The rapid changes in Myanmar since President Thein Sein began democratic reforms in 2011 present China with a problem. For decades, China had a cozy relationship with its authoritarian neighbor, enjoying a near-monopoly on its natural resources and foreign policy. But now, Myanmar is a messy quasi-democracy, whose people resent Beijing for its past support of the junta and its economic exploitation of their country. And Myanmar's still a threat to regional stability: China sent troops to the two countries' border in early January because of fighting between the Myanmar government and rebel groups -- if things get worse it could spill into Chinese territory.
China can no longer count on Myanmar as its strategic corridor into the Indian Ocean, or as a loyal supporter at the Association of Southeast Asian Nations. Naypyidaw (Myanmar's new capital) has vastly improved its relations with Washington, increasing Beijing's anxiety about the U.S. rebalancing to Asia. And things are getting worse for Beijing. Monks and villagers in central Myanmar have protested for months against the expansion of the Mongywa copper mine, the country's largest, which is operated by a Chinese weapons company and a holding company controlled by the Burmese military. In 2011, Sein suspended construction by a Chinese company of the $3.6 billion Myitsone Dam, saying it went against "the will of the people." The protests against Mongywa have raised worries that all Chinese investments in Myanmar are in danger.
Beijing finds itself with little ability to prevent Naypyidaw from hurting its interests. An increasingly loud section of China's foreign policy community, including government analysts and Southeast Asia specialists, are now arguing that China should return to its old friends -- the border ethnic groups that are waging small-scale rebellions against Naypyidaw -- to enhance its leverage there. Liang Jinyun, a professor of political science at Yunnan Police College in southwest China, argued in an influential 2011 paper that these ethnic groups, if "used" well, "will become China's most loyal friend in the frontline of confrontation between the United States and China in Myanmar."
China has long maintained close ties with the Wa and Kachin, ethnic minorities who live in the north and have struggled for autonomy against the government since Myanmar became a country in 1948. The relationship peaked during the 1960s, when China supported the Burmese Communist Party (which consisted primarily of Wa and Kachin, as well as Chinese nationals) in their (partially successful) struggle against the central government. The material and human assistance from Beijing ceased in the early 1990s, though local governments in China's Yunnan province have maintained cross-border ties on issues ranging from business cooperation to drug-related crop substitution programs. Naypyidaw reached a peace agreement with the Wa in September 2011, but the Kachin and the Myanmar military remain at war. On Jan. 2, Myanmar admitted that it had been using aircraft to attack the Kachin, which still boasts an army of about 15,000.
Publically, Beijing has said very little. The Foreign Ministry has stated that China and Myanmar are important neighbors, and that China welcomes the improvement of relations between Washington and Naypyidaw. But treating Myanmar nicely, as Beijing feels it has done over the past few decades, has not brought the desired outcome. Therefore, China should "diversify" its approach, said a Chinese government analyst at a private gathering in November. "The border ethnic groups are our card and China needs to play it well," said another influential Chinese analyst in Beijing. His view is shared by many analysts I've spoken with over the past few years, though none has spoken about it publically.