AFP

An alliance of Myanmar ethnic minority groups is waging a lightning offensive against the military which analysts say is the biggest battlefield challenge to the junta since it seized power.

The fighting across northern Shan state has displaced more than 23,000 people according to the UN, and seen dozens of military outposts fall.

The rugged jungle region has long been a bitterly contested theatre of conflict between ethnic armed groups and military-aligned militia fighting over lucrative criminal enterprises ranging from drug smuggling and casinos to prostitution and cyber scams.

- Lords of the sky –

A patchwork of kingdoms ruled by local sawbwas ("lords of the sky"), the Shan states came under the control of Burmese kings around the 15th and 16th centuries.

During colonial rule, the British gave the region a large degree of autonomy and built their summer capital, May Myo, in its cool hills.

Today the town -- renamed Pyin Oo Lwin after independence -- is home to the military's premier officer training school, the Defence Services Academy, which trained many of the current junta leadership.

Soon after independence Chinese nationalist troops retreating from Mao Zedong's communists made several incursions into Burma through Shan state, leading to bloody and repeated clashes with the military.

- Patchwork of armed groups –

Today a giddying array of ethnic armed organisations that can call on tens of thousands of well-armed fighters control swathes of Shan state.

Some administer autonomous enclaves granted to them by previous juntas, which analysts say are home to casinos, brothels and weapons factories.

The Ta'ang National Liberation Army (TNLA) and the Myanmar National Democratic Alliance Army (MNDAA) have provided training and support to "People's Defence Forces" that have sprung up to battle the military.

Current junta chief Min Aung Hlaing made a name for himself as a regional commander in 2009, prising the MNDAA from the town of Laukkai, just inside the border with China.

The MNDAA have since hinted they wil try to recapture the town.

At least four other major armed groups have so far stayed out of the fighting, including the United Wa State Army (UWSA), which analysts say has a standing force of around 25,000.

The UWSA said this week it would stay out of the current fighting but warned it would retaliate to any incursion into its territory by land or air.

- Drug economy –

Shan state's hills were once famous for the opium poppy crop they bore, but in recent years methamphetamine production has become a billion-dollar industry.

Meth production is less labour-intensive, factories are easily hidden in remote terrain and there is a largely unchecked supply of precursor chemicals flooding in from China.

Shan state is now Southeast Asia's primary source of meth, according to the United Nations.

The UN reported record seizures of crystal meth last year in Myanmar and said opium poppy farming had seen a revival in the chaos unleashed by the coup.

- The China link –

The restive region is a vital link in Beijing's sprawling Belt and Road infrastructure initiative.

Two pipelines already cross the state, carrying billions of cubic metres of gas and millions of barrels of oil from offshore rigs in Myanmar to China each year.

A billion-dollar rail link is also planned, linking China to the Indian Ocean.

But the region's chronic instability is a major headache for Beijing.

Its minister for public security visited top junta officials this week in the wake of clashes and discussed "security for major projects," according to Chinese state media.

- Scams –

Online scam centres are the newest criminal enterprises in northern Shan state.

Criminal syndicates are accused of kidnapping or luring citizens of China and other countries to lawless enclaves and forcing them to work as online scammers.

The scammers typically target their compatriots and groom them for weeks before cajoling them into ploughing money into fake investment platforms and other ruses.

Earlier this year the UN's human rights office said at least 120,000 people could be being held in scam compounds in Shan state and elsewhere in Myanmar.

The scams anger Beijing, which has repeatedly called on Myanmar's junta to root out the gangs.

The ethnic armed groups say their current offensive is aimed at doing just that.

"China has always made a stable border a priority," Richard Horsey of the International Crisis Group told AFP.

"But it may not be too perturbed if the Kokang MNDAA -- an ethnic Chinese armed group -- ends up with greater influence along the shared border at the expense of the Myanmar military and its allied militia."

AFP, Mizzima