Geopolitics

Inside China's Quiet Flex On Myanmar Coup

The coup? What coup? China remains extremely cautious about upsetting its delicate relationship with Myanmar, given the important economic and strategic elements at stake.

A protester in front of China's embassy in Yangon
Bruno Philip

China, with its propensity to cover up the truth, has reacted with surreal moderation to the coup d"état perpetrated on Feb. 1 by the Myanmar army. Global Times, the English-language daily paper of the Chinese Communist Party, simply described it as "a major ministerial reshuffle."

Earlier, immediately after the coup, the spokesman for the Foreign Ministry of the People's Republic of China, Wang Wenbin, issued a more terse but significant diplomatic statement: "All concerned parties in Myanmar should settle their differences' in order to "maintain social and political stability."

Here's the reality behind this hollow statement: Everything that happens in Myanmar, which has an extensive border with China, is of paramount importance in the eyes of Beijing. For China, political stability in Myanmar is essential to guarantee China's economic investments in the country will continue without hindrance. What do the rulers of the Forbidden City hate most of all? Unexpected, sudden changes— even if it is possible that Beijing had been informed in advance of this "reshuffle."

For both nations, geopolitical imperatives and economic necessities are combined in the framework of a complex, strategically important and longstanding Sino-Myanmar relationship.

But who benefits from the coup? How will China be able to best protect its interests at the dawn of this new age in Myanmar's turbulent history? Will China benefit from the military returning to the forefront, if only because this event symbolizes a setback in the United States' Asian policy? Since the Obama era, this policy has been dependent on a strategy of supporting democratic countries that can balance the rise of China in the Asia-Pacific region.

Up to this point, Beijing had been courting Aung San Suu Kyi, the former dissident who became the leader of Myanmar. This courtship caused General Min Aung Hlaing, the leader of the Feb. 1 coup, to worry about Beijing's persistent double dealing: China needs to guarantee a solid relationship with any Myanmar leader, but there is always an "at the same time" clause in its strategy because the Middle Kingdom always keeps two irons in the fire.

A more democratic Myanmar would provoke an ideological conflict with China.

Presenting itself as a friend and ally of Myanmar, China, out of its own self-interest, arms several ethnic guerrillas who fight against Myanmar's army and whose rear bases are located on the Chinese border. This allows Beijing to present itself as a "peacemaker" and a key interlocutor in the peace process — so far unproductive — between these guerrillas and Myanmar's government.

In 2017, Aung San Suu Kyi went to Beijing where she formally announced Myanmar's participation in China's famous "New Silk Roads' program. The two countries then signed an agreement to develop the "China-Myanmar Economic Corridor," which is intended to strengthen Sino-Myanmar cooperation.

On the ground, these initiatives took the form of major infrastructure projects, such as the construction of a new main road from the border town of Muse to Mandalay, Myanmar's second largest city. There was also the building of a deep-water port in Kyaukpyu, on the Bay of Bengal, an area that already serves as an oil and gas terminal for the pipelines supplying China's Yunnan province. This enables the Chinese to receive Myanmar's offshore gas and oil directly from the Indian Ocean without making the long detour through the Strait of Malacca to reach Shanghai, Tianjin or other ports on the Pacific coast. Significantly, this strait could be obstructed in the event of a conflict between Beijing and Taiwan.

Xi Jinping with Aung San Suu Kyi in January 2020 — Photo: Xie Huanchi/Xinhua via ZUMA Wire

Since 2015, however, Myanmar has been actively expanding its ties with Western countries in addition to those it already had with Japan, Thailand and Singapore. It has also managed to reduce its debt to China by 26%, even though the People's Republic of China remains its main trading partner.

A former professor of political science at Tsinghua University in Beijing, Wu Qiang, argued in an interview with Radio Free Asia that the coup could ultimately prove to be a good deal for Beijing. "If Myanmar had continued on the path to democracy under the leadership of Aung San Suu Kyi, its foreign policy might have moved in the direction of strengthening ties with Washington. And for now, there is no conflict between Myanmar and China in terms of economic interests. On the other hand, a more democratic Myanmar would provoke an ideological conflict with China."

Aung San Suu Kyi had tried to maintain a cordial relationship with the leader of China, President Xi Jinping. In the West, she has been totally discredited for her inaction following the torture and massacre of tens of thousands of members of the Rohingya minority. More than seven hundred thousand Rohingya refugees have since fled to Bangladesh.

The "men in green" have a de facto ally.

The impassable constraint of the realities of the diplomatic doctrine of any great power should lead China to support the leadership in place, because that is in its interest. This makes it unlikely that Beijing will provoke tensions with the new military administration in the name of a haphazard defense of Aung San Suu Kyi.

During the last years of dictatorship at the beginning of this century, the leaders of the Tatmadaw, Myanmar's armed forces, felt it was time to open the country up in an attempt to free itself from China's stifling embrace — and to lower the level of dependence on their neighbor. Such unfaltering nationalism, however, risks complicating the relationship between Beijing and Naypyidaw (Myanmar's capital). And the "men in green" of Myanmar's military have already found a de facto ally in China. The gesticulations of Washington and European countries may not end up changing this relationship much.

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Economy

European Debt? The First Question For Merkel's Successor

Across southern Europe, all eyes are on the German elections, as they hope a change of government might bring about reforms to the EU Stability Pact.

Angela Merkel at a campaign event of CDU party, Stralsund, Sep 2021

Tobias Kaiser, Virginia Kirst, Martina Meister


-Analysis-

BERLIN — Finance Minister Olaf Scholz (SPD) is the front-runner, according to recent polls, to become Germany's next chancellor. Little wonder then that he's attracting attention not just within the country, but from neighbors across Europe who are watching and listening to his every word.

That was certainly the case this past weekend in Brdo, Slovenia, where the minister met with his European counterparts. And of particular interest for those in attendance is where Scholz stands on the issue of debt-rule reform for the eurozone, a subject that is expected to be hotly debated among EU members in the coming months.

France, which holds its own elections early next year, has already made its position clear. "When it comes to the Stability and Growth Pact, we need new rules," said Bruno Le Maire, France's minister of the economy and finance, at the meeting in Slovenia. "We need simpler rules that take the economic reality into account. That is what France will be arguing for in the coming weeks."

The economic reality for eurozone countries is an average national debt of 100% of GDP. Only Luxemburg is currently meeting the two central requirements of the Maastricht Treaty: That national debt must be less than 60% of GDP and the deficit should be no more than 3%. For the moment, these rules have been set aside due to the coronavirus crisis, but next year national leaders must decide how to go forward and whether the rules should be reinstated in 2023.

Europe's north-south divide lives on

The debate looks set to be intense. Fiscally conservative countries, above all Austria and the Netherlands, are against relaxing the rules as they recently made very clear in a joint position paper on the subject. In contrast, southern European countries that are dealing with high levels of national debt believe that now is the moment to relax the rules.

Those governments are calling for countries to be given more freedom over their levels of national debt so that the economy, which is recovering remarkably quickly thanks to coronavirus spending and the European Central Bank's relaxation of its fiscal policy, can continue to grow.

Despite its clear stance on the issue, Paris hasn't yet gone on the offensive.

The rules must be "adapted to fit the new reality," said Spanish Finance Minister Nadia Calviño in Brdo. She says the eurozone needs "new rules that work." Her Belgian counterpart agreed. The national debts in both countries currently stand at over 100% of GDP. The same is true of France, Italy, Portugal, Greece and Cyprus.

Officials there will be keeping a close eye on the German elections — and the subsequent coalition negotiations. Along with France, Germany still sets the tone in the EU, and Berlin's stance on the brewing conflict will depend largely on what the coalition government looks like.

A key question is which party Germany's next finance minister comes from. In their election campaign, the Greens have called for the debt rules to be revised so that in the future they support rather than hinder public investment. The FDP, however, wants to reinstate the Maastricht Treaty rules exactly as they were and ensure they are more strictly enforced than before.

This demand is unlikely to gain traction at the EU level because too many countries would still be breaking the rules for years to come. There is already a consensus that they should be reformed; what is still at stake is how far these reforms should go.

Mario Draghi on stage in Bologna

Prime Minister Mario Draghi at an event in Bologna, Italy — Photo: Brancolini/ROPI/ZUMA

Time for Draghi to step up?

Despite its clear stance on the issue, Paris hasn't yet gone on the offensive. That having been said, starting in January, France will take over the presidency of the EU Council for a period that will coincide with its presidential election campaign. And it's likely that Macron's main rival, right-wing populist Marine Le Pen, will put the reforms front and center, especially since she has long argued against Germany and in favor of more freedom.

Rome is putting its faith in the negotiating skills of Prime Minister Mario Draghi, a former head of the European Central Bank. Draghi is a respected EU finance expert at the debating table and can be of great service to Italy precisely at a moment when Merkel's departure may see Germany represented by a politician with less experience at these kinds of drawn-out summits, where discussions go on long into the night.

The Stability and Growth pact may survive unscathed.

Regardless of how heated the debates turn out to be, the Stability and Growth Pact may well survive the conflict unscathed, as its symbolic value may make revising the agreement itself practically impossible. Instead, the aim will be to rewrite the rules that govern how the Pact should be interpreted: regulations, in other words, about how the deficit and national debt should be calculated.

One possible change would be to allow future borrowing for environmental investments to be discounted. France is not alone in calling for that. European Commissioner for Economy Paolo Gentiloni has also added his voice.

The European Commission is assuming that the debate may drag on for some time. The rules — set aside during the pandemic — are supposed to come into force again at the start of 2023.

The Commission is already preparing for the possibility that they could be reactivated without any reforms. They are investigating how the flexibility that has already been built into the debt laws could be used to ensure that a large swathe of eurozone countries don't automatically find themselves contravening them, representatives explained.

The Commission will present its recommendations for reforms, which will serve as a basis for the countries' negotiations, in December. By that point, the results of the German elections will be known, as well as possibly the coalition negotiations. And we might have a clearer idea of how intense the fight over Europe's debt rules could become — and whether the hopes of the southern countries could become reality.

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