Prospects for Chinese Projects in War-Torn Arakan State

By Admin 18 Aug 2025

Written by Moe Pauk

The Arakan Army (AA) has seized control of 14 of 17 townships in Arakan State, excluding Sittwe, Kyaukphyu, and Manaung, and is currently besieging and attacking Kyaukphyu and Sittwe.

These clashes are becoming more of an international issue than just a military defeat for Myanmar's military regime.

There are India- and China-backed projects in Sittwe and Kyaukphyu. The China-backed projects are larger than India-backed projects and have more immediate benefits. The China-backed projects include the Shwe Gas Project, the Kyaukphyu Special Economic Zone (SEZ), planned rail and road links with China and others.

Projects Amid Armed Conflict

These China-backed projects are now becoming part of the battlefield between the AA and the military regime.

"The first clashes between the AA and the Myanmar military were near the designated area for the deep-sea port," said Ko Khin Oo, who monitors foreign investment projects in Arakan State. "Now, clashes are taking place between the AA and the Myanmar military in village-tracts such as Sittaw, Kyattein, Katthabyay and Kandi, which are also within the SEZ area."

Malakyun Village is home to the OGT gas refinery, which is connected to a gas pipeline to Maday Island. Maday Island also has a gas distribution plant and oil storage facilities, and oil and gas are sent to China via a pipeline.

Malakyun Village is located about 6 miles from Kyaukphyu town and Maday Island is 7 miles from Kyaukphyu. This means that there is ongoing fighting between the AA and the Myanmar military near the junta's Danyawadi naval base near Maday Island and the OGT gas refinery in Malakyun Village.

On the other hand, village-tracts such as Sittaw, Kyattein, Katthabyay and Kandi, where the SEZ is to be built, along with the deep-sea port and planned housing projects, are now a battlefield between the Myanmar military and the AA, near the junta's No 32 police battalion.

China's Shwe Gas Project generates annual sales of up to $7 billion, of which the Myanmar regime receives more than $500 million annually, according to a report by Arakan Oil Watch (AOW) released in April.

Similarly, the AOW report says that the railway and highway projects connecting Kyaukphyu and China, including the Kyaukphyu Special Economic Zone, are worth an investment of up to $28 billion.

AA-Held Territories

Currently, the AA has a blockade of about 6 miles around Kyaukphyu town and controls the surrounding areas and parts of the projects.

Kyaukphyu Township is home to the Myanmar military's Light Infantry Battalion Nos. 34, 542, 543, Danyawadi naval base, No. 32 police battalion, Taungmawgyi naval base and Ohnkyein naval base.

The AA is attacking the junta's Danyawadi naval base and No. 32 police battalion, and is also threatening the military's Light Infantry Battalion Nos. 34, 542 and 543, and is waging a battle for control of Kyaukphyu.

The military regime now controls only the urban areas of Kyaukphyu and the adjacent areas of Gonechein, Ohntaw and Thit Pote Taung, Simaw and Sittaw villages near Danyawadi naval base Maday Island.

The SEZ project will initially develop a deep-sea port, an industrial zone, and a high-end residential project, with the acquisition of farmland in the project area starting in 2023. In addition, the Environmental Impact Assessment and Social Impact Assessment reports were completed in December 2023.

The military regime announced in December 2023 that construction work for the deep-sea port would be completed by the end of 2024 and that work was ready to begin.

Veteran Arakanese politician U Pe Than said, "Starting this project when even the junta troops cannot leave the city is just wishful thinking. In reality, there is no way it [the project] will happen."

A report by the Institute for Strategy and Policy - Myanmar (ISP - Myanmar) released in January found that the AA has full control over eight of China's 11 major projects and partial control over three. These projects are the Kyaukphyu Special Economic Zone, natural gas-fired power project, natural gas pipeline, oil pipeline, Kyaukphyu-Ann railway, Mandalay-Kyaukphyu railway, Mandalay-Kyaukphyu road, Kyaukphyu-Nay Pyi Taw road, and Thandwe wind power project.

Since the projects connect China via Kyaukphyu, Magway, Northern Shan, and Mandalay, China is in a position to consider not only the situation in Arakan State but also the Myanmar military's posture.

U Tun Kyi, an observer of Chinese projects, said: "China's main dream is to have the railway and highway projects connecting Yunnan and Kyaukphyu, which China wants to do. For this dream to come true, China needs to be comfortable with the people who can rule Magway, Mandalay, Northern Shan, Shan State, and mainland Myanmar."

China has great influence over the Myanmar regime and ethnic armed groups, and is able to influence political change. However, the nationwide revolution against the military dictatorship that has occurred since 2021 may have been a surprise to China.

The AA, which has built alliances with armed resistance groups in northern Shan, Magway, Mandalay, and Sagaing along the Chinese project route, is a force for the Spring Revolution.

Political analyst U Than Soe Naing said, "I believe that the AA's alliance with anti-regime forces will be the decisive unifying force for the Spring Revolution."

China Will Engage With the Victor

China sent an eight-member team, including an official from the Myanmar embassy, to inspect the ground conditions of its project for three days in the second week of June 2024.

In August 2024, junta boss Min Aung Hlaing promised Chinese Ambassador to Myanmar Ma Jia that he would do his utmost to protect Chinese projects and Chinese employees in Myanmar.

However, the AA's determination is more practical than the military regime's promise for Arakan State's military, political, and Chinese projects.

"The military regime is in a situation where it may soon hand over Arakan State to the AA. At this time, China will mainly talk to the AA, or it may come to talk," said Ko Tun Kyi.

Although there has been no official confirmation of discussions between China and the AA regarding Chinese projects in Arakan State, political analysts believe that there are ongoing relations.

On the other hand, China has sent at least 25 security force members to Kyaukphyu since last February to monitor its projects. There are reports that these Chinese security forces are providing drones and other military technology to the military regime on the Kyaukphyu front.

If China were to have direct involvement with the military regime on the Arakan front, it could lead to political complications and tensions between China and the AA over the future of the project.

"China-backed projects in Arakan State are more important to China than Arakan State itself. Therefore, China must avoid situations that will cause misunderstandings among the Arakanese people from now on, so that its projects will be in good standing," said a young man from Kyaukpyu who did not want to be named for security reasons.

The AA has stated since March 2024 that it will protect the security of foreign investors in projects. The AA also has a strong intention to permanently remove the military regime from Arakan State and determine its own resource management.

For China, other Belt and Road Initiative (BRI) components, including the Kyaukphyu SEZ, will be interesting to watch.