimatum: if they don’t cooperate, similar sanctions will be imposed on their region as well. At the same time, China closed its borders when the Kachin Independence Army (KIA) seized border towns.
When we analyze these events, China employs unprecedented simultaneous sanctions against various EAOs at its border in a collective punishment style to show its strong disapproval of the current political landscape. This sanction uses a carrot-and-stick approach with a clear and specific goal. We can say that this blockade by China at the border is a politically motivated sanction. Sanctions are often designed to restrict one party while opening opportunities for the other. China restricts the EAOs while offering the SAC openings in this instance. China’s recent invitation to the SAC Chairman to attend the Greater Mekong Subregion (GMS) summit and his meeting with China’s Premier can be regarded as an opening for the SAC. In addition, China supports the SAC’s election plans, a political exit for SAC, and also provides military backing. We can see these characteristics in China’s sanctions and want to comment that China is determined to impose sanctions in the northern Myanmar until the situation changes to its desired condition. Kaung San, could you please discuss the northern EAOs’ territory control and the status of Chinese sanctions?
A year after Operation 1027, the 3BHA and KIA gained control of key Myanmar-China border trade gates, enhancing their geopolitical leverage. That means these groups hold control over territories advantageous for long-term war dividends, other economic interests, and geopolitical influence. EAOs have gained control of three out of five national-level Myanmar-China border trade stations.
As shown in the graph, the total trade value of these three stations in the past three years of the coup made up 91% of the total Myanmar-China border trade value. These stations are strategic gateways to President Xi Jinping’s grand geopolitical strategy, notably the BRI and the New International Land-Sea Trade Corridor (ILSTC), meaning northern EAOs now control critical strategic choke points.
Additionally, in the regions linking northern Shan State and central Myanmar, 10 Chinese investment projects— both active and in the pipeline— are entirely under the control of EAOs and PDFs. The KIA has also seized Myanmar-China border towns, such as Chipwi, Pang War, and Phimaw, where at least 300 rare earth minings are located. That is also a significant condition. For the past seven years, Myanmar’s rare earths have accounted for 70-80 percent of China’s rare earth imports. The rare earth mining operations are on hold due to the escalating conflict, and the closure of border gates has created challenges in transporting the already mined rare earth resources. Meanwhile, China’s market also heavily relies on the rare earth of Myanmar, especially those of Kachin State. Consequently, the rare earth price is skyrocketing. Given these circumstances, it’s crucial to analyze what the KIA will do, how China might adjust its relationship with the KIA, and what additional pressures China could exert.
As Nan Lwin noted, China aims to weaken the military strength of EAOs that do not follow its wishes by setting the “Five Cuts”—cutting off electricity, water, internet, supply chains, and personnel. Border gate closures and trade restrictions have nearly halted trade at all Myanmar-China border gates.
As shown here, ISP-Myanmar’s research reveals that 14 out of 19 gates trading under both the SAC and EAOs are closed. The remaining five are facing trade restrictions. The restricted items include construction materials, household products, medicines, electronic appliances, food, and fuel. On the one hand, the SAC argues that illegal border trades are sustaining, prolonging the existence of EAOs. This has led to SAC’s crackdown campaign on illegal trade. They not only seized the goods imported via the border but also arrested traders. Under the pretense of crackdowns on illegal trade, tens of thousands of cases have been pursued, with confiscations totaling over 300 billion kyats. In short, conflicts nearly suspended formal border trade. The SAC seized goods that entered through illegal routes, and China closed its border gates. Eventually, ordinary citizens suffered the consequences.
Commodity prices are escalating rapidly everywhere, along with shortages of goods. In some places, even if you have money, you still can’t buy what you need. For instance, the border areas of the northern Shan and Kachin states are facing shortages of fuel, food, and medicines. Fuel prices have doubled, and some gas stations are out of petrol and diesel. Due to ongoing conflicts and natural disasters, the country is facing a severe shortage of jobs, a raging war, soaring prices, and a shortage of goods. As discussed in our previous 30 Minutes with the ISP event in July, people are in a state of breathlessness in adversity. Next, Htet Shein will explore how EAOs respond to China’s sanctions and the ongoing trade blockages.
During the first phase of Operation 1027, some viewed that China was backing the 3BHA. However, changes occurred following the collapse of Kyar Phyant – online scam networks in the Kokang region. After the second wave of Operation 1027, the 3BHA seized the SAC’s North Eastern Command, Lashio, and other important towns in northern Shan.
In this backdrop, diplomatic engagements increased between the SAC and China. China even permitted SAC Chairman Snr. Gen. Min Aung Hlaing to visit Yunnan. Analyzing this development tells us that China is trying to aid the weakened SAC’s military, prevent Naypyitaw from collapsing, and control the escalation of conflicts in northern Shan, preventing their spread to major cities like Taunggyi and Mandalay through its sphere of influence using sanctions.
So, I want to discuss how EAOs respond to China’s sanctions and pressures in three instances. The first incident is China’s ceasefire ultimatum to the TNLA this early September. The TNLA responded that they will not cease fire and continue to engage in combat. Later, TNLA captured the town of Hsipaw. The second incident involves the MNDAA’s statement responding to China’s pressure. This statement reflects MNDAA’s stance on China’s concerns and positions. It stated that the MNDAA will not collaborate militarily with the NUG, and they will not launch offensives in major cities like Taunggyi and Mandalay. Additionally, it said the MNDAA will not collaborate with any international forces opposing China. It has also invited China to facilitate negotiations regarding Myanmar’s conflicts. Considering the relations and history shared between Kokang and China, the MNDAA’s response is no surprise. Although clashes have ceased, we still observe daily aerial bombings by the SAC in Kokang and Lashio areas.
The third instance was what Nan Lwin discussed earlier: a meeting minutes of the Chinese special envoy and Wa leaders meeting. The meeting record indicated China’s disapproval of regional conflicts escalating to the national level. China was quiet about the clashes at its border during the first wave of Operation 1027, but now it sought stability in the area. So, in the first wave, China regarded the MNDAA’s recapture of the Kokang region as a regional issue. In the second wave, China is not happy about Lashio being seized, PDFs getting involved and the conflict spreading to Mandalay.
Despite China’s pressure and sanctions, the allied forces continue to launch offensives throughout the Mandalay region. As you can see in this graph, it’s evident that conflicts and armed clashes are still widespread nationwide.
The condition is similar at the Myanmar-China border. When the KIA attacked border towns, China summoned KIO leaders, pressing them to halt the offensives. However, the battles did not cease. KIA seized Pang War town a day after the meeting. Following that, China closed all border gates linked to the KIA. Yet, the offensives continue till now.
What I really want to highlight is the balancing act in China’s relationships with the armed groups of northern Myanmar. China needs to maintain strong ties with armed groups along its border to assert pressure on the obstinate SAC and to safeguard its economic interests in Myanmar. On the other hand, these armed groups could gain more support from the public and legitimacy from military victories. They could strengthen ties among the alliances through linked territories and subsequently, break free from China’s sphere of influence. China is closely monitoring to prevent this from happening. From the perspective of EAOs, China is a superpower. EAOs rely on China for military, politics, and their existence to some extent, and therefore, they are careful to avoid direct confrontations. At the same time, they are continuously vigilant about expanding their military and political power to move beyond China’s influence.
Currently, EAOs are adopting a silent and non-compliant strategy toward China. While China is pressuring EAOs to cease hostilities through sanctions, the SAC simultaneously conducts daily airstrikes on towns and villages it lost in the northern Shan and Kachin areas.
Civilians in this region mostly suffered from these strikes. As shown here, after Operation 1027, the number of clashes, airstrikes, and civilian casualties in northern Shan State has increased in folds. The number of internally displaced persons (IDPs) has also grown tenfold following the operation, even within northern Shan State alone. Before Operation 1027, there were around 18,000 IDPs in northern Shan State. Now, it has risen to 220,000 IDPs. Kaung San discussed how China’s sanctions impacted the daily lives of ordinary people. The people are suffering through a double whammy of war and oppression, enduring the double troubles.
Thank you very much to the panelists for the discussion. Do you have anything to add as a key takeaway, Nan Lwin?
Firstly, looking at China’s approach, ISP-Myanmar emphasized that if conflict de-escalation through economic incentives is handled poorly or the political root causes aren’t effectively resolved, significant adversity will follow. Neighboring countries will likely suffer the negative impacts when the vicious cycle of conflict returns after some period. Therefore, this point should be considered with great care.
For the second point, China’s sanctions come with great costs and risks —not only economically but also in terms of long-term relationships. These sanctions have affected both China and the armed groups, disrupting trade, straining strategic relationships, and worsening border security. Moreover, these affect the economies and security of both nations’ people while also worsening relations between the Chinese government and the Myanmar people. Currently, it remains to be seen whether silent and non-compliant EAOs can hold out longer or if China will tighten its sanction screws to the max to secure the desired outcomes. The winning forces will set the direction of shifts in the conflict landscape.
Thirdly, regardless of which side maintains resilience, civilians are clearly the most affected by all of these events. It is crucial to acknowledge that civilians bear the burdens of the ongoing conflict and the added consequences of China’s sanctions. We can’t solely focus on bilateral government-to-government interactions when considering Myanmar-China relations. Its relations with the Myanmar people cannot be overlooked for China’s long-term interests. Strong anti-China sentiments among the Myanmar people stem from its historical tendency to engage solely with authoritarian regimes for its benefit primarily. The Chinese government should be cautious and reflect on this history.
Thanks to our panelists, Nan Lwin, Kaung San, and Htet Shein, for the insightful discussion. We would now like to move on to the Q&A session. We have gathered some questions from our Gabyin members and prepared three common questions. I’d like to read the first question, which says:
Historically, Beijing and Yunnan have taken different approaches to Myanmar. What is the policy stance of the Beijing and Yunnan governments regarding the border issues currently?
Normally, all provinces have to follow the policies set by China’s central government. However, our analysis reveals a distinct relationship between Yunnan’s administration and the ethnic groups along the border exists. Inter-related ethnic, economic, and cultural matters and interdependence among each other mark the relation. Consequently, Beijing’s engagement with these ethnic groups at the border differs from Yunnan’s approach. The interactions between Yunnan Province and each ethnic group along the border are distinct based on their historical and economic ties, especially in reciprocal relations. Policies also differ based on economic incentives. Yunnan perceives that the central government’s intervention has significantly affected and wasted its efforts to build ties with the people of Myanmar, particularly since the Myitsone Dam issue. Beijing’s support for the SAC’s election as a political exit is like a gamble. Meanwhile, Yunnan can do nothing but watch helplessly as events unfold.
Thank you, Nan Lwin, for your insight. I’d like to continue with the second question, related to the U.S. election. It asks:
How could the current US election result impact the Myanmar-China relations?
Donald Trump’s new administration might not significantly affect the relationship between the SAC and China. But it may impact the NUG, the EAOs, and resistance forces that lean closer to the West. Donald Trump’s “America First” agenda and inclination to cut foreign aid might challenge funding and aid provided under the Burma Act, a law enacted during President Biden’s term. But Donald Trump’s confrontational approach towards China could escalate the US-China geopolitical rivalry, drawing considerable attention to Myanmar. However, this attention could put Myanmar in the crossfire of the US-China competition. Nevertheless, China’s influence and political significance on Myanmar’s conflict actors could increase.
Thanks for your answer, Kaung San. I’d like to go to the third question:
Because of the restrictions and sanctions imposed on the border areas and EAOs, if EAOs comply with China’s demands, what consequences could arise, and how can they impact the current conflict landscape?
If EAOs comply with China’s demands, the most notable consequence could be the cessation of gunfire and the end of conflicts in the northern Shan. In this case, these groups will face a security dilemma. In the eyes of EAOs, SAC’s weapons production, new soldiers recruitment, and aircraft purchases, such activities could be suspected as preparations to recapture lost territories in northern Shan State. These would make EAOs feel insecure. At the same time, they might even have to give up places like Lashio and the North Eastern Command, which incurred great cost to capture. On the other hand, new fronts of conflict could emerge in regions such as the central lowlands—Ah Nyar—and southern Shan State. The Bamar People’s Liberation Army (BPLA), an allied force involved in Operation 1027, also officially announced it would deploy its forces to Ah Nyar, central lowlands of Myanmar. So, other forces could also expand into the region. Furthermore, China has stated its support for SAC’s election plans in 2025. In this scenario, assassinations of election officials and representatives, along with attacks on polling stations, are possible.
Thank you very much for your discussion, Htet Shein. Moving forward, I’d like to go to the Q&A section. We will accept live questions and comments from the Gabyin members. You can ask questions by using the raise hand button. We’ll first accept questions from the first person who has pressed the raise hand button.
You discussed how sanctions with Chinese Characteristics impact the EAOs. I also want to know how gate closures affect the general public.
Firstly, thanks for the question. The difficult situations in the border regions have become even more tense due to the closure of the border gates. As I mentioned earlier, northern Shan and Kachin border areas with China are particularly affected. These regions are close to China and heavily rely on imports from China. Due to the restrictions, there is a shortage of goods, and fuel prices are skyrocketing. If we look at it from another perspective, the inland conflict has caused a complete halt to the flow of goods. Goods from the inland cannot reach the border either. As the SAC disrupted the flow of goods to all areas controlled by the EAOs and each side continued blocking, the public faced increased adversity. These are the current conditions. As EAOs control these regions, they are doing their best to help ease the local population’s survival struggle. If the sanctions last longer, things could take a much worse turn for the public. I’d like to answer that the impact will be devastating for everyday socioeconomic.
Can I add to the question? It seems like a big problem for Myanmar, but the Myanmar issue is rather insignificant at a global level. It’s not significant for China either, just another neighboring country. China doesn’t want a war inside its neighbor, Myanmar. However, I want to know if Myanmar is vital to them for rare earth resources.
This question is related to Kaung San’s discussion. If we tally the value of China’s foreign rare earth imports seven years before the coup, 70-80 percent of rare earth imports come from Myanmar. Globally, China has long capitalized on the rare earths market within the diplomatic landscape. The suspension of rare earth exports from Myanmar has significant impacts.
We’d like to thank all the Gabyin members for the lively discussion and questions. I want to give special thanks to the panelists as well. Before we wrap up the program, could our panelists give a summary of today’s discussion?
As we discussed, China’s current approach prioritizes profit-sharing. So, managing to minimize adverse follow-on effects is necessary. China’s current agenda pushes for a process that centered the SAC, particularly to work within the 2008 constitutional framework, making it hard to swallow for the Spring Revolution and EAO leaders. Given the forceful and coercive nature of the process, it is crucial to exercise great caution to prevent spilling out more conflict. Ultimately, any solution to Myanmar’s crisis must align closely with the will of the Myanmar people. With that, I’d like to conclude.
Thank you, the panelists, for your discussion today. For the questions we could not answer live today, we’ll answer them in our Recap memo via email. You can also explore other research data, maps, and findings on ISP-Myanmar’s website at www.ispmyanmar.com and our social media platforms. I would like to thank all the members in attendance, and with that, I’ll conclude today’s program.
Appendix
This appendix includes responses to the questions we collected in advance of the event and the questions received via chat and Q&A buttons during the event.
What does China mainly want in return?
As we discussed before, China’s main interest in imposing sanctions targeting ethnic armed organizations along the Myanmar-China border is to stop the chaos along its border, to safeguard and implement its major strategic and economic interests, and to restore stability in border areas. As a broader political objective, China wants to restrengthen the weakening SAC’s military. China wants a leadership change through the election and to implement its economic interests. National reconciliation through discussion between SAC and resistance forces, especially the EAOs along the Myanmar-China border, is the ultimate goal. It also wants to gatekeep Myanmar’s affairs from Western interventions. In short, China’s economic and geopolitical strategy is to keep Myanmar within its sphere of influence, ensuring it doesn’t drift away.
I understand that sanctions are meant to sever connections and teach a lesson to certain individuals or organizations. Concerning halting supplies to populations along China’s border, is there a specific international term or standard used to describe this action?
Using overt and subtle strategies, China’s sanctions and interventions are designed to pressure the target to comply with their political and economic goals. Typically, China employs economic incentives to build favorable international relationships and assert its influence. Conversely, it also imposes punitive measures to show disagreements with other countries’ policies. Reflecting on history, China’s sanctions have a limited extraterritorial reach, but they significantly impact countries that are heavily reliant on the Chinese market and investments. The closure of border gates and the actions to weaken EAOs at the Myanmar-China border are direct pressures aimed at changing their behaviors to China’s liking. However, due to Myanmar’s heavy reliance on Chinese imports, the general populace also endures significant hardships, ultimately bearing the brunt of the situation.
What actions might the EAOs take under China’s sanctions, and how effective could these measures be?
Efforts are needed to maintain the fragile balance in the relationships between the northern EAOs and China. EAOs will carefully manage the balancing acts to respond to China’s sanctions. Meaning EAOs might tweak their demands to avoid direct confrontations with Chinese interests. At the same time, they could continue supporting conflicts against the SAC in areas other than northern Shan State while potentially engaging in ceasefire discussions within the northern Shan.
