Chinese Foreign Minister Wang Yi who visited Myanmar made the proposal yesterday.
The proposed corridor is regarded significant as the BCIM (Bangladesh, China, India, Myanmar) Economic Corridor initiated by China as part of its Belt and Road Initiative (BRI) has struggled to make progress.
The direct economic corridor, which would help Myanmar's development plan and needs, will start in China's Yunnan Province, extend to the central Myanmar city of Mandalay and then east to Yangon and west to the Kyaukpyu special economic zone, forming a three-pillar giant cooperation pattern, Wang said.
The proposal will further develop China-Myanmar cooperation under the Belt and Road initiative.
The corridor, which connects both Myanmar's core economic zone and its less-developed western part, could balance development across the country, Song Qingrun, a research fellow at the China Institute of Contemporary International Relations said.
Due to its location between China and Southeast Asia, Myanmar serves as an important intersection for China's BRI.
The establishment of the corridor will allow China to access the Indian Ocean more conveniently, Gu Xiaosong, head of Southeast Asian Studies at the Guangxi Academy of Social Sciences, told the Global Times.
The two countries agreed to start operating a USD 1.5 billion pipeline in April, which allows China to import oil through the Bay of Bengal, which has an estimated capacity of 22 million tons of crude oil per year.
China argues that the corridor will also help develop Rakhine state, the centre of a conflict in Myanmar from where over six lakh Rohingya refugees had fled to Bangladesh.
China is seeking to play a mediatory role to end the crisis.
China said yesterday that Myanmar and Bangladesh have agreed to implement its three-phased solution to resolve the vexed Rohingya refugee crisis.
The Chinese Foreign Ministry spokesman, Lu Kang told the media that both Myanmar and Bangladesh have accepted the three-phased solution proposed by Wang during his visit to both the countries.
Wang said the first phase proposes to achieve a ceasefire so that local residents can no longer be displaced. Through joint efforts, the ceasefire has been in place, Wang said.
Second, the international community should encourage Myanmar and Bangladesh to keep communication in a bid to find a feasible solution to the issue, he said.
The two countries have reached an initial agreement on repatriation of refugees fleeing to Bangladesh from Myanmar.
The third phase is to find a long-term solution, he was quoted as saying by state run Xinhua news agency.