Golden Triangle: After Obama’s Visit to Rangoon, What’s Next for Burma-China-U.S. Relations?

When U.S. President Barack Obama arrived in Burma on Nov. 19, locals lined the streets, waving American flags that a couple years ago could have landed them in jail. “For many years, the U.S. flag meant defiance against the regime,” says Thiha Saw, a newspaper editor in Rangoon, the country’s largest city, where Obama spent six hours. “It meant democracy, freedom, all those good things.”

Two years ago, when China’s Premier Wen Jiabao arrived in the country known officially as Myanmar, there was no such spontaneous outpouring of goodwill from the Burmese people. After all, China may be one of Burma’s top foreign investors, but it was also one of the few nations to support an isolated military government as it brutalized its people. Even as Burmese rely on cheap Chinese imports, there is little love for their giant neighbor to the north.

China’s global outreach has been spurred by its search for natural resources needed to power its economy. Chinese state-owned companies have descended across the globe, from Africa to the farthest reaches of the South Pacific, bringing the kind of foreign investment that had dried up after the Cold War, when the U.S. and the Soviet Union vied to woo governments to their sides. But even as the Chinese have signed contracts with some of the world’s more unsavory governments, the benefits from this foreign investment boom have tended not to trickle down to locals. Chinese usually bring their own work crews to staff foreign projects, and the tapped natural resources, of course, are for Chinese consumption.

(PHOTOS: Obama Abroad: Scenes of a U.S. President in Burma)

Burma is a case in point. The country boasts a treasury of natural resources that the Chinese crave, from hydropower and timber to natural gas and jade. The military junta that ruled Burma for nearly five decades inked major investment deals with the Chinese, then among the few players in town because Western nations had slapped sanctions on the regime for its human-rights abuses. Under the reign of junta chief Than Shwe, Burmese generals and their business cronies grew rich from these Chinese contracts, even as one-third of Burmese lived under the poverty line—this in a country that used to be Asia’s rice basket. “The Myanmar people’s mindset is that Than Shwe was selling Myanmar to China,” says Hla Maung Shwe, vice-president of the Myanmar Chamber of Commerce. “The Chinese come here, even their cooks, their drivers, they are all Chinese. This is not the right way. Resentment against China is growing in Myanmar.”

Complicating matters is the fact that much of Burma’s natural bounty is located in its borderlands, where ethnic minorities already feel marginalized by the central government. Take the Shwe pipeline, which will dispatch energy from Burma’s far west to the interior of China, even though the resident ethnic Arakanese enjoy little electricity despite proximity to major natural-gas fields. (Burma is one of the least electrified countries in the world, particularly in ethnic areas.) “How can we send all this gas to China when the Arakanese almost have no electricity?” asks Phyo Phyo, an ethnic Arakanese who works for Shwe Gas Movement civic group, which monitors the country’s largest foreign investment project to date. “Our people are not getting the benefits. Instead, the project leaves fishermen with no livelihood and farmers with no land.”

(MORE: Obama in Burma: U.S. President’s Landmark Visit Brings Hope, Criticism)

Now, with the country led by a hybrid military-civilian government that has introduced various democratic reforms since assuming power in March 2011, China is finding it must compete with other countries eager to capitalize on an emerging investment destination. Last year, in a warning signal to the Chinese, President Thein Sein, a retired general who has helmed the country’s surprising opening, suspended construction on the Myitsone dam in the country’s north, a mega-project that would have sent nearly all the generated electricity to China, leaving locals literally in the dark. (There are, however, reports that some building is quietly going on at the Myitsone site in Kachin state, where the Burmese army has been clashing for months with ethnic Kachin rebels.)

With the increasingly liberal environment in Burma, locals are speaking out more forcefully against Chinese projects. Not far from the city of Monywa, thousands of Burmese have rallied against what they say are illegally seized or inadequately compensated land that will be used for a copper mine partly owned by a subsidiary of a Chinese weapons-maker. Protests broke out most recently while Obama was in Burma. Some of the country’s most high-profile former political prisoners have joined the cause, which includes worries about the mine’s environmental impact.

One of the winners in Burma’s populist push against China? The U.S., which has eased its sanctions against the new government. Despite the former junta’s xenophobia against the West, the U.S. generally enjoys respect from the Burmese people, who associate the country with democratic ideals. That affection aligns nicely with Obama’s recent foreign-policy pivot toward Asia. Throughout the continent’s Southeast Asian flank, regional governments are struggling to balance a hunger for Chinese investment with concerns over Beijing’s increasingly aggressive territorial ambitions in various maritime disputes.

(MORE: Why China Could Be Obama’s Second-Term Foreign Policy Headache)

At the East Asia Summit in Phnom Penh, Cambodia, which President Obama attended after his Burma stop, interference by the host, Cambodia’s long-ruling strongman Hun Sen, helped guarantee that the gathered Southeast Asian nations did not confront China on the South China Sea tensions. Cambodia’s No. 1 investor and donor? China, which has allowed Hun Sen to flout the human-rights concerns to which Western donors would tie their aid. (China says its foreign policy and aid program is based on non-interference in other nations’ internal affairs.)

The Summit brought together the 10-member Association of Southeast Asian Nations (ASEAN) along with a host of other countries including China and the U.S. Yet even those ASEAN members with a territorial beef with China are wary of angering Beijing by encouraging Washington. At the Summit, President Benigno Aquino III of the Philippines, a close American ally, pointedly noted that his country had “the inherent right to defend its national interests” and to go “international.” That meant involving organizations such as the Hamburg-based International Tribunal for the Law of the Sea. Indeed, in contrast with Beijing, which wants to deal bilaterally with the other claimants, the U.S. has urged precisely such a multilateral approach. Aquino got little traction, however. For one thing, not every ASEAN government has a stake in the South China Sea disputes. For another, not just Cambodia owes China. Immediately after the Summit, Chinese Premier Wen Jiabao dropped by Bangkok, where Prime Minister Yingluck Shinawatra asked for Beijing’s help in building a deep-sea port. As David Kang, a professor of international relations and business at the University of Southern California, recently wrote, “East Asian countries are seeking a pathway that avoids taking sides.”

In Burma, too, the reformist leadership has taken pains not to alienate China. After all, Beijing was a key ally of the junta—some of whose retired members still rule the nation—when few other nations were willing to stand by the army leaders. Before Thein Sein visited the U.S. in September for the opening of the U.N. General Assembly, he made sure to pop by China for a visit to a trade fair. “Myanmar is at present in a transitional phase, but it pays great attention to developing relations with China,” Thein Sein said while in southern China, according to state Chinese news agency Xinhua. “Its policy of seeing China as a true friend has not changed.”

Similarly, shortly before Obama began his much lauded Burma tour, Soe Win, the deputy commander of the Burmese military was in Beijing reaffirming military ties between the two nations. But the news galvanizing the international military community had nothing to do with Burma and China. Next year, Burma may well observe U.S. military exercises in Asia, a stunning turnaround for an armed forces schooled for so long on hatred of America. China, which considers the U.S. exercise to be taking place practically in its backyard, won’t be invited.