China’s economy has been slowing since President Trump began the trade war during his first term. The year Trump was elected, 2016, China’s GDP growth rate was 6.8 percent, and other than a spike in 2021 caused by COVID and by the Biden administration being soft on China, it has trended downward since. Growth is expected to be only 5 percent this year. Similarly, the yuan was 6.5 to the dollar in 2016 and is down to 7.3 this year. Foreign investment in China was approximately 175 billion dollars in 2016 and is now down to about 43 billion dollars.
As the economy slows, Chinese leader Xi Jinping has become more desperate and has resorted to tighter state control over the economy. But more communism and central planning is the opposite of what the economy needs. Government crackdowns on major tech firms like Alibaba and Tencent have disrupted private investment in the technology sector, while regulatory uncertainty has further dampened business confidence.
Rising labor costs have eroded China’s competitiveness in low-end manufacturing, prompting companies to relocate to lower-cost regions such as Vietnam and Bangladesh. At the same time, China is beginning to experience deflation, including declining producer prices and declining consumer spending.
China’s rural economy has also lagged, exacerbating income disparities between rural and urban areas, with urban dwellers earning more than double what rural dwellers earn. Despite government efforts to stimulate spending, consumer confidence remains subdued, and households continue prioritizing savings over consumption. The high savings rate is further crippling the economy, driving youth unemployment, which now approaches 20 percent.
China’s economic slowdown has amplified its strategic interest in Burma (Myanmar), primarily driven by its need to secure trade routes, energy supplies, and economic influence in Southeast Asia. Burma, located at the crossroads of South and Southeast Asia, offers China a critical avenue for achieving these objectives through initiatives such as the China–Myanmar Economic Corridor (CMEC) and efforts to bypass the Malacca Strait.
China’s Malacca Dilemma refers to its strategic vulnerability caused by dependence on the Malacca Strait, through which approximately 80 percent of China’s oil and natural gas imports flow. This narrow waterway, protected by the US Seventh Fleet, poses a major risk to China’s energy security, food security, and exports in the event of a war with the United States. To mitigate this vulnerability, Beijing has invested heavily in alternative routes that reduce its dependence on the Strait.
The China–Myanmar Economic Corridor, part of Beijing’s broader Belt and Road Initiative, highlights China’s strategic economic interests in Burma. The corridor includes a series of infrastructure projects such as railways, highways, and ports designed to create a direct trade route from China’s Yunnan Province to the Indian Ocean.
One of the most critical components is the China–Myanmar Oil and Gas Pipelines, which stretch from Burma’s coastal city of Kyaukphyu to Kunming and allow China to import energy directly from the Bay of Bengal. This bypasses the chokepoint of the Malacca Strait, reducing the US ability to blockade China.
Beijing is constructing a deep-sea port at Kyaukphyu, in Arakan State, Burma, which, once fully operational, will enable China to export goods and import energy without relying on the Strait of Malacca. CMEC strengthens China’s trade connectivity and enhances its economic integration with Southeast Asia and South Asia, while also improving Beijing’s access to Africa and the Middle East.
Burma’s rich natural resources—ranging from oil and natural gas to minerals, timber, and hydropower—are another critical factor driving China’s interest. Chinese companies have heavily invested in hydroelectric dams, mining, and infrastructure in Burma to secure access to these resources. Reliable access to cheap energy and raw materials will help China’s manufacturing industry produce products cheaper than global competitors, stabilizing China’s industrial output and exports.
The most important natural resource in Burma is rare-earth minerals, and China is now the largest buyer, while Kachin State in Burma has become one of China’s largest suppliers.
Beyond direct economic interests, Burma’s strategic location further aligns with China’s broader regional ambitions. By strengthening its economic and political influence in Burma, China secures a foothold in the Bay of Bengal and counterbalances Indian influence in the region. A stronger presence in Burma also enhances China’s position along the String of Pearls, a network of strategic ports and infrastructure projects stretching across the Indian Ocean designed to protect Chinese trade routes and project influence.
And finally, Burma is crucial to Xi Jinping’s desire to capture Taiwan. Securing Taiwan is central to Xi’s political and historical legacy, as he seeks to fulfill the Chinese Communist Party’s long-standing goal of Chinese reunification. Of course, because Taiwan was never part of China, it is not truly a reunification, but Xi wants to build a legacy. He knows that if he is the leader who captures Taiwan, his name would be immortalized in Chinese history.
An added bonus, which circles back to the economic question, is that Taiwan’s advanced semiconductor industry, particularly Taiwan Semiconductor Manufacturing Company, holds immense strategic importance. Control over this industry would give China a technological edge, strengthening its global influence and economic position. The acquisition of such critical infrastructure would also bolster China’s economic revival and military modernization, providing Xi with a significant political triumph.
At present, China’s military is not quite ready to engage the United States, but many analysts believe the factor preventing Xi from making a move on Taiwan is the state of the economy. With the Strait of Malacca as an Achilles heel that could disrupt energy supplies, food supplies, and trade, a prolonged conflict could cripple China’s economy.
Given the economic risks of military action, completing CMEC becomes a vital step before any invasion of Taiwan. CMEC enhances China’s resilience by reducing its dependence on maritime trade and ensuring uninterrupted access to energy and resources.
The Burma war is hampering China’s ability to complete CMEC. The US could achieve significant economic and strategic advantages by engaging with the Burma resistance forces, establishing trade, investment, and support as a means of preventing China from completing CMEC. The US could also work with the resistance to support a free and fair election in Burma, which would place a democratic US ally on China’s border. If the US does nothing, however, China will complete CMEC, the US will lose its strategic leverage, and Burma will remain under the power of the dictators and move fully into China’s axis.
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