The Arakan Army (AA) has seized control of 14 townships in Arakan State, excluding Sittwe, Kyaukphyu, and Manaung, and is now conducting military operations to capture Sittwe and Kyaukphyu.

If the junta fails to thwart the AA’s current military plans, it will face not only a battlefield defeat but also setbacks in international relations.

Sittwe and Kyaukphyu townships host numerous development projects funded by India and China, with Chinese investments being larger in scale and more profitable for the junta. Key Chinese projects include the Shwe oil and gas project, the Kyaukphyu Special Economic Zone (SEZ), and railway and road projects designed to connect with China.

Chinese projects in warzone

From now on, areas hosting Chinese projects are on the verge of becoming part of the war zone.

“The first clashes broke out near the planned Kyaukphyu SEZ site, and now the fighting has spread to the village tracts of Sittaw, Kyattein, Katthapyay, and Kandi within the SEZ-designated area,” said Ko Khin Oo, who monitors development projects in Arakan State.

A Chinese-owned gas refinery in Malakyun Village, Kyaukphyu Township, has now fallen into the expanding war zone. Gas pipelines run from the refinery to Madaykyun Island, which houses gas tanks and oil depots, before continuing to China through long-distance gas and oil pipelines.

Malakyun Village is located about six miles from Kyaukphyu Town, the administrative center of Kyaukphyu Township, while Madaykyun is roughly seven miles away. Fighting is ongoing around Malakyun Village, near the junta’s Dhanyawadi naval base.

Clashes are also underway around the deep-sea port and housing projects within the SEZ site, including the village tracts of Sittaw, Kyattein, Katthapyay, and Kandi, near the junta’s Police Battalion 32 headquarters.

The annual production value of the Shwe oil and gas projects is around 7 billion USD, with the junta receiving over 500 million USD each year, according to an April report by Arakan Oil Watch (AOW).

The report also claimed that investments in constructing railways and roads directly connecting Kyaukphyu Township including the Kyaukphyu SEZ, to China, along with other infrastructure projects, could total up to $28 billion.

AA-controlled territories

Currently, the AA has established a blockade just six miles from central Kyaukphyu Town, controlling areas near the projects as well as parts of some of the projects themselves.

Kyaukphyu Township hosts several of the junta’s military and security installations, including the bases of Infantry Battalion 34 (IB 34) and Light Infantry Battalions 542 and 543 (LIB 542 and LIB 543), the Dhanyawadi naval base, Police Battalion 32 headquarters, Taungmawgyi naval facility, and the Ohnkywein naval facility.

Among these, the AA is attacking the Dhanyawadi naval base and Police Battalion 32, while also trying to threaten IB 34, LIB 542, and LIB 543.

Currently, the junta controls only parts of central Kyaukphyu Town, the nearby villages of Gonechwain and Ohntaw, as well as Sittaw, Simaw, and Thitpotetaung villages near the Dhanyawadi naval base, and Madaykyun Island in Kyaukphyu Township.

The SEZ project is expected to feature a deep-sea port, an industrial zone, and high-end housing. The junta began land seizures for the project in 2023, completing the collection of social and environmental impact assessment reports in December that year.

In December 2023, the junta announced that construction of the deep-sea port would begin by the end of 2024, stating that all plans were ready to move forward. However, as of 2025, construction has yet to begin, and the project’s future remains uncertain due to the ongoing military situation.

“How can the junta carry out the project when its own troops in the town can’t even move around freely? The junta’s promise to start the project is just talk, it’s not going to happen in reality,” said U Pe Than, a veteran Arakan political analyst.

According to the Institute for Strategy and Policy–Myanmar (ISP-Myanmar), 8 of the 11 major Chinese projects in Arakan State are now located in AA-controlled territory, while parts of the remaining 3 projects also fall under AA control.

China’s investment projects in Myanmar are linked to its territory via railways, roads, and pipelines through Magway Region, northern Shan State, and Mandalay Region. If China wants to ensure the security of its interests, it must take Myanmar’s political and military developments seriously.

“One of China’s big dreams is to link Kyaukphyu and Yunnan directly by rail and road. But to pull that off, China’s got to stay on good terms with whoever controls the territories those routes run through,” said U Tun Kyi, an analyst focusing on Chinese projects.

Traditionally, China has had the ability to influence the junta and certain ethnic armed organizations, shaping political developments. However, the political changes across Myanmar since the coup have even taken China by surprise.

“I believe this alliance is going to be the decisive force in Myanmar’s Spring Revolution,” said U Than Soe Naing, a political analyst.

China will only deal with victor

In the second week of June 2024, China sent an eight-member delegation to Myanmar to assess the on-the-ground situation of its projects.

In August 2024, coup leader Min Aung Hlaing assured the Chinese ambassador that his regime would make every effort to protect Chinese projects and citizens in Myanmar.

However, in practical terms, both militarily and politically, the AA has greater power than the junta to influence the impact of Chinese projects in Arakan State.

“The junta is at risk of losing all of Arakan State soon. When that happens, China could start dealing directly with the AA, and that’s very likely,” said U Tun Kyi.

The AA has not officially told China what it plans to do with the Chinese projects yet, but analysts believe there could be some behind-the-scenes deals going on.

On the other hand, in February, China deployed at least 25 security personnel to Kyaukphyu, claiming it was to protect its investment projects in the town.

There are also reports that these Chinese security personnel have been supplying drones and other technical support to the junta during the fighting in Kyaukphyu.

If China decides to directly support the junta on the Arakan State battlefield, it could create political complications and strain the AA’s relationship with China, a relationship that will be crucial for the future of Chinese projects.

“Chinese projects in Arakan State matter more to China than to the local people. So, it would be smarter for China to stay away from anything that might upset the Arakan people,” said a young Arakan man who asked to remain anonymous for safety.

Since March 2024, the AA has stated that it will ensure the security of foreign projects and investors in Arakan State. It has also indicated that once the junta is fully removed from the region, it will take direct control over the management of Arakan State’s resources.

China will need to keep a close watch on the Kyaukphyu SEZ, related components of the Belt and Road Initiative (BRI), China’s most ambitious multinational infrastructure project, and the modern Silk Road project.