A $US20 million loan from Beijing will help kick start a Chinese truck manufacturing line in Burma as reports suggest that Chinese manufacturing is now at a six month low.

The deal between the China National Heavy Duty Truck Group Co Ltd (CNHTC) and the Burmese government was signed in a ceremony on Tuesday in the capital Naypyidaw. The 10 to 15 tonne vehicles will be produced with General Heavy Machinery Industry, a Chinese state-owned entity.

The slowdown in Chinese manufacturing is largely a result of the government allowing the Yuan to appreciate in value, sparking a rise in labour costs and commodity prices.

The news will be greeted warmly by the Burmese government and business sector, which are hopeful that warm relations with China will attract the spill-off of labour from low-end manufacturing that could result from rapid economic growth in its northern neighbouring.

China recently overtook Thailand as the largest investor in Burma, having injected $US9.603 billion in its economy over a 20-year period compared to Thailand’s $9.568 billion.

CNHTC will join Indian giant TATA and a Japanese company in setting up shop in Burma. Success for the industrial vehicles is a fairly safe bet, the specialised vehicles will be required for some time, if not by the Burmese themselves then in the Chinese and other foreign-dominated extractive industries.

Such investments helped official bilateral trade between the two nations climb by around 50 percent last year.

Expectations for manufacturing however will be tempered by enduring issues with the Burmese economy, with political instability high on the problem list. Investors were said by business sources in Rangoon to be warily eyeing progress with the new parliament and will assess developments before lending or investing heavily.

Other perennial issues such as poor infrastructure will meanwhile remain, particularly with regards to fuel and electricity.

While lower-end fuel can be produced in domestic refineries and thus the price kept stable, the Burmese government is unable to control prices on commodities like diesel and higher-end petroleum products. These are generally imported and thus at the mercy of sudden fluctuations in global prices and inflation, often beyond the state’s control.