Illegal trade behind China account freeze

Traders affected by China’s decision to freeze more than 100 accounts at Chinese banks believe Beijing is trying to clamp down on illegal trade with Myanmar, particularly the import of rice and sugar across its borders.

By SITHU AUNG MYINT | FRONTIER

THE BUSINESS community was shaken last week by China’s decision to freeze more than 100 accounts held by Myanmar traders at Chinese banks.

The Chinese authorities said they had investigated about 350 accounts at branches in Ruili, a town on the border with Myanmar, to determine if they were connected to illegal activity, particularly smuggling and gambling.

Of these accounts, 132 were in the name of Myanmar citizens. The Chinese authorities said that they would unfreeze accounts not related to illegal activities as soon as possible. As soon as news of the account freeze emerged, Myanmar government officials began discussing the issue with their Chinese counterparts, hoping to resolve it promptly through negotiation.

Myanmar traders also reported the issue to government officials in Muse, a town opposite Ruili on the Myanmar side of the border, seeking their assistance.

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Although the Chinese authorities said that the 132 accounts held by Myanmar traders had been frozen, nearly 400 businesspeople reported the issue to the Muse District authorities. Based on this, most Myanmar traders believe the 132 figure is incorrect.

Traders also do not believe the reason given by the Chinese authorities; they think that the real purpose is to stop the trade of rice and sugar into China, as these products are not officially permitted by the Chinese government but are regularly smuggled across the border.

According to Myanmar statistics, bilateral trade through normal channels – mostly shipping – amounted to US$5 billion from April 1 to the start of June, and $1.4 billion for border trade. The majority of border trade is conducted with China. It is not an insignificant amount; rice and sugar, together with corn, are among Myanmar’s biggest export earners.

While rice is produced domestically, most sugar is actually imported from abroad and then transported by truck to the Chinese border and re-exported. The Chinese government bans rice and sugar imports to protect domestic producers and processors in China.

However, this illegal trade has been happening for years. Myanmar exporters rely on a combination of Chinese banks and informal hundi networks to settle transactions. Typically, the Chinese importer will make payment into the account of a middleman. This person will then settle with the exporter in Yangon or Mandalay after taking a fee.

Frankly, it’s very difficult for Myanmar traders to avoid Chinese banks completely. It’s thought that at least 20 of the Myanmar accounts frozen are middlemen responsible for paying local traders. The amount of money in the accounts is not known, but could be the equivalent of millions of US dollars.

The Chinese government has form on this issue; it has previously frozen the accounts of rice and corn traders. Sometimes, it took years for the accounts to be re-activated.

This is always a risk while the trade remains illegal but the Myanmar government needs to take steps to protect its business community. This incident sends the message that it is not safe for Myanmar traders to do business with China.

When you look at the China-Myanmar border trade, it is clear that the Chinese have the upper hand. This is not a reference to the scale of trade in either direction; rather, it means the transactions take place on their terms, and they can exploit the Myanmar traders if they want. The markets for jade, gems and agricultural commodities are in the hands of the Chinese.

This is a legacy of Myanmar’s flawed economic policies and the corruption of the military government, whose members were more interested in enriching themselves than building up a sound export markets for businesses. It is time for the government to protect its traders, build markets for them and create more opportunities for doing business.

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