The two countries had failed to implement the contract for a 1,215-kilometre railway between western Myanmar's Rakhine state and the Chinese city of Kunming, within three years of memorandum of understanding (MoU) signed in April 2011.
"No progress within three years after signing the MoU between us, so the project was to be cancelled," the official said.
"Also, China made no request to sign another contract," he said.
"This is because we care about the people's desires. Most people view the project as having more disadvantages than advantages," the official told dpa.
Opponents criticised the proposed 20-billion-dollar project for displacing too many communities. Some political parties and ethnic groups objected to it on the grounds of risk to national security.