YANGON • Myanmar's government praised China yesterday for suspending a Chinese bank account used by ethnic rebels fighting Myanmar troops, in a move to prevent potential damage to diplomatic ties.

Reuters has revealed that an ethnic rebel armed group fighting Myanmar forces near the Chinese border had been openly soliciting funds via China's giant state-owned lender Agricultural Bank Of China (AgBank).

Myanmar's peace process - started under the previous semi-civilian administration - has lost momentum after Nobel Peace Prize winner Aung San Suu Kyi came to power last year. Some of the militias accuse her of taking a one-sided approach and refusing to join a major peace conference.

Relations with China have been strained by the ethnic conflicts spilling over the border, and some observers say that Beijing uses ethnically Chinese insurgent groups as a means of leverage over Myanmar.

The decision to suspend AgBank was welcomed by Ms Suu Kyi's government.

"We appreciated this action. Stability and peace in border area is common interest for both sides," Myanmar's presidential spokesman, Mr Zaw Htay, told Reuters. "(It was a) very positive move from China."

Mr Zaw Htay shared the Reuters report on his widely-followed Facebook page and Twitter accounts, tagging key negotiators in Myanmar's peace process.

In Beijing, Chinese Foreign Ministry spokesman Hua Chunying said that she was not aware of the specifics about the decision on AgBank.

"We consistently persevere in not interfering in other countries' internal affairs and respect the entirety of Myanmar's sovereign rights and territory.

"We will not allow any group or individual to use China's territory to undermine China-Myanmar relations and the border regions' stability," she said.

"For any illegal activity, we will deal with it according to law."

Over nearly two years, the Myanmar National Democratic Alliance Army (MNDAA) raised more than US$500,000 (S$700,400), deposited directly in an AgBank account or sent via two mobile payment services - Tencent's WeChat Pay and Alipay, part of Ant Financial, which is affiliated with US-listed Chinese e-commerce giant Alibaba.

The bank account was suspended over the weekend, shortly after Reuters sent AgBank a list of questions regarding the transactions, which compliance experts said could point to a weakness in controls aimed at stopping the global financial system being used to fund terrorism or facilitate crime.

There is no evidence that AgBank or other financial entities that handled transactions for the MNDAA have broken Chinese law.

Earlier this month, insurgents from the predominantly ethnic Chinese MNDAA attacked government troops in north-eastern Myanmar. Some 20,000 people fled across the border to China to escape the fighting, prompting Beijing to call for a ceasefire.

In a rare move, Myanmar army chief Min Aung Hlaing disclosed on his official Facebook page that he had summoned the Chinese ambassador and defence attache on Tuesday to discuss the conflict and how to cooperate to bring about peace and stability.

REUTERS