https://www.orfonline.org/research/chinas-perspective-on-ties-with-pakistan-and-the-cpecs-prospects/
Introduction
In recent months, Pakistan has been grappling with what some
analysts have referred to as a “polycrisis”[1]—an “existential” economic crisis,[2] an intense political conflict between the government and opposition leader Imran Khan,[3] and a drastically deteriorating security situation.[4] Pakistan has sought assistance from “friendly countries”[5] and the International Monetary Fund (IMF) to stabilise its economy and strengthen its ability to pull through the ongoing crisis. While Pakistan did secure an initial approval from the IMF for a US$3 billion loan programme on 30 June 2023, mere hours before the IMF agreement expired,[6] overall, this time, international assistance for the country has been somewhat less forthcoming.[7] Most notable was China’s ambivalence to a faltering Pakistan, despite being the country’s largest creditor,[a] and having the ability to restructure its debt and reverse its economic free fall.[b],[8] Despite the rhetoric of an ‘iron-clad, all-weather friendship’ between Beijing and Islamabad, of Pakistan being the fulcrum of China’s South Asia policy,[9] and of the US$60 billion China-Pakistan Economic Corridor (CPEC) being the cornerstone of the Belt and Road Initiative (BRI), China chose a ‘wait and watch’ policy on the Pakistan situation, often even suggesting the US is to blame for Pakistan’s current plight.[10],[11] At one point, even Pakistan’s strategic circles[12]—which are rarely critical of China—began to question why Beijing was not doing more to help Islamabad. Significantly, China’s current reticence comes on the back of reported cuts to the CPEC budget (by a substantial 56 percent) in 2022.[13]
Amid this backdrop, this brief examines Chinese resources—the discourse in the Chinese-language media, discussions on the Chinese internet, and writings by Chinese academics and scholars—to understand the current dynamics of China-Pakistan relations.
Background: China-Pakistan Ties
China and Pakistan established diplomatic relations in May 1951,[14] but the relationship gained real traction only after the 1962 India-China border war,[15] eventually turning Islamabad into Beijing’s closest ally in South Asia. In recent years, the relationship has been cemented through the CPEC. In May 2013, Chinese Premier Li Keqiang formally proposed the “historic long-term plan of the CPEC” during a visit to Pakistan.[16] In April 2015, the two sides agreed to upgrade bilateral ties to an all-weather strategic cooperative partnership, and determined a ‘1+4 cooperation layout’[c] to construct the CPEC, focusing on the Gwadar Port, energy, transportation infrastructure, and industrial cooperation. Since then, the CPEC has emerged as the core of China’s relations with Pakistan.
The 3000-km CPEC starts in Kashgar in China’s Xinjiang province and ends in Gwadar Port, Pakistan.[17] As per Chinese planning, it is connected to China’s Silk Road Economic Belt in the north and the 21st Century Maritime Silk Road in the south.[18]
Chinese literature indicates that China sees immense strategic value in the CPEC, particularly to:
- Ensure energy security (to help it bypass its ‘Malacca dilemma’[d] and the instability in the South and East China Seas);
- Expand its western development strategy[e] that is improving connectivity between landlocked western China and the outside world, and thus enhancing the ability of its western provinces, especially the Xinjiang Autonomous Region, to attract foreign investment.[19] This is considered critical to China’s industrial restructuring and upgrading and economic transformation, and to address its excess-capacity problem, enhance the international competitiveness of its industries, and further promote its ‘Made in China’ agenda;
- Maintain stability in western Chinese provinces, particularly Xinjiang, and expand its geopolitical influence in the Islamic world, Central Asia, South Asia, and Africa.
On the other hand, China has marketed the CPEC to Pakistan as:
- A “game-changer in South Asia”[20] that will transform Pakistan’s economic fortune and make it the next “Asian Tiger”[21];
- Helping maintain the balance of power in South Asia, strengthen Pakistan’s power and position in the region, and alleviate the strategic pressure caused by the US-India rapprochement in South Asia.[22]
- In the first phase of construction (2015-2020),[23] about 22 early harvest projects were identified or completed at a total investment of at least US$19 billion (see Table 1).[24] Among these were 11 energy projects (including the coal-fired Sahiwal and Port Qasim power stations that began operations in July 2017 and April 2018, respectively); four major transportation projects [including the PKM highway (Sukkur-Multan section), and the Karakoram Highway (Havellian-Mansehra) projects]; one port project (Gwadar Port); five livelihood projects (including a school, medical centre, and a desalination plant at Gwadar); and one feasibility study project for funds.Table 1: Projects started or completed in the first phase of CPEC
Project Name Funding Source Cost (US$100 million) Category Progress (till 2020) Gwadar Smart City Planning Funded by China Total Amount 0.29 Livelihood Projects Handed over on 5 November 2019 Gwadar China-Pakistan Friendship Primary School Funded by China Livelihood Projects Completed in 2016 Gwadar Emergency Centre Funded by China Livelihood Projects Completed on 7 May 2017 Pilot Project of Digital Terrestrial Multimedia Broadcast (DTMB) Funded by China Livelihood Projects Under construction Gwadar East Bay Expressway Interest free loan 1.43 Livelihood Project Under construction 50 WM Dawood Wind Power Project Chinese-funded and joint venture enterprises 1.15 Energy Project Grid connected on 4 April 2017 100MW UEP Wind Farm, Jhimpir, Phase 1 Chinese-funded and joint venture enterprises 2.52 Energy Project Grid connected on 15 June 2017 50MW Sachal Wind Power Project Chinese-funded and joint venture enterprises 1.34 Energy Project 300 MW ZTE Solar Power Project in Punjab Chinese-funded and joint venture enterprises 4.6 Energy Project Grid connected in June 2016 1320 MW Qasim Port Coal-fired power plant project Chinese-funded and joint venture enterprises 20.85 Energy Project Commercial operations began in April 2018 1320 MW Sahiwal coal-fired power plant project Chinese-funded and joint venture enterprises 18 Energy Project Completed and put into production on 3 July 2017 720 MW Karot Hydropower Project Chinese-funded and joint venture enterprises 16.98 Energy Project Under construction 660 MW Hub coal-fired power station project Chinese-funded and joint venture enterprises 19.95 Energy Project Completed on 21 June 2018 100 MW Three Gorges Wind Power Project Phase ii and Phase III Chinese-funded and joint venture enterprises 2.24 Energy Project Normal operations began in 2018 Suki Kenari Hydropower Station Project Chinese-funded and joint venture enterprises 18.02 Energy Project Under construction A pit-mouth coal-fired power plant in the Thar Coal Mining Block II project Chinese-funded and joint venture enterprises 20 Energy Project Completed on 21 October 2019 Karakoram Highway Phase II Upgrading and Reconstruction, (Havellian to Thakot Section), Chinese government preferential loans 13.15 Transport Infrastructure Completed on 18 November 18 2019 Sukkur-Multan section of the Karachi-Lahore Expressway (392 km) Chinese government preferential loans 28.89 Transport Infrastructure Completed on 5 November 2019 Lahore Orange Line rail transit project Chinese government preferential loans above 16.26 Transport Infrastructure Completed on 10 December 2019 China-Pakistan cross-border optical cable project Chinese government preferential loans 0.44 Transport Infrastructure Opened on 13 July 2018 Gwadar Port Operation and Free Trade zone Construction Project Chinese enterprises 2.35 Industrial Park Park opened on 29 January 2018 Feasibility Study on upgrading and transformation of Main Line 1 project (ML1) Pakistan government funding 0.03 Transport Infrastructure Submitted in April 2019 Source: Lu Jia[25]
In the second phase of construction (2021-2025),[26] the CPEC focuses on agriculture, poverty alleviation, education, health, and human resources, in addition to continuing with energy and infrastructure cooperation projects, particularly in the western Pakistan’s underdeveloped areas. Nine special economic zones are expected to be established, which are in Khyber Pakhtunkhwa, Sindh, Balochistan, Punjab, Islamabad, Port Qasim, Pakistan-occupied Kashmir, Federally Administered Tribal Areas, and Gilgit-Baltistan (see Table 2).[27]
Figure 2: Special economic zones proposed in the second phase of CPEC
Project Name Place Area (in acres) Industry Type Rashakai Economic Zone, M-1, Nowshera Khyber Pakhtunkhwa 1000 Fruit, food, packaging, textile, knitting China Special Economic Zone Dhabeji Sindh 1000 Determining feasibility Bostan Industrial Zone Balochistan 1000 Fruit processing, agriculture machinery, Pharmaceuticals, motorcycle assembly, chromite, edible oil, ceramic industry, cold storage, electrical appliances, halal food industry Allama Iqbal Industrial City (M3), Faisalabad Punjab (Faisalabad) 3000 Textiles, steel, pharmaceuticals, engineering, chemicals, food processing, plastics, agricultural implements. ICT Model Industrial Zone, Islamabad Federal Government (Islamabad) 200~500 Steel, engineering, pharmaceutical, chemical, printing, processing. Development of an Industrial Park on Pakistan Steel Mills Land at Port Qasim near Karachi Federal Government (Port Qasim near Karachi) 1500 Steel, automobiles and related, manufacturing, chemical, printing, packaging, clothing Special Economic Zone at Mirpur, Pakistan-occupied Kashmir Pakistan-Occupied Kashmir (Mirpur) 1078 Mixed industries Mohamad Marble City Federally Administered Tribal Areas Information not available Information not available Mokpondass SEZ Gilgit-Baltistan Gilgit-Baltistan Information not available Marble, granite, iron ore processing, fruit processing, iron and steel industry, mineral processing equipment, leather industry. Source: Lu Jia[28]
Although the Chinese state media often projects the CPEC as a flagship project of the BRI, with great strategic significance for China and Pakistan,[29] several Chinese analysts have (in internal assessments) repeatedly flagged a myriad of risks and challenges involved in construction of the corridor.[30] These include Pakistan’s domestic political constraints, low project implementation efficiency, high public expectations, serious security concerns along the route, and interference from external forces. With the CPEC construction now in the second phase, which China calls the “enrichment and expansion” stage,[31] Chinese scholars have pointed out the emergence of new challenges, particularly in the post-pandemic era. They argue that with the evolution of the international and regional situation, the old and new challenges coexist, posing a big test for China in dealing with them appropriately.[32]
Assessing the Challenges to CPEC
The current dominant discourse in China is that the world is undergoing “major changes unseen in a century”[33] due to the impact of the COVID-19 pandemic and intensifying great power competition, and Beijing is at the centre of these major changes. Pakistan, which has traditionally been a close ally and partner of China, is also experiencing significant changes.[34] Indeed, the strategic environment in which CPEC was introduced a decade ago has changed drastically, impacting the second phase of construction.[35] As per the Chinese assessment, some of the most serious problems and challenges plaguing the CPEC in the current phase are:
- instance, it held the first edition of the Islamabad Security Dialogue[g] and launched the Comprehensive National Security Framework,[84] based on which it has compiled the National Security Policy 2022-2026. The policy places economic and human security at the core of Pakistan’s national security.[85]Pakistan is also striving to go beyond the distinction between the military and government, and has proposed a ‘whole-of-government approach’ to safeguard national security.[86] It is also seeking to make certain foreign policy adjustments:[87] resetting its relationship with the US; carrying out behind-the-scenes diplomacy for a working relationship with India, due to which the border ceasefire came into effect in February 2021;[88] considering a more balanced diplomatic position between Saudi Arabia, Türkiye, and Iran in West Asia, and strengthening trade, economic, and military ties with Russia and Central Asia.[89]However, the Chinese strategic community believes that although Pakistan’s foreign policy adjustments are positive developments, their impact will be limited.[90] This is because Pakistan is yet to find a favourable strategic position in the current international situation. It no longer has the weight to influence relations between major or regional powers, and its diplomatic sway is no longer pivotal in geopolitics.[91] At the same time, Chinese scholars note that Pakistan has certain important features that should not be underestimated or written off entirely—that it is a regional military power, a country with a big population, and the only de facto nuclear country in the Islamic world.[92]
China’s Apparent Message to Pakistan
In a rapidly changing geopolitical context, China’s message to Pakistan, as evident from the writings of the Chinese scholars, is two-fold:
- concerned-about-debt-pakistan-owes-china-official-says-2023-02-16/[b] China did roll over around US$5 billion in loans to Pakistan in the last few months as IMF negotiations dragged on, but this was primarily aimed at preventing Pakistan from defaulting, which would have forced China to offer debt relief under IMF conditionalities; see: https://www.arabnews.com/node/2339791/amp. For more on the Chinese lending approach, see: https://www.politico.com/news/2023/04/11/china-lending-imf-world-bank-00090588
[c] The 1+4 cooperation layout puts the CPEC at the centre, with the Gwadar Port, transport infrastructure, energy, and industrial cooperation as the four key areas of cooperation. For more, see: https://www.pakistantoday.com.pk/2023/07/09/14-layout-formed-cpecs-projects-attract-25-4b-of-fdi-during-past-10-years/
[d] China’s ‘Malacca dilemma’ is its worry over the possibility of a foreign navy, such as that of the US or India, disrupting China’s energy lifeline during wartime with a blockade of the Strait of Malacca. For more, see https://www.wilsoncenter.org/blog-post/internal-politics-instability-and-chinas-frustrated-efforts-escape-malacca-dilemma
[e] The Chinese government’s plan to invest in development and growth in the inland western regions, thereby addressing domestic regional inequality. For more, see https://borgenproject.org/tag/the-great-western-development-strategy/
[f] According to the Pakistan Peace Institute’s Pakistan 2018 Security Report (released in June 2019), there were nearly 40 terror attacks on the CPEC projects in 2018.
[g] According to the event report, the dialogue is envisaged to “position Pakistan as a leading voice in thought leadership on national security issues.” Its aim is to unveil “Pakistan’s comprehensive national security framework”, access “Pakistan’s role and potential as an economic melting pot for positive global economic interests”, and launch “the first-of-its-kind National Security Division Advisory Portal”. It was attended by members of Pakistan’s federal cabinet, diplomatic corps, former government officials global and local thinkers, policy experts, and scholars. For more, see https://mofa.gov.pk/wp-content/uploads/2021/05/Islamabad-Security-Dialogue-Event-Report.pdf
[h] For instance, scholars note that by 1964, overall aid and assistance amounted to about 5 percent of Pakistan’s GDP and acted as a catalyst for its industrialisation and development, with GDP growth rates rising to as much as 7 percent per annum. For more, see: https://carnegieendowment.org/files/pakistan_aid2011.pdf
[i] The sudden rush in Pakistan to attract foreign investment by setting up forums like the Special Investment Facilitation Council or project the country as a destination where key investors (like China, Saudi Arabia, and the UAE) continue to maintain faith and confidence should be seen in the context of the message emanating from Beijing. For more, see: https://www.reuters.com/business/energy/pakistan-china-sign-48-bln-nuclear-power-plant-deal-2023-06-20/, https://www.al-monitor.com/originals/2023/08/uae-saudi-arabia-race-investment-pakistan
[j] Preferably by aligning existing or proposed cooperation mechanisms such as the Turkmenistan-Afghanistan-Pakistan-India regional energy cooperation project, the Iran-Pakistan-India natural gas transmission project, and the US ‘New Silk Road’ plan with CPEC. Another way is to encourage the American private sector to invest and build factories in the Pakistani industrial parks under the CPEC.
[k] While Pakistan’s overall relation with the Taliban regime in Afghanistan has been in a downward spiral, Iran and UAE continue to see Gwadar as a competition to Bandar Abbas and Dubai Ports and have complex attitudes towards the CPEC.
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Endnotes:
[1] Maleeha Lodhi, “Year of polycrisis”, The Dawn, January 2, 2023.; S Akbar Zaidi, “A polycrisis that is depleting Pakistan’s resilience”, The Hindu, February 8, 2023.
[2] Shahbaz Rana, “Pakistan’s Existential Economic Crisis”, USIP, April 6, 2023.
[3] “Timeline: Imran Khan, from ouster to arrest in Pakistan” Al Jazeera, May 9, 2023.
[4] “Over the borderline: on Pakistan and its security situation with Afghanistan”, August 1, 2023, The Hindu.
[5] “Pakistan looking towards friendly countries for funding following delay in revival of IMF bailout program”, ANI, May 17, 2023.
[6] “Pakistan Wins Initial Nod for $3 Billion IMF Bailout Deal”, Bloomberg, June 30, 2023.
[7] “PM Shehbaz Sharif says, “even friendly countries started looking at Pakistan as beggars”” , The Times of India, September 15, 2022, Umer Karim, “Why Saudi Arabia has left Pakistan out in the cold”, Middle East Eye, April 23, 2023.
[8] “巴基斯坦深陷债务危机,及其对中国的影响, (Pakistan’s Deep Debt Crisis, and Its Implications for China)”, February 22, 2023,
[9] Lin Minwang, “南亚的地缘政治博弈及其战略格局的演进”( South Asia’s geopolitical game and the evolution of its strategic pattern) , Baijiahao, May 6, 2020.
[10] “巴基斯坦面临“破产”？中国这次没有出面，西方提出援助方案 (Pakistan facing “bankruptcy”? China did not come forward this time, the West proposed an aid plan)”, 海峡快报, February 9, 2023.
[11] “China shouldn’t be excuse for West to shirk blame over debt”, Global Times, February 6, 2023.
[12] Pervez Hoodbhoy, “As Pakistan Gallops Towards Debt Default, Its ‘Unbreakable’ Bond With China Is Under Stress”, Feb 22, 2023, The Wire.
[13] “CPEC in trouble with China, Pak’s disengagement amid economic crisis”, The Tribune, August 4, 2022.
[14] Zamir Ahmed Awan, “A new era of Pakistan-China relations”, China Daily, May 21, 2018.
[15] Manjari Chatterjee Miller, “How China, Pakistan forged close ties”, The Hindustan Times, October 2, 2022.
[16] Xu Zhijie, Zhang Puling, Wang Fei, “”一带一路”倡议下中巴经济走廊建设的缘起,挑战与路径 (The Origin, Challenges and Paths of the Construction of the China-Pakistan Economic Corridor under the “Belt and Road” Initiative), Journal of Kashi University 2021,42(04),23-28
