Security guards are seen at the entrance of the City Hall in Yangon, Myanmar, Feb. 2, 2021. (Xinhua/Zhang Dongqiang)

Chinese companies operating in Myanmar need to watch out contractual and default risks amid the current political upheaval in the Southeast Asian country, a Chinese lawyer has said. 

The Myanmar President's Office declared a one-year state of emergency after the military's detention of government leaders including Aung San Suu Kyi on Monday. State power has been handed over to the commander-in-chief of the armed forces.

Chinese companies need to pay close attention to risks from the political situation, as well as legal and commercial agreements and policy implementation, a Myanmar-based lawyer told the Global Times on Wednesday.

“Government default is a major risk, especially for major and strategic projects in sectors including transportation and energy,” said the lawyer, who wished to remain anonymous. 

The risk of default spreading to counterparties should also be monitored closely, said the lawyer. 

Due to uncertainty over the future government reshuffle, there could also be an impact on Chinese-backed projects in the country. 

But Chinese companies can seek protection from a treaty that protects Chinese investment in case of emergencies and can seek international arbitration if they face illegal confiscation of their property, the lawyer said.

A number of Chinese companies operating in Myanmar said they were paying close attention to the situation for the moment. 

Chinese businesses have an increasing presence in the Southeast Asian nation as tremendous efforts have been made to develop the China-Myanmar Economic Corridor, which encompasses an array of infrastructure projects allowing for increased connectivity between the two countries.

The lawyer urged Chinese companies to be compliant with local laws and regulations given the complex situation.

Global Times