Myanmar’s border trade with China and Thailand has collapsed

Earlier this week, the Institute for Strategy and Policy-Myanmar, a Yangon-based think tank, published its report regular report about the state of affairs in the conflict in the country. The report provided a comprehensive analysis of overland trade between Myanmar and its neighbors, and the extent to which it has been affected by the country’s intensifying civil war.

For the Army’s State Administrative Council (SAC), the report would likely make grim, but perhaps unsurprising, reading. Among the various statistics continued in the ISP-Myanmar report, the notable conclusion was that anti-military ethnic armed organizations (EAOs) now control the trade routes responsible for almost all of the land trade with China.

As the report states, of the seventeen official border trading stations between Myanmar and its five neighbors – India, China, Thailand, Bangladesh and Laos, resistance groups now control five: three on the border with China (Muse, Chinshwehaw and Lwegel), one on the border with China. Thailand (Mese), and one bordering India (Rihkhawdar).

Of the five border crossings with China, Muse and Chinshwehaw were captured late last year by the Three Brotherhood Alliance of ethnic armed groups during the first phase of the Operation 1027 offensive in northern Shan State. flooded by the Kachin Independence Army in April. By capturing these stations, the ISP-Myanmar pointed out, these EAOs have come to control trade routes that accounted for as much as 91 percent of the value of border trade between China and Myanmar in the three years following the 2021 coup.

These losses are reflected in the SACs own latest data showing that total land trade with China fell by 41 percent between April 1 and July 19, compared to the same period in 2023. These figures also show that trade at the Muse border crossing fell by $371 million, or 46 percent. Even then, the $411 million trading volume recorded at Muse from April 1 to July 19 consisted largely of export of natural gas via the pipelines that run to China. Once this is disregarded, it is likely that trade in goods has largely come to an end. SAC data also shows that trade in Chinshwehaw and Lwegel has fallen to nothing.

The ISP-Myanmar report also notes that the SAC now has full control “over just one of the six trade routes connecting these five border trading stations.” The most important of these, the Northern Shan trade route linking Mandalay to the Chinese border, “appears to have come to a complete standstill” since the launch of Operation 1027. The ISP-Myanmar report includes a map showing that the SAC has only full control of a small section of highway between Pyin Oo Lwin and Nawnghkio; the rest are under the control of the members of the Three Brotherhood Alliance and their allies.

Even border crossings not yet under resistance control have suffered a dramatic drop in trade due to the security situation. Border trade with Bangladesh through the Sittwe and Maungdaw stations, which remain under military control, has come to a standstill due to the ongoing conflict with the Arakan Army. The Tamu station on the Indian border in the Sagaing region also “can only operate minimal trade due to conflict and hardship along the way.”

Meanwhile, trade at the Myawaddy border crossing between Thailand and Myanmar has collapsed since late last year, when EAOs and People’s Defense Forces nearly took over the town. While Myawaddy is now under the control of a border guard force previously linked to the junta, ISP-Myanmar stated that “the Myawaddy-Kawkareik Asian Highway is still not in use.”

According to SAC dataTrade volume across the Myawaddy crossing fell by 87 percent, from $556 million between April 1 and July 19 last year to just $71 million in the same period in 2024, part of a 53 percent decline in total overland trade between the two countries. At the Htee Khee border station in the Tanintharyi region, trade volume fell by 55 percent; Again, natural gas exports to Thailand accounted for the majority of the $570 million in exports recorded in the last quarter.

One of the consequences of this is that the illegal trade, which has long flourished around Myanmar’s borders, has worsened. ISP-Myanmar cited estimates indicating that “illegal trade now accounts for about 80 percent of border trade, while legal trade only accounts for about 20 percent.” (Previously the ratio was reversed.)

According to ISP-Myanmar, the junta has tried to compensate for the loss of almost all overland trade with China by opening a new trade route through eastern Shan State, via the city of Kengtung, home to the Myanmar military’s Triangle Region Command, to Thailand. and Laos, and – via the Mekong River – to China. While this passage is part of a long-standing story regional connectivity projectand is seen as an important future trade route, its realization appears “doubtful if the ongoing conflict in the eastern and southern Shan states continues to expand.”

In any case, this route is longer and considerably more expensive than the one in northern Shan State. Similarly, alternatives to the Myawaddy border trade route north and south at the Thai border require “smaller trucks to be used to transport smaller shipments of goods instead of large trucks.” In addition, “several armed groups along the route also levy taxes.” To help offset the loss of overland trade, the junta has also tried to increase air freight from southern China, but this is also much more expensive.

Although land trade only accounts for about a quarter of the Myanmar junta’s trade since the 2021 coup, the collapse of this trade leads to a bleak diagnosis for the SAC, according to ISP-Myanmar. On top of runaway inflation in the value of the kyat, this is likely to put further upward pressure on the price of basic goods, leading to greater hardship and greater discontent with the generals.

On the other hand, it remains unclear whether and to what extent EAOs will benefit from the control of border trade with China. Angered by the launch of the second phase of Operation 1027 in June, which marked the final collapse of a Chinese-brokered ceasefire that was partly intended to allow the resumption of trade, Beijing has closed border crossings that controlled by the Three Brotherhood Alliance. Trade is likely to resume only in the context of a new ceasefire between the Alliance and its allies and the Myanmar military, which appears to be a distant prospect with the latter poised to launch new attacks on central Myanmar .

If trade resumes at some point, it could provide a source of income for the EAOs, strengthening their positions in Shan and Kachin states and making it less likely that the military will be able to to reverse recent losses. Whether all this will lead the military junta to a slow economic death, or whether the generals can come up with sufficient economic solutions to maintain their regime in the longer term – through smuggling or alternative trade routes through the few regions still under its stable control – will be put to the test in the coming months.