For decades one of Southeast Asia's most insurgency-plagued nations, Burma, is beginning to make significant gains in its military and diplomatic campaigns against a range of insurrections, most notably that of the powerful outlawed Burmese Communist Party.

The military headway against Communist and ethnic insurgencies has come against a background of growing cordiality between Burma and its giant northern neighbor, China, in recent years. Burma was the first noncommunist country to recognize China in 1949, but relations later were downgraded because of the turmoil of China's 1966-76 Cultural Revolution and the anti-Chinese rioting in Rangoon in June 1967.

Throughout the 1970s, China offered military, financial and political support for the Burmese Communist Party, whose insurgents are based along Burma's rugged northeastern border with China.

But sustained Burmese diplomatic efforts to end Chinese backing for the rebels now appear to be paying dividends, according to diplomatic sources.

The Army's capacity to exploit new advantages is limited by the country's flagging economy and chronic shortages of resources. At the same time, Rangoon's military-dominated rule shows no sign of seeking political settlements with the rebellious minority groups scattered around the country's northern and eastern rim.

Indeed, diplomats here said they detect a new government aggressiveness and a perceptible shift in favor of the government in recent campaigns against the insurgents.

Peking began distancing itself from the staunchly Maoist Burmese Communist Party in 1979, following the consolidation of a more moderate Chinese leadership and a need to strengthen diplomatic support in Southeast Asia after the Vietnamese invasion of Cambodia in late 1978.

Western diplomats believe there has been a gradual diminution in arms supplies over the past five years from China to the Burmese Communist Party, reflecting Chinese skepticism toward a party that has been unsuccessful so far in winning support in the rice-growing heartlands of this mainly Buddhist nation of 36 million.

In addition, there has been a flurry of state visits in the past year, notably that of Burmese President San Yu to China last October and a trip by his Chinese counterpart, Li Xiannian, to Burma in March.

In May, Burmese strongman Ne Win, 74, flew to Peking for the first time in his capacity as chairman of the ruling Burmese Socialist Program Party. The visit was seen to imply Chinese recognition of the party. In the past, Peking had ignored the ruling Burmese party, confining its dealings with Rangoon to a "state-to-state" level while maintaining "party-to-party" links with the insurgent Communists.

Further signs of the new warmth in Sino-Burmese relations are the cultural exchanges and several Chinese aid projects in Burma that have gathered momentum in the past three years. A joint survey of the two countries' 1,388-mile-border began this year. "Right now, the Chinese are in very high profile here," said one western diplomat.

The most revealing indication of Chinese preparedness to sever links with the Burmese Communist Party, however, has been the recent closing of the party's clandestine radio, the Voice of the People of Burma. Based in rebel-held territory just across the Chinese border and on the air since 1971, the station made its last broadcast on April 16, less than one month before Ne Win's arrival in Peking.

Chinese leverage on the Burmese Communist Party is also seen to be behind a sharp decline in antigovernment operations by the Communists' 12,000 to 15,000 troops, according to western diplomats and Burmese observers.

The party's last full-scale offensive, seizing towns in the northeast, came in 1980. Since then, hostilities have been limited to skirmishing. At the same time, the Communists have become increasingly involved in both production and trafficking of narcotics across Burma's sprawling Shan State, according to these diplomats and observers.

This year, apparently at Chinese insistence, Communist troops have also withdrawn from numerous positions near the border, including the town of Kyukok, which they had captured in 1971. According to informed Burmese sources, Rangoon government officials have reestablished a presence in the town and opened a customs post.

The drop in hostilities along the northeastern front also has permitted the Burmese Army to move decisively against other major insurgent groups, according to Rangoon analysts.

The new campaigns appear prompted by mounting government frustration with rebel control of the black-market trade across the country's porous borderline, the analysts said. That trade is the main source of consumer goods and includes Thai and Chinese consumer goods and Burmese teak, livestock, jade and precious stones.

Insurgent taxation of the trade traditionally has served to finance rebel armies and resulted in a significant and uncontrolled drain of raw materials and loss of potential revenue for the government, according to Rangoon analysts.

The most visible target of Rangoon's drive has been the Karen National Union, which has been in revolt since shortly after Burma gained independence in 1948. Once active across much of the Irrawaddy delta, the 4,000-strong, Christian-led Karen guerrillas in recent years have been confined to the jungled hills along Burma's eastern border with Thailand.

Since what Burmese analysts describe as an unprecedentedly heavy government offensive in late 1983, the Army has surprised observers by maintaining continuous pressure on the rebels through the wet seasons, which in the past have been marked by lulls in fighting. "The former policy was containment," said a Burmese analyst. "The new policy is to exterminate them once and for all."

Current fighting appears less aimed at attempts to storm Karen border strongholds and more at blocking trade through guerrilla-controlled posts, according to informed western and Karen sources on the Thai side of the border. At the same time, the Army reportedly is consolidating territory won last year and isolating guerrillas from the rural population by relocating villagers in strategic hamlet-type settlements, according to these sources.

Despite resistance from the Karen guerrillas, the ongoing Army presence already has seen the guerrillas' income from border trading slashed by 50 to 60 percent, according to diplomats. "The Karens are clearly hurting," said a senior western envoy. "They've suffered a rather serious setback."

The government also has moved hard against its third major insurgent enemy, the largely Christian Kachin Independence Army, which has been in revolt since 1961 when Buddhism was declared Burma's state religion. Fielding a well-trained force estimated at 6,000 to 8,000 men and controlling much of Kachin State in the north, the Kachin insurgents operate in an alliance of convenience with the Communists and have benefited from Chinese support.

The Kachin guerrillas are also a leading element in the rebel National Democratic Front, a grouping of noncommunist insurgents, including the Karen guerrillas and Shan and tribal factions.

Last year, Kachin guerrillas raided several towns in the north in an apparent attempt to relieve pressure on their Karen allies. But early this year, Rangoon struck back, inflicting reportedly severe losses on the Kachin guerrillas' second brigade in the Hukawng Valley area. "I didn't expect an offensive at the same time that the Army was involved with the Karens," said a diplomatic analyst.

Longer term successes are likely to be limited by the state of the Burmese Army, however. Although it is one of Asia's most experienced infantry forces, the 163,000-strong Army is hampered by a manpower shortage, obsolete weaponry, often markedly inferior to that of its guerrilla opposition, and an inadequate, overburdened logistics system. "For a military dictatorship, Burma must have the worst-equipped Army in the world," said a western diplomat.