In December 2021, at a grand ceremony in Myanmar’s capital Naypyidaw, the country’s military chief — and leader of last year’s coup — awarded the highest honors for “extraordinary contributions to the development of the state” to an internationally obscure entrepreneur named Liu Zhengxiang. 

A Burmese soldier at the border with Thailand in Tachileik, Myanmar. November 20, 2013. (Guillem Valle/ The New York Times)
A Burmese soldier at the border with Thailand in Tachileik, Myanmar. November 20, 2013. (Guillem Valle/ The New York Times)

Liu, a pivotal figure in a semi-autonomous area adjacent to China, had certainly provided financial support to the ruling junta, drawing on his underworld ties. But his greatest contribution stemmed from a pre-coup initiative: Liu was a founder of an army-sponsored Border Guard Force in his home district of Kokang. Today, with Burma’s military rulers rattled by a nationwide armed insurrection, the border guard forces have become a crucial element in the military’s counter-insurgency strategy.

The Border Guard Forces (BGF), militarized units of former ethnic insurgents now under the command of the army, are strung along the Chinese and Thai frontiers in zones adjacent to territories controlled by Myanmar’s ethnic armed organizations. Increasingly key to the generals’ plans for suppressing the insurgency, the BGFs serve as a force multiplier particularly against major ethnic armed organizations, providing battlefield intelligence, logistics support and even troops. In addition, the BGFs’ cross-border connections into Thailand and China are helpful for spreading junta propaganda internationally and enhancing the junta’s relations with neighbors.

In exchange for their aid to the generals, BGF leaders are given free rein to conduct a range of illicit business activities and special access to the military-controlled economy, which has enabled them to establish corporate conglomerates across Myanmar. These enterprises, in turn, pour funds into assisting the coup regime’s efforts to control and influence the population.

Of the BGFs along the China border, the Kokang Border Guard Force is the most important to the junta because of its control of the Kokang Special Administrative Zone (Kokang SAZ) — a territory slightly smaller than Rhode Island that extends like an arrow into China’s Yunnan Province along one of China’s most important trade corridors. The leaders of the Kokang BGF maintain close ties with local officials of the Chinese Communist Party despite their full integration into China’s criminal underworld and heavy involvement in narcotics trafficking and illegal online gambling.

On the Thai border, the Karen BGF is the primary player, controlling a key logistics corridor into Thailand. Since 2016, the Karen BGF has expanded dramatically in size and influence after forming an alliance with a notorious Chinese criminal network to convert its headquarters into a hub for regional criminal activity.  

While the BGFs are not as well-known as Myanmar’s Ethnic Armed Organizations (EAOs), understanding their contribution to the coup regime is essential to assessing the junta’s violent campaign to control the country. This article is the first in a three-part series: A subsequent piece will probe similar developments in Karen state and a final installment will lay out steps the U.S. and other countries could take to staunch the growth of transnational crime tied to the BGFs.

The Kokang BGF Families: Commander-in-Chief Min Aung Hlaing’s Allies on China’s Border

Most of Myanmar’s BGFs were formed in the late 2000s as part of a military campaign to pacify ethnic armed organizations. The military demanded the EAOs come under control of the army and in exchange offered the right to develop largely criminal business empires. One of the founders of the Kokang BGF, Liu Zhengxiang (Lee Kyein Chan) is best known as chair of the Fully Light company, a multi-billion-dollar business conglomerate and a key player in China’s illegal online gambling market. The company operates large casinos, hotels and industrial-scale online gambling operations in Kokang, Karen State and Sihanoukville, Cambodia.

One of four principal Kokang BGF-affiliated conglomerates, Fully Light has built a business empire with more than 30 subsidiaries across Myanmar since the Kokang BGF was established in 2009. Major investments include two jade mines in neighboring Kachin State, including a $1.6 million investment in a jade factory and trading operation in China’s Zhenkang county (Ruixiang Trading, Ltd); a coal mine in Sagaing State with annual output of 52,000 tons; a $10 million cement factory in Kokang; a billion-dollar new city project in Mandalay that is larger than Washington, D.C.; a 20-square-kilometer sugarcane farm near Lashio; and multiple import-export companies central to the China-Myanmar border commerce, including the sugar trade, over which Fully Light holds a monopoly.

How did Liu earn his award from the leader of the coup that ousted a democratic government last year? According to Chinese media reports, Liu donated more than 1.85 billion Myanmar kyats ($1 million) to conservative Buddhist foundations across Myanmar for construction of monuments that symbolize the Buddhist nationalism the generals seek to be identified with. Liu’s Fully Light company also made repeated donations to the junta’s COVID-19 health response, to its public works projects and to the advancement of “public administration” following the coup.

While the Liu family appears to have developed the closest ties to the junta’s governing administrative council, the leaders of the other three clans (Bai, Wei and Li) that comprise the leadership of the Kokang SAZ have made similar contributions to the junta.

Beyond financing, the Kokang BGF has assisted the regime in the multiple ways:

  • Tactical Support: After the coup, the Kokang SAZ leadership mobilized the Kokang Police Force to engage in what it calls “counter-terror” operations, supporting the Myanmar Police crackdown on all forms of popular resistance to military rule. The Kokang BGF Police have publicized these operations on Kokang TV.  
  • Political Support: The Kokang SAZ leaders hold positions in the military’s USDP party, previously representing the party in the National and Shan State Parliaments. The Kokang USDP branch has promoted junta efforts to stage an election in 2023, and even organized pro-military parades in the China-Myanmar border area. Much of this activity is amplified on China’s WeChat platform, having the added effect of influencing attitudes in China.
  • Business Connectivity in China: The Kokang BGF leaders maintain strong ties in Yunnan Province, particularly with local-level officials in Zhenkang Prefecture, Lincang City and within the Yunnan Provincial Government. Kokang leaders and their businesses have leveraged these ties to advance business initiatives helpful for the military after the coup. For example, Kokang leaders, including Kokang SAZ Chair Li Zhengfu and Council Member Bai Yingneng, met repeatedly with Lincang City officials throughout 2021 to negotiate the reopening of the critical border trade between China and Myanmar. The Kokang BGF later facilitated construction of a cross-border sanitation facility to meet China’s trade requirements and played an essential role in organizing the virtual China–Myanmar Border Trade Fair in August 2021 and a RCEP meeting in February 2022. Kokang elites have also poured support into the China-Myanmar Economic Corridor, most significantly by initiating an investment to expand the LNG facilities connected to the China-Myanmar pipeline project in Kyaukphyu.  

Why Are the Kokang SAZ Leaders So Committed to the Cause of Min Aung Hlaing?

The answer can be found in the origins of the Kokang SAZ and BGF in 2009, when a military operation led by Min Aung Hlaing defeated the Kokang Army — the Myanmar National Democratic Alliance Army (MNDAA) — which had refused to become a BGF in 2009. Following the battle, four Kokang clans led by former deputy commander of the MNDAA Bai Suocheng defected to the military side, agreeing to form a new militia under the military’s control in exchange for ruling Kokang. Ironically, the Myanmar army justified the 2009 attack on the MNDAA as means of eliminating narcotics trafficking, but then permitted the new Kokang BGF leaders to engage in whatever illicit businesses they chose to.   

Kokang Criminals

While Chinese court cases provide ample evidence of rampant narcotics trafficking through the Kokang SAZ that implicates many of the zone’s leading businesses, the mainstay of Kokang’s economy has long been illegal gambling marketed to Chinese nationals. Many of the Chinese citizens involved in cross-border gambling have been subject to Chinese law enforcement, particularly after an intensified crackdown began in late 2019. The impact in Myanmar, however, has been to make the casino operations owned by Kokang leaders only more powerful. Those operators include the Fully Light casinos owned by the Liu clan, the Hanley casinos owned by the Wei clan, and the Baisheng casinos owned by Bai Suocheng’s clan.

The Fully Light company’s new casinos in Kokang, Sihanoukville, Cambodia and Karen State territory controlled by the Karen BGF illustrates the effect. China’s crackdown has not kept these companies from using the Chinese internet, social media and banking systems. As of early February 2022, Fully Light’s GoBo East Casino continued to operate online, allowing gamblers to use China’s Unipay platform,  despite GoBo East’s implication in the conviction of multiple Chinese triad figures from Guizhou and Sha’anxi Province.

In early February, Chinese media exposed an even darker side to the illegal activity, reporting that Kokang and Chinese gangs jointly set up Tik Tok accounts designed to lure Chinese nationals into captivity in Kokang. Promised high wages or the chance to marry an attractive Kokang man or woman, hundreds of Chinese were tricked into taking jobs at the BGF casino operations in Kokang, only to be held for ransom or sold to Chinese crime groups in Cambodia.

Undermining Chinese National Security to Shore up Min Aung Hlaing’s Regime

The activities of the Kokang BGF clans put China in an awkward position.

On one hand, they have partnered with the Chinese government to respond to COVID-19, to re-open border trade and to initiate new economic collaboration with the Myanmar military government following the coup. On the other hand, these same families are the kingpins in a multi-billion-dollar criminal network that preys on victims in mainland China. This undermines a nationwide Chinese campaign to crack down on cross-border gambling and fraud and makes a mockery of China’s efforts to protect its nationals overseas. 

This raises an important question: Despite projecting a tough stance on crime, is the Chinese government looking the other way as a means of supporting the SAC’s campaign and mobilizing resources into its connectivity plans for Myanmar?

What is clear for now is that the Kokang BGF has emerged as a clear beneficiary of the Myanmar army’s ongoing attack on democracy.   

Related Publications

Myanmar’s Rakhine State: Parties Split, Rebels Rise, and the Junta Schemes

Myanmar’s Rakhine State: Parties Split, Rebels Rise, and the Junta Schemes

Wednesday, August 10, 2022

By: Kyaw Hsan Hlaing

Myanmar’s military regime has a plan for trying to establish its governing legitimacy next year: In August of 2023, the dictatorship, which overthrew a democratically elected government in early 2021, intends to hold sham elections. A critical piece of this strategy involves maneuvering Myanmar’s welter of small ethnic parties into taking part in the electoral process. Nowhere are the risks and uncertainties inherent in the generals’ plan more evident than in poor but economically strategic Rakhine State on Myanmar’s western border with Bangladesh and India.

Type: Analysis and Commentary

Conflict Analysis & Prevention

Why Myanmar’s Desperate Generals Executed Prominent Pro-Democracy Figures

Why Myanmar’s Desperate Generals Executed Prominent Pro-Democracy Figures

Thursday, July 28, 2022

By: Priscilla A. Clapp;  Billy Ford;  Jason Tower

From virtually the moment Myanmar’s military overthrew the country’s democratically elected government last year, the generals have faced a popular uprising that they met with escalating brutality. Even so, their decision last week to put to death — by hanging — four high-profile democracy advocates sparked shock and outrage at home and around the world. USIP’s Jason Tower, Priscilla Clapp and Billy Ford discuss what is behind the coup regime’s bloody move and its implications for Myanmar and international efforts to bring peace and democracy to the Southeast Asian country.

Type: Analysis and Commentary

Democracy & Governance

In Myanmar’s Rakhine State, a Fraying Truce May Hold Key to Anti-Regime Fight

In Myanmar’s Rakhine State, a Fraying Truce May Hold Key to Anti-Regime Fight

Thursday, July 21, 2022

By: Kyaw Hsan Hlaing

Myanmar has been crippled by growing political turmoil and militant resistance since the army overthrew the elected civilian government on February 1, 2021. Today, most of the country is engulfed in a virtual civil war. In Rakhine State, however, home to one of Myanmar's most powerful ethnic armed organizations, a tenuous peace still prevails under a cease-fire reached with the pre-coup military in 2020. At the time, the truce benefited both the military and its adversary, the Arakan Army. Now, under the pressures unleashed by the military’s power grab, that deal is fraying. Should it collapse, the coup regime will face a vastly strengthened insurgency. The people of Rakhine, collaterally, will all but certainly suffer brutal counterstrikes from the air force and artillery of a military untroubled by its record of war crimes.

Type: Analysis and Commentary

Conflict Analysis & Prevention

China Bets Strategic Projects, Regional Stability on Myanmar Coup Regime

China Bets Strategic Projects, Regional Stability on Myanmar Coup Regime

Thursday, July 14, 2022

By: Jason Tower

Chinese Foreign Minister Wang Yi’s visit to Myanmar last week was the first by a senior Beijing official since a military coup toppled Myanmar’s elected government in February 2021. Its ostensible purpose was to co-chair the foreign ministers meeting of a Chinese-led subregional framework known as the Lancang Mekong Cooperation Forum. Its deeper — though related — significance was to deliver a crystal-clear message on the conflict raging in Myanmar: China has chosen to bolster Myanmar’s military in its fight against a rapidly growing popular resistance movement and will support the junta’s position within key multilateral platforms.

Type: Analysis and Commentary

Conflict Analysis & PreventionEconomics

View All Publications