Wethmay – Public anger over plans to expand a Chinese-backed mine near here is emerging as a test case of Myanmar’s recent political reforms.

Villagers have staged raucous protests in recent weeks over the giant copper mine near Monywa in northwestern Myanmar, owned jointly by Myanmar’s military and a subsidiary of China North Industries Corp., an arms manufacturer. The subsidiary, Wanbao Mining Ltd., and its Myanmar partners are hoping to expand the mine, but that would require taking over huge tracts of land and moving as many as 26 villages, locals say.

In one flare-up earlier this month, police arrested a dozen of the protesters, holding some of them for several days, the villagers say. Groups of villagers—sometimes more than a thousand—have gathered in tense rallies in recent weeks and challenged police who held weapons in firing positions, according to residents and local media reports.

The standoff echoes an earlier fight over an unpopular Chinese-backed dam and is the latest flashpoint in an increasingly tense relationship between Myanmar and Chinese companies, which have aggressively expanded their presence in the country in recent years, taking advantage of the void left by Western sanctions.

The Monywa disputes, which come as Myanmar President Thein Sein travels to New York to attend the United Nations General Assembly, raise questions as to what extent the country’s recent reforms will disrupt commercial deals involving Chinese companies, many of which have benefited Myanmar’s former military regime but have brought limited trickle-down benefits to regular citizens.

Mr. Thein Sein’s trip, the first U.S. visit by a leader of Myanmar since 1966, follows a visit to China in recent days in which he met with Xi Jinping, vice president and presumed future China leader, who said China will continue to encourage its companies to invest in Myanmar, according to Xinhua news agency.

Public protests are becoming increasingly common and bolder in Myanmar, whose reformist government has allowed more freedoms and courted foreign investors since the country’s former military dictator retired last year. Hundreds of people marched through central Yangon on Friday to celebrate the International Day of Peace, one of the largest public rallies in Myanmar in years, despite not having a required permit to do so. Other demonstrations have criticized the government for not providing enough electricity, while factory workers have held a series of strikes over the past year.

So far such demonstrations, which have been largely peaceful, appear to be a tolerable cost of reform for the government.

But unlike those protests, the latest episodes near Monywa have repeatedly threatened to spin out of control, with locals blaming police for using intimidation and other tactics common in Myanmar before the new government took power.

President Thein Sein’s government has released political prisoners, eased restrictions on public assembly, and encouraged the media to become more assertive. But power brokers in more remote areas have at times ignored the directives from Naypyitaw, the capital. That has raised fears that for all the excitement over Myanmar’s reforms, large parts of the country, also known as Burma, may not be changing much, especially some of the areas loaded with natural resources.

One protester says she was dragged into a police station and strip-searched after participating in protests against the mine expansion. She was held for several days before being released.

“I’ll never forget what happened,” said the protester, 29-year-old Thwae Thwae Win, as she recounted her experience in her muddy village of thatched-roof huts with scattered broken pottery and cows tied to trees. No matter what the authorities do, “I’m not leaving,” she said.

A police official located in a Monywa teashop said he was unable to comment without permission from authorities in Naypyitaw. Government officials in Naypyitaw didn’t respond to request for comments.

Geng Yi, vice president of Wanbao Minining, said in an email that no village had been forced to relocate, and that some “small groups” of villagers had tried to disturb “our legal normal works at the project site” through illegal demonstrations, in some cases encouraged by people from outside the region.

He said the company was following “all legal procedures” in accordance with Myanmar law and that further questions over demonstrations should be directed to local Myanmar authorities, because “it is the government’s responsibility to ensure and guarantee the legal right and smooth implementation of the project.”

President Thein Sein last year suspended construction of the $3.6 billion Myitsone hydroelectric dam project in northern Myanmar led in part by China Power Investment Corp., which would have flooded an area the size of Singapore if completed. Activists hailed the move as a breakthrough for popular democracy at a time when Chinese investment in the country was stirring increasing resentment.

Activists are less optimistic about the current dispute. The Myitsone dam involved a river system vital to Myanmar’s history and culture, whereas the Monywa mine project would affect a smaller number of people.

“The government is showing its magic for the international community, but it hasn’t really changed,” says Kyaw Ko Ko, an activist with the All Burma Federation of Student Unions, whose group has tried to drum up support for the villagers. In the end, “the government will cover the company.”

The mine was originally a joint venture between Canada-based Ivanhoe Mines Ltd. TRQ.T -2.56% and a Myanmar state-owned company. Ivanhoe exited the venture in 2007 as it focused on other projects, transferring its stake to an independent third-party trust charged with finding a new investor. China’s investors later acquired the stake from the trust in a transaction activists said lacked transparency under Myanmar’s previous military government. The mine is jointly operated by Wanbao and the military-owned Union of Myanmar Economic Holdings Ltd.

To expand the mine, which is one of Myanmar’s main mineral producers, Wanbao offered to relocate families to better houses and pay $600 per acre in compensation, locals said. Many villagers agreed to the company’s terms, but others resisted, saying the $600 offer was too low since many of their farms yielded that much or more in revenue every year. Others argued they had no future without their corn and bean farms, even if they were moving to better housing.

Several villages banded together to launch protests last June after bulldozers and mine waste began appearing on their land. After a series of protests such activities stopped, locals said, but restarted again in August. Officials also closed down Wethmay’s monastery in an apparent attempt to force that village’s residents to leave.

Tensions boiled over earlier this month, when angry villagers tried to organize a march to a pagoda near Monywa, which is about 15 miles, or 24 kilometers, away. Locals say authorities blocked them from crossing a river along the way, so some hopped on motorbikes to the city, where several protesters were arrested.

Area residents say protests continued over the past week, with hundreds of people gathering last Thursday before being ordered home by armed authorities.

—Celine Fernandez, Minh Zaw and Olivia Geng contributed to this article.

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