Scams, Weapons, and Resource Extraction Entangle Chinese Actors in Myanmar Civil War

More than three years after the military’s coup d’état, Myanmar remains engulfed in instability and civil war. China has more leverage in Myanmar than any other foreign power, and the ongoing crisis along the China-Myanmar border has pushed China to take on a larger role in the conflict. Thus far, China has pursued a delicate balancing act by attempting to “play all sides” and safeguard its economic interests while calling for a peaceful resolution. But these political and economic imperatives have occasionally clashed with each other and with China’s domestic concerns, to the detriment of individuals caught in the crossfire. In a major investigation on the subject published last week, Shibani Mahtani, Christian Shepherd, and Pei-Lin Wu from The Washington Post revealed that criminal networks in northern Myanmar along the border with China enjoyed the protection of both the military government in Myanmar and Chinese officials:

A Washington Post investigation found that Kokang’s criminal networks — principally led by the Wei, Bai and Liu families, according to U.N. officials, Chinese court records and analysts — had for more than a decade enjoyed close relations with Chinese officials, primarily in neighboring Yunnan province, along with support from Beijing and the military government in Myanmar. The Myanmar military chief, Min Aung Hlaing, further solidified the families as political and economic brokers after taking power in a 2021 coup.

Evidence of the Kokang families’ deep cooperation with Chinese state officials has partially been scrubbed from the Chinese internet and social media but some of it was archived and verified by The Post. Statements, news releases and photos on the official websites and social media pages of the Kokang authorities, and the Myanmar and Chinese governments show that they worked together on multiple economic projects worth hundreds of millions of dollars.

[…] Workers, mostly Chinese nationals or ethnic Chinese, were bought, sold and traded; and then beaten, tortured or killed when they didn’t reach financial targets or tried to escape, according to firsthand accounts, in some cases supported by verified video footage, photos and screenshots of text messages supplied by victims. The Post also reviewed Chinese court records and found more than 1,100 criminal cases linked to Kokang, some specifically to the compounds and businesses operated by the three clans, over the past decade. Almost all focused on low-level operatives involved in illegal gambling, human trafficking and narcotics, the records show, while the heads of the families continued to work with Chinese officials.

[…] “The Kokang families were engines for the Chinese-Myanmar economic relationship. Their economic sway came from [illicit businesses] but also from this massive web of relationships that they built with economic and political elites all across China,” said Jason Tower, director of the Myanmar program at the U.S. Institute of Peace.

China, he added, has helped create “a Frankenstein monster that it now can’t control.” [Source]

On Monday, China launched a month-long nationwide campaign aimed at raising public awareness and combatting telecommunication and cyber fraud. On Tuesday, the Ministry of Public Security (MPS) announced that 150 Chinese nationals suspected of telecom fraud had been transferred from Myanmar to China. Over 49,000 telecom-fraud suspects have been extradited to China by Myanmar since 2023, according to the MPS. At times, anti-fraud efforts appear to overreach: CDT recently published an account of one woman’s Weibo post, later censored, detailing how police summarily froze her bank account based on an ill-founded suspicion of fraud.

This month, China Labor Watch published an in-depth article unpacking the Chinese government’s recent efforts to combat scam operations in Myanmar. The article highlighted the brutal living conditions suffered by many Chinese victims who are trafficked into Myanmar and forced to facilitate illicit scam operations

In one particularly infamous case, Zhang, a postdoctoral researcher at the Chinese Academy of Science, was lured and trafficked to Myanmar under the guise of a job offering in Singapore. In Myanmar, he stayed for over one year working whopping 18-hours-days for online scams. Zhang reported experiences of horrific treatment after being brought to the scam operation. Accordingly, more than a dozen of smaller operations (dubbed “companies”) existed in his scam compound, with two to three hundred people working under each. As the operations are carried out like lucrative, profit-generating businesses, scams were delicately crafted. Each operation carried out a dedicated type of fraud. Zhang, in particular, was in a “pig-butchering scheme” in which he posed as romantic interests to scam rich middle-aged men in Europe and the United States. In the operation, Zhang went through dedicated training to learn scripts and design realistic characters. The operations imposed strict rules on victims regarding outside contacts. Zhang, in particular, was beaten for two days and locked in solitary confinement for two months after it was found out that he sought help from the outside world. According to Chinese media, Zhang was released after paying a ransom in August 2023 because the scam operation felt increasing pressure from media and Chinese authorities. The case caused a stir in the Chinese internet. [Source]

Clara Fong and Abigail McGowan from the Council on Foreign Relations provided a brief overview of how China has responded to the scam industry within Myanmar:

The rise in Southeast Asian scam centers has altered China’s role in Myanmar’s civil war and its relationship with the military government, as many of the cyber scams and trafficking victims are Chinese citizens. Beijing has generally supported Myanmar’s junta to safeguard its Belt and Road infrastructure projects in the country and to prevent fighting or displacement from spilling into China’s Yunnan province. But the junta’s inability to crack down on scam centers, as well as the growing victimization of Chinese citizens, has changed China’s calculus. 

In late October 2023, three ethnic insurgent groups successfully coordinated an attack on the Myanmar military in northeastern Shan State. In their justification for launching the offensive, the ethnic armed groups claimed they would eliminate scam centers along the China-Myanmar border, accusing the junta of tolerating and profiting from the industry. Experts say China offered tacit approval for the attack, suggesting Beijing is willing to allow temporary instability on its border if it stops the human trafficking and scamming of its citizens. Chinese law enforcement is pressuring local ethnic militias to hand over Chinese nationals and close the scam centers. Since the counteroffensive, China has repatriated more than forty thousand citizens […], according to state-backed media. [Source]

In addition to scam industries, the unstable security situation in Myanmar has fostered trade practices that are harmful to the environment, with China again playing a major role. Audrey Thill described in Foreign Policy this month how the flow of conflict timber from Myanmar into China and other countries helps fund the military junta:

One strategy that [Myanmar’s] military employs is circumventing sanctions in order to sell timber to international buyers. According to its own reporting, Myanmar exported $235.6 million worth of timber between October 2021 and mid-2023. Actual production levels are likely much higher than official reports due to the prevalence of cross-border smuggling.

As much as 80 percent of timber leaving Myanmar is smuggled to India and China, according to research published in 2021 by the Global Initiative Against Transnational Organized Crime. The organization’s investigations show that smugglers often conceal logs in oil tankers and humanitarian vehicles, but in some cases, they operate out in the open. Domestic furniture makers also purchase illegal timber from Myanmar’s Sagaing region due to its lower price compared to certified logs.

[…] Investigations conducted in the United States and Italy, for example, have found evidence indicating that timber businesses have illegally sourced teak from Myanmar to build yacht decks and high-end furniture. Large amounts of rosewood from Africa and Southeast Asia, including Myanmar, also end up as expensive furniture, or hongmu, in Chinese homes and businesses. One recent estimate put the Chinese market for hongmu at $26 billion per year. [Source]

Last month, the international environmental NGO Global Witness followed up on its 2022 investigation into unregulated mines in Myanmar, which have become an essential source of heavy rare earth elements (HREE), themselves key components in magnets used for electric vehicles and wind turbines. The latest report shows that Chinese and global dependence on these mines has only deepened, with negative consequences for local residents in Myanmar:

We also found that imports of heavy rare earth oxides from Myanmar to China skyrocketed from their previous highs of 19,500 tons in 2021 to reach 41,700 tonnes in 2023 – more than double China’s own quota for domestic HREE mining. Given that limited alternative sources have emerged in the meantime, this further cements Myanmar’s role as the single largest source of vital HREE.

[…] Myanmar’s lucrative trade in HREE – worth $1.4 billion in 2023 – risks financing conflict and destruction in a highly volatile region. In 2018 Myanmar’s civilian-led government banned exports and ordered Chinese miners to wind down operations. Since 2021, extraction has continued in the context of a ruthless dictatorship and widening civil conflict. The vast majority of the country’s extraction is explicitly illegal – controlled by an illegitimate military-aligned militia which, according to Kachin sources, has no regulation on mining standards. The KIO [Kachin Independence Organisation] enjoys greater legitimacy, and operates as a de facto government in Kachin. 

When contacted by Global Witness prior to publication, a KIO spokesperson said that they had placed “strict rules” on rare earth mining companies in order to protect the environment. However, local sources consulted by Global Witness were not aware of any legal frameworks put in place by the KIO to regulate the industry. On both sides, this largely unregulated mining is environmentally devastating, and the threat it poses to ecosystems and to human health is becoming ever more urgent. [Source]

Beyond resource extraction, China has also played a role in the combat itself. In January, China brokered a ceasefire in northern Myanmar between the junta and an alliance of ethnic armed resistance groups, which accused the junta this week of repeatedly violating the deal. Chinese technology has appeared on the front lines, including drones used by resistance fighters, and jets and jamming technology used by the junta. As Reuters reported this month, the military junta is now copying the resistance fighters’ tactics by increasingly resorting to Chinese-made drones:

[A 31-year-old rebel fighter in the country’s southeast identifying himself by the nom de guerre of Ta Yoke Gyi] said the junta began using armed unmanned aerial vehicles (UAVs) to attack the rebels at around the turn of the year and that his unit recently shot down a drone, which they identified as Chinese from its components and had been modified for combat. Two rebel fighters in other parts of Myanmar also described similar skirmishes to Reuters.

The news agency interviewed four resistance fighters, two analysts and an official from a country in the region who tracks the conflict. They described for the first time specifics about the junta’s use of Chinese-manufactured drones that are jerry-rigged to carry explosives. Some of them spoke on condition of anonymity because of the sensitivity of the issue.

[…] The junta started procuring thousands of Chinese commercial UAVs at the start of the year that it is modifying to arm with locally-manufactured munitions, said Min Zaw Oo, executive director of the Myanmar Institute for Peace and Security think-tank.

He said he obtained information on junta drones from military officials and people with knowledge of weapons production. [Source]

Chinese state-affiliated actors walk a fine line in attempting to continue economic cooperation and BRI projects in Myanmar amid the civil war, complicated by the shifting territorial claims between the combatants. One of these projects is the $3.6 billion Myitsone hydropower dam. Last month, Myanmar’s military junta announced a new leadership team to potentially revive the project in collaboration with China’s SPIC Yunnan International Power Investment company, the project’s developer. This month, the Chinese ambassador to Myanmar signed a bilateral agreement for 12 projects related to agriculture, poverty alleviation, trade, innovation, and livelihoods in Myanmar. 

Meanwhile, the activist group Justice for Myanmar published a report this month detailing the involvement of Chinese and Burmese companies in the junta’s digital surveillance and censorship:

A Justice For Myanmar investigation based on sources including leaked documents and corporate records has exposed the involvement of two Chinese companies in the junta’s digital surveillance and censorship program. 

Planning documents show the use of two products from the Chinese company Geedge Networks, which trades as Jizhi (Hainan) Information Technology Company Limited, in the surveillance and censorship system that was activated in Myanmar at the end of May. 

Geedge Networks founder and chief scientist is Fang Binxing, the “father” of the Great Firewall of China. 

One product, Taingou Secure Gateway (TSG), uses deep pack inspection and claims to be able to decrypt and inspect traffic between the server and client that is encrypted with secure sockets layer (SSL) and transport layer security (TLS) encryption protocols.

TSG also features a firewall that can block applications, including virtual private networks (VPNs), based on their behaviours and attributes. 

Cyber Narrator, also from Geedge Networks, is a network intelligence platform designed to monitor and analyse internet traffic and respond to “threats”, including the use of VPNs.

In addition, the Chinese state-owned company China National Electronics Import and Export Corporation (CEIEC), also linked to Fang Binxing, has been involved in a proposed location tracking system for the junta controlled communications ministry. [Source]

Updated on June 26, 2024 to include reference to the report by Justice for Myanmar.


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