China Negotiating With Arakan Army To Protect its Projects in Rakhine State

On June 8th, a spokesperson for the Arakan Army (AA), Khine Thu Kha, said that China is actively negotiating with the armed group to protect its investment projects in Rakhine State. The negotiations occurred as the Junta lost control over several areas in the state to the AA. The AA is considered the largest of the armed groups fighting the Junta in various parts of the state..Kyaukphyu Deep Seaport and Special Economic Zone.China's negotiations with the AA come as the group has increased its military capabilities due to the capture of significant amounts of territory, weapons, and equipment. Furthermore, the group also gained control over several townships in the state and is currently fighting Junta forces on the outskirts of the state capital of Sittwe. However, the AA's increased capabilities and territorial gains, along with the Junta's weakening position, caused significant concern among foreign governments and investors involved in the various investment projects in Rakhine State..China's most important project involves the deep seaport and Special Economic Zone (SEZ) located near the town of Kyaukphyu on Ramree Island. The project is being developed by Kyaukphyu Special Economic Zone Deep Seaport Co. Ltd., a joint venture between the Junta-backed Kyaukphyu SEZ Management Committee and the Myanmar subsidiary of the Chinese state-owned investment company CITIC – Myanmar Port Investment Co. Ltd. China and Myanmar initially signed agreements totaling $11.5 billion USD to build the seaport, SEZ, and oil and natural gas pipelines. However, the project stalled after the February 2021 coup that deposed the democratically elected government of Aung San Suu Kyi's National League for Democracy. The project also saw delays due to the civil war between the military government, People's Defense Forces (PDFs), and ethnic armies such as the AA. In December 2023, officials from both countries agreed to accelerate the completion of the deep seaport and the SEZ..The port is key to the 1,056-mile (1,700-kilometer) China-Myanmar Economic Corridor that will connect Yunnan Province to the Indian Ocean via Myanmar. The economic corridor is also part of China's Belt and Road Initiative (BRI). Myanmar and China also share the investment costs for the project, but China has the majority stake with 70 percent, while Myanmar has 30 percent. The project will be implemented in four phases and will have 10 jetties that will have the capacity to handle seven million Twenty Foot Equivalent Unit containers annually. The oil and natural gas pipelines will begin from Kyaukphyu and end at the city of Kunming, the capital of Yunan Province, a distance of 605 miles (973 kilometers). Both China and Myanmar envision the port as a trade hub that will connect both countries to Africa, Europe, the Middle East, and other countries in the Indo-Pacific region. Myanmar also views the project as a means to promote the country's socioeconomic development while also boosting its economy and trade..Potential Arakan Army Offensive and Chinese Negotiations .Since the AA began its offensive in Rakhine State in December 2023, the Junta has begun efforts to fortify Kyaukphyu Township. However, the local military units intensified their efforts after the AA captured the town of Ramree, located approximately 31 miles (49 kilometers) south of the town, in March 2024. Military units based in Kyauphyu have indiscriminately shelled surrounding villages and restricted residents' movements within the town to prevent AA and PDFs from advancing towards the town..China shifted its focus to negotiating with the AA due to the group's growing presence in the region, with the aim of safeguarding the port, SEZ, and oil and natural gas pipelines to allow them to remain viable. Previously, China worked with the Junta to maintain stability in the town, Ramree Island, and Rakhine State. However, the Junta's loss of large amounts of territory and vows to liberate all the remaining townships in the state, including Kyaukpyu and Sittwe, to the AA and its allies incentivized China to directly negotiate with the group. Furthermore, the AA's continued capture of territory throughout Rakhine State led China to question if it could protect its projects in the state..Analysis.The negotiations with the AA show how China will place its long-term economic interests above its relationship with the Junta. Furthermore, the negotiations also point to China's willingness to engage with the AA and other rebel groups if the country believes the Junta cannot protect its interests. The negotiations to protect China's long-term economic interests in Rakhine State began because the country understood that the Junta could not provide the same protection as it had previously. Furthermore, China understands that the BRI cannot have a second project with similar economic and security issues as the China-Pakistan Economic Corridor (CPEC) and its port at Gwadar. The potential for such a scenario to occur is why China began to negotiate with only the AA instead of mediating between both the rebel group and the Junta. However, China would continue with the project due to its strategic considerations. Chief among these considerations is that it would allow for an alternative trade route that does not involve the Strait of Malacca..While the negotiations are not an overt acknowledgement that China will remove some of its support from the Junta, they do indicate that China understands that the Junta cannot be fully trusted to assist in avoiding any long-term disruptions to its trade or projects. For example, China mediated several ceasefire agreements between the Junta and the Three Brotherhood Alliance (3BHA) after the alliance captured several key border towns along the Myanmar-China border in late 2023. China's primary motive for holding these ceasefire talks was to allow cross-border trade to resume and to protect the infrastructure in these areas. The Junta broke the ceasefire agreements in an attempt to recapture the territories and prevent the 3BHA from controlling the border areas. China likely started negotiations with the AA to prevent the Junta from using the same strategy it previously used in the areas along China's border in Rakhine State.