OBSERVERS are still wrestling with the implications of a stunning piece of news out of Myanmar on September 30th. Thein Sein, the president, informed parliament that work on a huge $3.6 billion dam on a confluence of the Irrawaddy river in the north-east of the country would be suspended for the duration of his term in office, ie, until at least 2015.

The decision has provoked China, which has been building the Myitsone dam and would buy almost all of the electricity generated by the associated 6,000MW hydropower plant, into a rare public rebuke of a friendly neighbour. And critics at home and abroad have been taken aback by the reason Mr Thein Sein gave for the suspension: that it was “contrary to the will of the people”. That has not, in the past, been a consideration for Myanmar's rulers.

Like many members of his government, Mr Thein Sein is a former general. But the “civilian” regime that succeeded the military junta after rigged elections last year is trying hard to look different. The suspension of the dam comes after a series of conciliatory gestures, notably a meeting in August between the president and Aung San Suu Kyi, the de facto leader of Myanmar's opposition, who was freed from house arrest last November, just after the election.

That the new regime seems willing to antagonise China is the latest sign that things may really be different. Shunned by the West, Myanmar had been falling ever more closely into China's orbit. China is Myanmar's biggest foreign investor, followed by Thailand. A Chinese foreign-ministry spokesman has condemned the suspension of the dam and called on Myanmar to protect the rights of the Chinese companies involved. 

Myitsone is one of the most important of China's many projects in Myanmar. The main investor is the state-owned China Power Investment Corporation, whose construction arm had already started work. On a visit to the site this year, The Economist's correspondent found that it had built supply roads and large pre-fabricated living quarters for the Chinese workers, cleared hillsides and moved the population to a resettlement village (pictured to the right).

Of a series of seven Chinese-built dams planned on the Irrawaddy, the Myitsone was to be the largest, and at about 150 metres (458 feet), one of the highest in the world. If completed, the dam's reservoir would flood an area the size of Singapore and drive more than 10,000 people, mainly from the Kachin ethnic group, from their ancestral lands. The area straddles territory controlled by the Kachin Independence Organisation (KIO), one of Myanmar's myriad insurgencies. Last May the KIO warned China that building the dam would lead to “civil war”. Since then fighting between government forces and the KIO's armed wing, the Kachin Independence Army, has increased markedly. Thousands of villagers caught up in the clashes have fled the area.  

Hitherto suppressed environmental NGOs spoke out against the project. They were backed by Miss Suu Kyi, who in August wrote an open letter calling for a reassessment of the project. She has welcomed the suspension because “every government should listen carefully to people's voices.” 

It is not just concerns about the environment or the people displaced that have raised hackles. There is widespread popular resentment against Chinese economic expansion within Myanmar, and against the large-scale immigration of Chinese nationals into northern Myanmar—estimates range from 1m to 2m—that has accompanied it. Many Burmese complain that Myanmar's states have become like provinces of China. 

The government's decision to suspend the dam comes at a time when it is also showing more willingness to engage with the West. Barack Obama's special envoy to Myanmar was there in September. The regime has even been hinting that it might release at least some of its 2,000 political prisoners. Their continued detention makes it hard for Miss Suu Kyi to advocate the lifting of Western sanctions, and her support for sanctions makes it hard for Western governments to drop them. In an interview this week with the BBC, she urged caution in assessing the government's intentions, but expressed at least moderate optimism: “We are beginning to see the beginning of change.” 

Among the many signals the regime is sending by suspending the dam is that it does not want to be dependent solely on its neighbours, especially China. The regime is trying to build bridges with both its opponents at home and its critics overseas. The danger is that the changes it is making may not be fast enough or fundamental enough to win big concessions from the West. And in the past, when engagement has failed, there has been no shortage of vengeful hardliners waiting to come out of the woodwork.