Last October, Secretary of State Hillary Clinton gave a speech to the New York Economic Club. She spoke on the need for the United States to improve its statecraft by using economic policy to enhance its diplomatic leverage abroad. The speech was delivered in the context of widespread concern inside the State Department that Beijing’s economic and aid policies have proven more effective than the muddle-through approaches of Western democracies.

From a distance, authoritarian great powers appear far more efficient at harnessing economic tools for strategic advantage. But recent developments in Burma suggest that Beijing’s statecraft may not be as effective as has been suggested.

Beijing’s Influence

Burma remains the most ostracized country in Asia outside North Korea. Since the junta’s brutal crackdown of protesters in 1988, the United States and the European Union have imposed increasingly robust economic sanctions against the regime. China also faced international condemnation over the repression of demonstrators following the 1989 Tiananmen protests, and since the 1990s, Beijing has emerged as Rangoon’s most dependable ally.

Rangoon seems willing to take shelter under Beijing’s embrace: China is behind two-thirds of all foreign investment in Burma and is its second-largest trading partner after Thailand. China is the primary supplier of military equipment to the Tatmadaw, Myanmar’s armed forces. Beijing provides diplomatic and political cover for the regime, consistently vetoing U.S. plans to investigate allegations of civilian repression through UN agencies. Without Chinese economic and technical assistance, the stuttering Burmese economy would have completely collapsed, endangering the continued rule of the junta. It is no wonder that Burma is sometimes dismissed as a Chinese “economic colony” or even as the unofficial twenty-third province of China.

Turning West

When President Thein Sein took office last March, few expected much change from the emergence of a so-called civilian government. But the last few months in Burma have taken the region and America by surprise.

The president suspended the $3.6 billion Chinese-funded Myitsone Dam project on the northern mouth of the Irawaddy River. The dam was to send 90 percent of the hydroelectric power generated to Yunnan Province in China for the next fifty years.

In an unexpected move, Rangoon has welcomed several senior American officials over the past few months. These include Secretary of State Hillary Clinton, former presidential candidate John McCain, former vice-presidential candidate Joe Lieberman and Senate Minority Leader Mitch McConnell. All have returned expressing cautious optimism about the prospect of political reform in Burma.

Clinton was even granted an audience with Nobel Peace Prize-winner Aung San Suu Kyi, who is considered by the West to be the legitimate leader of Burma on account of her election victory in 1990. Rangoon has approved meetings between Suu Kyi, Thai prime minister Yingluck Shinawatra and British foreign secretary William Hague. Released from house arrest in 2010, she was recently cleared to run for parliamentary elections in April 2012.

Cautious Reform

China’s continued courting of Burma is understandable—and to be expected. Burma is of strategic importance because it is superbly positioned above the Andaman Sea, which leads into the shipping chokepoint of the Malacca Straits. Potential transport routes through Burma also offer southern Chinese provinces an alternative to relying solely on U.S.-patrolled maritime routes through Southeast Asia.

But as in African countries such as Zimbabwe, Sudan, Algeria and Nigeria, China is also interested in the resources of its southern neighbor: oil, gas, minerals, timber and hydropower generation. Almost all Chinese investment in Burma is in these sectors and by state-owned-enterprises (SOE). And as is often the case with Chinese SOE activity in poor countries ruled by authoritarian, corrupt regimes, the implied pact between Beijing and its partner’s political elites—with both under less pressure to address the concerns of their citizens than in genuine democracies—offers little in the way of economic, employment or social return to local populations. For example, Beijing puts no pressure on its SOEs to limit the environmental impact of commercial activities—especially mining—in foreign lands. Resentment is only deepening: Locals in the northeast economic regions close to China have long complained that commerce is dominated by Chinese entrepreneurs and businesses.

As in parts of Africa, Burma’s leaders are discovering that Chinese authoritarian largesse has a price. China negotiates with weak authoritarian countries from a position of strength. “No-strings-attached” economic aid, investment and political cover are explicit extensions of Chinese foreign policy, and Beijing expects considerable strategic and economic returns. In contrast, the activities of Western firms and those from countries such as Japan are watched by the government and other concerned groups. Even stringent conditions-based aid, preferred by democratic countries and institutions such as the World Bank, is beginning to appear more attractive.

As Beijing can attest, even authoritarian regimes must eventually respond to demands of their citizens. China will remain Burma’s primary economic partner. But Rangoon is reaching out to democratic states—and promising gradual political reform in the future—in order to find alternatives to Burma becoming a de facto Chinese colony.

This pivot does not necessarily mean that genuinely free and fair elections will be held in Burma soon. But it should cast doubt on the self-defeating argument making the rounds in democratic capitals, including Washington, that authoritarian powers like China are far more efficient and successful at statecraft than their democratic rivals.

Dr. John Lee is the Michael Hintze Fellow for Energy Security, an adjunct associate professor at the Centre for International Security Studies at Sydney University and a nonresident senior scholar at the Hudson Institute in Washington, DC.