Transnational Crime on the China-Myanmar Border

On September 6, the United Wa State Party, the political arm of one of the most powerful ethnic resistance armies in Myanmar, handed over 1,207 Chinese online scammers for extradition back to China (Eleven Media Group, September 9; Global Times, September 9). This was the latest act in a long-running saga of transnational criminal activity, including human and drug trafficking, cyber and financial scams, illegal gambling, and natural resource and gem smuggling, which has increased dramatically in those parts of Myanmar that border China and Thailand over the past two years (Interpol, June 7). Much of the rise has been due to the ineffective and corrupt rule by the Tatmadaw — the junta that has been attempting to govern the country since it staged a coup in February 2021. The military regime’s lack of consolidated control has enabled large-scale illegal enterprises tied to Chinese criminal organizations to flourish. Often, Chinese citizens are the targeted victims. However, Beijing’s renewed desire to stem the tide of criminality has less to do with the plight of its victimized citizens, and more to do with the country’s wider strategic interests.

Myanmar’s Internal and External Complexities

Any discussion of Myanmar must begin with an awareness of its complexities: The relatively small country is populated by 135 officially recognized ethnic groups (along with many who remain unrecognized). The junta is currently battling at least 11 insurgencies from numerous ethnic armed organizations (EAOs) — recently, for instance, by conducting air strikes on Karen State after an EAO there claimed responsibility for several attacks against them (Terrorist Monitor, August 8). And yet despite almost insurmountable difficulties, the country is not yet at the point of collapse.

The complexities continue when focusing on its relationship with China, its neighbor to the northeast. Along the mountainous border which Myanmar shares with Yunnan Province, there are many strong cultural and familial ties which form links across the divide. In some areas, people on both sides only speak the regional dialect, while in other rebel-held areas, the people speak Mandarin, read and write Chinese characters, and even use the renminbi as their primary currency (China Brief, July 17, 2015). These blurred boundaries have caused issues in the past: In 2015, clashes on the border between the then-government in Myanmar and a rebel group — the Myanmar National Democratic Alliance Army — killed five Chinese citizens and wounded another eight at a village located half a mile from the border (Myanmar MOFA, April 3, 2015). More recently, and perhaps more worryingly, former Foreign Minister Qin Gang (秦刚) took an inspection tour to one part of the border area, and while speaking with communities that straddle the border, used the language “One Village, Two Countries” (China Embassy to Myanmar, May 2). Such language is redolent of the “One Country, Two Systems” framework used to speak about both Taiwan and Hong Kong. By using similar formulations here, Qin’s comments suggest that Beijing conceives of Myanmar as part of a larger geopolitical framework — one in which China naturally sits at the center.

Myanmar in China’s Energy Strategy

Beijing certainly does see Myanmar as an important node of its global strategy to achieve its ambitions of autarkic security. The PRC seeks to benefit from Myanmar in two ways: from what the country itself has to offer, in terms of securing access to vital raw materials, energy resources, and precious gemstones, and from using it as a steppingstone to the Bay of Bengal in the Indian Ocean.

Its geopolitical importance relates to China’s desire for energy security. China is a net importer of crude oil and liquefied natural gas, and a key pipeline which transports some of that oil to Kunming from the Bay of Bengal goes directly through Myanmar. The strategic significance of this pipeline is that it allows China to avoid the chokepoint of the Straits of Malacca which, in the event of an invasion of Taiwan, would likely be cut off to China-bound vessels. Another energy-related project that China is keen to restart is the stalled Kachin state hydropower project, which is intended to be larger than the Three Gorges Dam. That particular infrastructure project isn’t strictly part of Beijing’s Belt and Road Initiative (BRI), but the initiative does play a part in China’s approach to the country: Yunnan constitutes a strategic node in the original document laying out BRI (China Brief, July 17, 2015), specifically the Maritime Silk Road component, due to the province’s proximity to the Indian Ocean. Myanmar also provides access to the rest of Southeast Asia, opening avenues for the substantial trade that China does with the region.

The mining industry is an increasingly important part of China’s interest in the region, especially in the border regions of Kachin which produce vast quantities of Rare Earth Elements (REEs) crucial to the energy transition. In 2021, Myanmar accounted for 70 percent of the total import value of REEs in China. According to Chinese Customs data, this amounts to almost $500m, though actual volumes could be much larger (Kontinentalist, October 27, 2022). Research from the NGO Global Witness used satellite imaging to identify over 2,700 mining collection pools over 300 separate locations in Kachin. Most of these operations are conducted by Chinese workers in the employ of Chinese firms, who moved their operations to Myanmar after their mines in China were shut down due to their deleterious effects on the environment (Global Witness, August 9, 2022). By one estimate, as many as 16,000 people moved from Ganzhou to Myanmar to mine rare earths between 2016 and 2019 (Roskill, May 24, 2019). The extracted minerals, which include elements such as dysprosium and terbium, supply the same Chinese state-owned companies that control 80% of global rare earth refining: there are few viable alternative sources that exist.

It is for these reasons that Qin Gang visited the country earlier this year, as did Xi Jinping (习近平) in 2020 (Xishuangbanna Dai Autonomous Prefecture Government, June 14, 2020). On both occasions, the two countries pledge support for one another, held high-level meetings, and discussing trade and investment (PRC Ministry of Foreign Affairs, January 18, 2021; The Irrawaddy, April 3). However, despite China’s overtures, Myanmar remains deeply distrustful of Beijing’s intentions. This wariness is apparent among the junta, which Beijing has supported (Xinhua famously referred to the coup as “a major cabinet reshuffle” (China Brief, March 25, 2021)), but also among the populus: In June, a convoy of vehicles carrying a Chinese delegation came under fire in Kachin (China Brief, July 7); and in May, angry online campaigns criticizing Beijing’s support of “fascist criminals” — referring to the Myanmar generals — gained widespread public backing (Economic Times, May 15).

Chinese Crime Victims and Chinese Crime Bosses

Most recently, Beijing has shown increasing desire to clamp down on transnational crime in Myanmar that targets its citizens. On June 19, six fraud suspects were handed over by Myanmar police to Chinese counterparts (China Embassy to Myanmar, June 20). A regional Chinese government statement explained, “a number of Chinese nationals were lured and smuggled into Myanmar’s Myawaddy region on the pretext of ‘high-paying jobs’ and asked to engage in telecommunications fraud” (Xishuangbanna Dai Autonomous Prefecture Government, June 14). Inside China, the Party’s media apparatus packages the crackdown on scammers in Myanmar as part of an anti-fraud campaign, with police officers teaching fraud prevention courses at schools and encouraging citizens to download anti-fraud apps on their phones. (Global Times, September 9). It is natural that Chinese authorities would want to protect their citizens from fraud, though naturally these apps can also be seen as another vector for encroaching state surveillance.

Fraudulent activities have been ongoing for several years (Global Times March 5, 2021; WeChat, August 15, 2021), but there has been an uptick since the coup in 2021, according to the United Nations High Commissioner for Human Rights (OHCHR, August 29). At least 120,000 people across Myanmar may now be held forcibly in locations where they are made to carry out online scams, with centers thought to be located in opaque Self-Administered Zones (SAZs) such as Kokang in Shan State and the Wa-administered city of Mong La on the Chinese border (East Asia Forum, June 14).

The Kokang SAZ is headed by Liu Zhengxiang (刘正祥), chair of a multi-billion-dollar conglomerate, the Fully Light Group. In addition to Kokang, Liu operates casinos in other parts of Myanmar which similarly cater to Chinese gamblers and illegal online gambling for Chinese customers. The Kokang area is practically a digital annexation of parts of Shan state by a Chinese entity (Frontier Myanmar, Jul 23, 2020; United States Institute for Peace, March 7, 2022). Liu is the founder of the Kokang Border Guard Force (BGF), an ethnic militia which operates along the Chinese and Thai borders. In exchange for supporting the junta army and combating opponents of the coup, the BGF are allowed to continue their criminal activities free of government intervention (United States Institute for Peace, March 7, 2022). The BGF thus protects Liu’s business empire. Additionally, by collaborating with business interests in Yunnan, the organization facilitates legitimate Chinese investments in Myanmar, while simultaneously engaging in cross-border illicit activities. They play a pivotal role in safeguarding these investments against potential attacks by EAOs currently in conflict with the military junta.

Additional criminal zones are emerging in the country, particularly in the northern region of Shan State, centered around the city of Tachileik. In their quest to rein in their own BGF and to appease Beijing, the junta has progressively permitted Chinese law enforcement operations to occur within Myanmar’s borders (United States Institute for Peace, July 11). In neighboring Karen State, Shwe Kokko, also called Yatai City, is another Chinese-backed SAZ. The city was conceived and operated by two companies: Yatai International Holding Group, headed by a Chinese criminal named She Zhijiang (佘智江) who is currently imprisoned in Thailand awaiting extradition to China (Sohu, February 3); and Chit Lin Myaing Company, a Burmese firm owned by former EAO members who are now part of the Myanmar armed forces (Radio Free Asia, November 13, 2019). At one time, Yatai Group claimed that Yatai City was part of the Belt and Road Initiative, but Beijing rebutted this claim (Chinese Embassy to Myanmar, August 25, 2020; for another similar instance, see China Brief, March 25, 2022). Such incidents are testament to the complex and murky relationship between Beijing and Naypyidaw, and between criminals and the rebels.

China: Unstable At Home, Seeks Stability Abroad

On his visit earlier this year, Qin Gang pointed out that China “sincerely hopes for the stability of Myanmar and the development of the country” (Xishuangbanna Dai Autonomous Prefecture Government, May 4). One reason why China might be looking to stem the crime wave on its southwestern border is the faltering state of its domestic economy. China’s exports and factory activity have been trending downward this year, FDI is at the lowest level on record (Nikkei, August 12), and youth unemployment hit 21.3 percent before the National Bureau of Statistics of China stopped reporting it (Japan Times, August 25; China Daily, August 15). As the cumulative effects of these economic headwinds start to impact on Chinese citizens, many are increasingly susceptible to pervasive get-rich-quick investment scams.

Another motivating factor in Beijing’s sudden desire to quash transnational crime is to support a falling yuan. The yuan has been trading at well above 6 and 7 to the dollar for the past year (Tradingeconomics, September 16). To prevent the currency spinning into freefall, Beijing needs to get dollars flowing into the country and prevent yuan from flowing out. The three main sources of U.S. dollar inflows in China are exports, FDI, and tourist arrivals, all of which are in decline. Online scams represent an outflow of yuan, as does gambling — both online and through Chinese citizens traveling to casinos abroad (The Irrawaddy, June 1). By tackling crime, Beijing can staunch some of its capital outflows, while simultaneously burnishing its image internationally as living up to the lofty values it espouses. However, as China continues to extend substantial financial backing to the country’s military junta (Observer Research Foundation, March 31), Beijing is confronted by an inescapable irony: by downplaying the post-coup trauma that Myanmar experienced as an “internal affair” (CGTN, February 19, 2021), Beijing misread not just its own immediate security environment, but also undermined its own strategic ambitions.

Conclusion

As of September 20, the junta has arrested 24,817 people since the coup, of whom they have killed 4,096. 19,246 remain detained (AAPB, Sept 20). While China’s emissaries urge “stability” and “development,” they simultaneously sanction exploitative, harmful, and illegal practices through state-connected business practices. The junta is reliant on PRC largesse but are not sufficiently in control of their country to give Beijing what it wants — and would prefer not to in any case. This is a problem that is partly of China’s making. It is less clear that it is one that China has the willingness to fix.