Does shutdown of key Chinese power plants in Myanmar mirror Beijing-Naypyitaw rift?

Chinese power companies are shutting down operations in Myanmar due to financial problems faced by the ostracised Myanmar military junta which is unable to pay dues to the power companies.

The Myanmar military, also called Tatmadaw, which seized power from the democratically elected government of President Aung San Suu Kyi in February 2021 faces a stringent global boycott. It also faces a drain on its resources as it continues to fight the People’s Defence Force (PDF) – a coalition of pro-democracy forces.

A report in The Irrawaddy says that three of the four China-backed liquefied natural gas (LNG) power plants in the strategically located Kyaukphyu township in western Myanmar have stopped work. The third power plant came to a stop recently after working intermittently since 2022.

Two power plants, which had stopped operations last year, have been dismantled and removed. All three were operated by a Hong Kong-listed power generation company – VPower, which continues to operate other plants in Myanmar.

The company’s fortunes fell after the military coup. The financial and economic woes that followed the coup include a banking crisis, shortage of funds with the power ministry and the decline in Myanmar’s currency Kyat against the US dollar.

Now these problems are hitting the China-Myanmar Economic Corridor (CMEC).

The South-East Asian country’s power ministry says that it can pay the Chinese power companies only in Kyats while power purchase agreements had mentioned dollar payments. VPower had signed the agreements with Suu Kyi’s government – the National League for Democracy (NLD) as far back as 2015.

Myanmar’s Kyaukphyu is located in Rakhine state bordering both India and Bangladesh. Kyaukphyu looks into the Bay of Bengal, making it an important port for China to pledge big investments to Naypyitaw – power plants and special economic zones along with plans to establish trade networks with Europe and the Gulf countries through an alternate route to the Strait of Malacca.

Even though China has been pushing its mega infrastructure projects in a big way in Asia, it also faces backlash from local communities as well as declining profits. The anti-China sentiment in Myanmar is strong as armed militias opposed to the military rule have been targeting Chinese projects. The local Myanmar people consider China as an enemy for helping prop up the junta regime.

Chinese power companies are facing similar problems in Pakistan as well.

In Pakistan issues include terror attacks on Chinese hydro-power projects in Pakistan’s northern provinces as well as non-payment of dues by Islamabad. Other problems include Pakistan’s incapacity to import coal for the power plants after which Chinese producers have cut down on power generation and told Islamabad that they consider the government a defaulter.

Will reduced power generation in the deep-sea port of Kyaukphyu put a speed-breaker on China’s dreams of developing a major trade way into the Indian Ocean from Myanmar? Will it also impact its plans of bypassing the Strait of Malacca and take the sheen off the ambitious Belt and Road Initiative (BRI) projects in an unstable and violence-prone Myanmar?