The agreement on Myitsone Dam project came during talks between Chinese Premier Li Keqiang and Myanmar's State Counselor Aung San Suu Kyi, who started a five-day official visit to China yesterday.
As 71-year-old Suu Kyi kicked off her official visit, the first after her government took over power following two decades of struggle against the Beijing backed military regime, she was accorded head of the government welcome by Premier Li Keqiang at the Great Hall of People.
Explaining the high level protocol to Suu Kyi, Chinese Foreign Ministry spokesman, Lu Kang said "as is known to all, State Counsellor is ranked second only to the President among all the posts in the state organs of Myanmar".
Officials said it was symbolic in recognition of Suu Kyi status as highest ranking political leader of Myanmar even through her designation is the State Councillor and Foreign Minister.
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Though herNational League for Democracy (NLD) party swept the polls with massive majority, the Nobel Laureate could not take over as President due to constitutional constrains imposed by the previous military regime.
China reportedly paid 60 per cent of the project.
Chinese Vice Foreign Minister Liu Zhenmin told reporters after the talks that, Myanmar's new government has decided to set up an investigation committee to find a solution that is in both countries' interests regarding the Myitsone Dam issue, state-run Xinhua news agency reported.
Opponents of the dam say the reservoir created by the Myitsone dam would create massive flooding on the Irrawaddy River, endangering ecologically sensitive areas and displacing thousands of people.
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After the meeting of Suu Kyi and Li several agreements were signed, including one involving a bridge project in Myanmar and construction of two hospitals, state-run CCTV reported.
Chinese media regards her visit as a diplomatic victory as she is visiting Beijing before visiting US or Europe which backed her during her prolonged campaign against rule by Beijing backed military junta.
"It will be the first visit to China by a leader of Myanmar following the establishment of its new government, and thus is of great significance to promoting China-Myanmar comprehensive strategic partnership of cooperation in the new era", Lu said.
This will be Suu Kyi's second trip to China. She met with Xi the first time through a party-to-party channel in June 2015 before Myanmar's general election in November.
Suu Kyi's China visit also comes two weeks before the 21st Century Panglong Conference, a peace conference involving the Myanmar government, the military and ethnic armed groups.
China's support is seen as vital in resolving Myanmar's decade-long ethnic conflicts, state-run Global Times reported.
In a commentary, state-run Xinhua news agency said Suu Kyi's visit comes roughly one week after Myanmar President U Htin Kyaw decided to form a new commission for reviewing all proposed hydropower projects on the Irrawaddy River, including the Myitsone Dam, which is jointly funded by China and Myanmar.