How China Uses Scam Hubs for Geopolitical Influence in Myanmar

Four years after Myanmar’s military coup, ethnic armed groups, resistance forces, and the junta are all competing for control of territory, resources, and political influence. Amid this ongoing instability, which has prompted the European Union and the United States to impose restrictive sanctions, Myanmar has become a focal point of China’s strategic interests. From brokering localized ceasefires to pressuring the junta over cross-border fraud centers targeting Chinese citizens, China is pursuing a delicate strategy aimed at maintaining both strategic economic corridors between China and Myanmar and broader regional stability. In northern Myanmar, China has notably leveraged so-called scam hubs as a tool of geopolitical influence. How will these overlapping domestic and international pressures shape Myanmar’s future?

Since the military coup of 2021, northern Myanmar has experienced both political and economic turmoil. The country has become a mosaic of contested territories. As of 2024, ethnic armed groups (known as EAOs) and resistance forces controlled roughly 40% of the country, particularly in rural and border regions, while the military junta’s authority was limited to about 20-25% of the territory. The remaining areas were contested or under the influence of local militias. In regions like Kachin and Shan in the north as well as Rakhine and Chin in the west, EAOs dominate significant portions of land, controlling border crossings, trade routes, and resource-rich areas. This fragmentation highlights the weakened reach of the junta and underscores the importance of EAOs in shaping both the country’s security landscape and its economic interactions, including with foreign partners such as China.

Myanmar has always been a highly fragmented nation, home to 135 distinct ethnic groups. During Aung San Suu Kyi’s civilian government (2016-2021), ethnic armed organizations (EAOs) already controlled significant portions of Myanmar, particularly in Kachin, Shan, Rakhine, Kayin, and Chin states. While the administration pursued peace talks and the 2015 Nationwide Ceasefire Agreement (NCA), many key groups, including the Kachin Independence Army (KIA) and United Wa State Army (UWSA), remained outside formal agreements. EAOs managed their territories independently, overseeing local administration, taxation, and cross-border trade with China, Thailand, and India. Suu Kyi’s government largely relied on diplomacy and engagement rather than military pressure, which allowed EAOs to maintain autonomy and control over local economies, laying the groundwork for the continued fragmentation and contestation that intensified after the 2021 coup.

At the same time, Myanmar has also become strategically important for China, offering access to the Indian Ocean through pipelines, roads, and ports that bypass the Strait of Malacca. The country also holds valuable natural resources, such as gas, minerals, including jade and sapphire, and timber, particularly teak. Across Kachin’s rare-earth mines, Shan State’s hydropower projects, and the transport corridors of the China-Myanmar Economic Corridor (CMEC) under the Belt and Road Initiative, these projects form key components of China’s efforts to expand trade, energy, and infrastructure connectivity in the region. Yet, commercial engagement with Myanmar requires careful coordination with both local authorities and EAOs to secure control, ensure project continuity, and manage environmental and social concerns.

One consequence of Myanmar’s instability post-coup has been the rise of scam hubs, which are compounds founded and run by Chinese syndicates that defraud Chinese citizens through online schemes. Often situated near China-Myanmar border towns such as Mong La, Laukkai, and settlements in Kachin State, these operations became a point of concern for Chinese authorities. These hubs have largely served as profit-driven ventures by private criminal networks, taking advantage of Myanmar’s fragmented political landscape and the limited law enforcement in northern regions due to the weakness of central authority. By operating across porous borders and outside Chinese jurisdiction, they could target Chinese victims more easily and with minimal risk. Local authorities or ethnic armed organizations often tolerated the operations in exchange for fees or trade leverage, allowing the hubs to flourish while avoiding direct conflict with powerful local actors. Scam hubs have now become a visible lever in China’s strategy, illustrating how the world’s second-largest economy manages influence in Myanmar.

In late 2023 and throughout 2024, media reports indicated that hundreds of Chinese nationals were being trafficked and exploited within these centers, prompting China to act. Rather than resorting to direct military intervention, China adopted a multifaceted approach. It pressured the junta to dismantle the hubs, coordinated with local ethnic armed organizations (EAOs) to prevent protection of the networks, and encouraged arrests and repatriations through legal channels. In doing so, China showed that protecting its citizens was a non-negotiable priority, while simultaneously reinforcing its influence over both the military regime and ethnic armed groups.

China’s ‘dual game' strategy applies subtle but powerful leverage. The presence of scam hubs influenced the priorities of both the junta and ethnic armed organizations: the junta needed to assert its territorial control, while the armed groups had to avoid antagonizing China in order to protect trade and resource flows. The scam hubs are a highly visible and politically sensitive element of China’s engagement in Myanmar. The underlying motivation is economic: the CMEC and other projects of the Belt and Road Initiative run through contested areas of Myanmar, including Shan and Kachin States. These corridors are critical for energy transport, hydropower projects, and mineral imports, including rare earths essential for electric vehicles, renewable energy, and high-tech manufacturing.

Construction and trade are disrupted by ongoing fighting, and the dual strategy ensures that China’s projects can continue even as the central state’s authority loses power. In Kachin, rare-earth mines are largely under the control of the Kachin Independence Army (KIA), which reportedly seized two towns at the heart of one of the world’s richest deposits of heavy rare earths, including dysprosium and terbium, two key components for electric vehicles, wind turbines, and advanced defense systems. By cultivating relationships with these groups, China secures both its supply chains and a measure of influence over local governance.

Hydropower projects face similar challenges. Facilities along the Shweli and Irrawaddy rivers in Shan and Kachin States supply energy to both local regions and Chinese partners. Ceasefires brokered by China have helped prevent attacks on these installations, maintaining operations while containing broader political conflict. In 2024, Myanmar’s military government considered reviving the China-backed USD 3.6 billion Myitsone hydropower project in Kachin State, suspended in 2011 amid public protests over its potential environmental impact, which was originally intended to export most of its electricity to China.

Beijing’s strategy in northern Myanmar is not simply to pressure the junta or appease ethnic armed organizations individually; it is a careful balancing act. In a region where control is fragmented, China maintains separate channels of communication with multiple actors, ensuring that no single group can threaten its interests. The military junta faces diplomatic pressure, public warnings, and economic leverage, such as when China demanded the dismantling of scam hubs in Shan and Kachin States. At the same time, EAOs like the Kachin Independence Army (KIA), United Wa State Army (UWSA), and the Myanmar National Democratic Alliance Army (MNDAA) are engaged separately: ceasefires, trade permissions, and tacit guarantees of operational freedom provide incentives for these groups to avoid provoking China. This dual approach mitigates the risk of a unified front against Chinese interests while allowing local actors to govern their territories with relative autonomy.

Myanmar’s northern and eastern border regions are critical to regional security and economic connectivity. Chinese investments, including logistics networks and mineral processing facilities, rely on secure transport routes. The post-coup civil war in Myanmar has made these routes precarious, and any disruption could affect regional and global supply chains.

Amid the economic maneuvering, the human cost of Myanmar’s fragmentation is significant. Civilians in EAO-controlled or contested areas face displacement, disrupted livelihoods, and the constant threat of violence as clashes between armed groups and the military persist. Scam centers in Myanmar are not just criminal enterprises but sites of forced labor and human trafficking, with tens of thousands held in exploitative conditions. Additionally, large infrastructure projects, including hydropower dams, have also sparked local opposition due to environmental degradation, loss of farmland, and social disruption, demonstrating that the costs of development and foreign investment are borne by affected communities. Chinese influence and border management in Myanmar have multiple consequences for local communities living in these contested zones.

In parallel, Thailand has increasingly become an alternative transit corridor for trade as the central military junta in Myanmar struggles to maintain control over key logistics routes. Traditional border crossings like Myawaddy-Mae Sot, which account for the majority of bilateral land trade, have faced closures and conflict‑related disruptions, prompting greater use of secondary crossings and maritime shipping links. For instance, maritime shipments now often run from Yangon Port through Kawthaung to Ranong Port in Thailand to bypass conflict-affected areas. China continues to work with Myanmar’s junta to keep critical corridors open for its own economic interests, while Thailand, India, and other neighbors adjust infrastructure and policy to accommodate shifting commerce flows and maintain supply chains.

The crackdown on scam hubs has wider implications. It illustrates how Beijing can influence local governance without deploying troops. By threatening to withhold access, trade, or recognition, China encourages both the junta and EAOs to regulate their territories in ways favorable to Chinese interests. In resource-rich border regions, this influence extends to mining operations and taxation systems. EAOs and local militias control checkpoints along trade routes, levying fees on trucks carrying jade, gold, and rare-earth minerals. China’s dual game ensures that these fees do not disrupt trade critical to its projects, while also keeping local power structures aligned with Chinese priorities.

Beijing’s quiet realignment in Myanmar carries implications far beyond the country’s borders. Neighboring countries, including Thailand, India, and ASEAN members, must navigate a border region increasingly shaped by China’s strategic calculations, balancing humanitarian, economic, and security concerns. Thailand has long engaged with issues emanating from Myanmar’s borderlands, including refugee flows, security risks, and criminal networks. China’s influence in northern Myanmar can reduce some immediate security pressures but also shifts the regional balance of influence, which Thailand and ASEAN must factor into their diplomatic and security calculations. From India’s perspective, closer China-Myanmar ties raise strategic concerns over China’s access to the Indian Ocean and influence in Southeast Asia, potentially complicating India’s own Act East Policy, border security, and regional partnerships.

Looking ahead, Myanmar is likely to remain a mosaic of contested territories where both local and foreign actors shape outcomes. In the near term, localized ceasefires may hold, scam hubs could be dismantled or relocated, and Chinese trade corridors are expected to continue functioning. Over time, ethnic armed organizations may strengthen their control over mining, trade, and border regions, while China advances Belt and Road Initiative projects maintaining influence without direct confrontation. Ultimately, Myanmar risks settling into a politically fragmented and China-influenced landscape, along with a semi-stable frontier where China safeguards its investments and citizens, while the central government remains weak. Scam hubs exemplify this 'dual game,' serving as a tactical lever through which China exercises power and highlights the limits of Myanmar’s sovereignty along its borders.