Developing states are unlikely to benefit long-term from growing investment from the likes of China, whose need to supply for its energy-hungry population means its fiscal policies abroad are taking on an increasingly exploitative quality, Hillary Clinton has warned.

The US Secretary of State made the comments in South Korea yesterday, a day prior to her historic visit to Burma today in which she will seek to draw the military-dominated government away from its closest ally to the north.

While not explicitly mentioning China, the content of the warning is likely aimed at what is rapidly becoming the chief threat to Washington’s global political and economic clout. Clinton said that developing nations need to be “smart shoppers” in their quest for benevolent foreign donors.

“Be wary of donors who are more interested in extracting your resources than in building your capacity,” Reuters quoted her as saying. “Some funding might help fill short-term budget gaps, but we’ve seen time and again that these quick fixes won’t produce self-sustaining results.”

Much of the Southeast Asian region has felt the burn of China’s rapacious overseas investments, particularly in the energy sector: Chinese companies are behind more than 40 hydropower projects along the Mekong River, and rely on lax environmental and corporate regulations in countries like Burma in order to gain unfettered access to its reserves.

Sean Turnell, a Burma economics expert at Macquarie University in Australia, told DVB he thought Clinton’s comments were largely accurate, although cautioned against uncontrolled access to these countries for the likes of the World Bank and IMF.

“China is a pernicious influence just about everywhere it touches, from Africa through Asia to Latin America,” he said. “The nature of its investments makes it in many ways the least capable of boosting economic development – it’s mostly narrowly related to natural or energy extraction, so there are very few developmental multipliers or anything like that.

“Also it normally sends its own workers into other countries so very often these big infrastructure projects that are ostensibly seen as aid create very little employment in the host country.”

An IMF delegation recently travelled to Burma following requests by the government that it offer suggestions on streamlining the country’s multiple exchange rates and advise on other nascent economic reform programmes. Suggestions have also been made that US companies such as Caterpillar are eyeing the country for investment.

“For all its faults, American companies, because of domestic pressure and a well-organised consumer lobby in the US, do tend to be more sensitive to environmental and human rights and labour concerns. This isn’t really true of China,” Turnell said.

He continued that while the record of western-backed financial institutions like the World Bank and IMF is far from stellar, “I think that of all the countries that the liberalising agenda of [these two institutions] would be most appropriate for would be Burma”.

Given the huge proportion of government expenditure that goes on the military in Burma, any slimming down of the state, a common feature of IMF intervention, would likely force the army to reduce its monolithic power, Turnell thinks. “The army is the biggest single fiscal problem in the country, and this needs to be high up on the political agenda”.

China has enjoyed relatively free reign in Burma, which in turn is provided with an ostensible security net through China’s veto in the UN and bottomless pit of investment capital. But simmering animosity among Burmese at Beijing’s encroaching presence in the country exploded this year with protests at the huge Myitsone dam financed by China. That was eventually suspended by the government, which includes ministers who are believed to be anxious about Burma’s increasing subservience to its northern neighbour.

Recent reforms to the country’s economy have been welcomed by economists, following decades spent watching Burma fall into ruin. Turnell said the World Bank would be able to help with practical reforms that Burma urgently needs, such as the boosting of rural finance.

“At the moment the likes of the World Bank will do little damage in Burma; in the long-term they might well, and they are certainly worth watching closely to make sure they don’t have a free hand on everything,” he said.