Beijing: China's strategic approach in Myanmar, often described as "running with the hare and hunting with the hound," is facing significant setbacks as rebel groups in the conflict-ridden country gain control over key economic zones. Originally aimed at safeguarding Beijing's economic and strategic interests, this dual-track policy of supporting both the Myanmar military junta and certain rebel factions has begun to unravel.

Since the military coup in Myanmar in February 2021, China has maintained close ties with the junta, providing arms and financial support. A key aspect of this relationship included a debt rescheduling agreement worth $130 million, signed between Myanmar's military-led government and the China Export-Import Bank. Additionally, Chinese Foreign Minister Wang Yi pledged a $3 billion bailout to Myanmar’s junta in August this year.

In military terms, China has provided substantial hardware to the Myanmar army, known as the Tatmadaw. This included deliveries of FTC-2000G fighter jets, with six aircraft arriving as recently as August 2024. China’s military assistance has bolstered the junta’s campaign of aerial bombardments against rebel-held territories. However, these areas are now proving problematic for China, as key infrastructure projects have fallen under rebel control.

Rebel Gains Threaten China's Investments
China’s investments in Myanmar, particularly under the Belt and Road Initiative (BRI), are at risk as rebel armies capture critical regions. The deep-sea port at Kyaukphyu, a cornerstone of China’s infrastructure development in Myanmar, is now under the control of the Arakan Army, a major rebel group. Likewise, the special economic zone surrounding the Kyaukphyu port and essential pipelines has also fallen into rebel hands. These disruptions threaten the China-Myanmar Economic Corridor (CMEC), a vital trade route for Beijing.

In response, China has shifted its strategy by tacitly supporting rebel factions, particularly those operating near the Chinese border. In late 2023, Beijing gave its indirect approval to "Operation 1027," a coordinated offensive launched by rebel groups against the Myanmar military. The goal was to stabilize areas near the China-Myanmar border, crucial for Chinese trade, and to dismantle scam syndicates that had proliferated in these regions under military patronage.

China’s Struggle to Control the Narrative
Despite backing rebel forces to secure its interests, Beijing’s strategy has backfired. Although over 25 armed groups, including the Ethnic Armed Organizations (EAOs), share a common goal of opposing the military junta, they have shown little interest in aligning with the National Unity Government (NUG), a coalition of pro-democracy forces in Myanmar. Without the unification of rebel groups under the NUG, China’s hopes for political stability — essential for its long-term investments — remain unfulfilled.

Beijing’s troubles are compounded by recent rebel advances. In August 2024, the NUG-aligned People’s Defence Forces (PDF) seized control of the Tagaung Taung Nickel Mine near Mandalay, one of China’s largest foreign investments in Myanmar. The PDF also took over an oil and gas pumping station, cutting off revenues that had previously flowed to the junta. These rebel victories further undermine the military government, which is now teetering on the brink of financial collapse.

A Delicate Balancing Act
Despite the setbacks, China cannot afford to entirely abandon the Myanmar junta. The military still holds strategic control over crucial infrastructure, including airports, seaports, and Myanmar’s commercial capital, Yangon. This has led Beijing to continue its support for the junta, as evidenced by Wang Yi’s recent meeting with General Min Aung Hlaing, where China pledged further financial aid and military hardware.

Yet, Beijing faces growing challenges. The NUG has issued a warning that any future government in Myanmar will not honor debts incurred by the military junta, casting a shadow over China’s multi-billion-dollar investments. "It is impermissible for the illegal military council to borrow from domestic and foreign lenders under the guise of raising foreign debts," the NUG stated.

As Myanmar’s civil war drags on, China finds itself entangled in an increasingly complex situation. While its initial policy of supporting both the junta and certain rebel groups was intended to safeguard its economic interests, it now faces new risks as rebel forces gain ground. With its investments at stake and no clear path to stability, Beijing’s once confident strategy in Myanmar is in dire need of recalibration.