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Two birds, one $46 billion stone

China, Pakistan have done better on security than economics. Can it be different?

April 22, 2015 12:21:45 am
The history of economic relations between the two sides might suggest that disappointment is to be expected. The history of economic relations between the two sides might suggest that disappointment is to be expected.

By: Andrew Small

After repeated cancellations, delays and false rumours, the fact that Chinese President Xi Jinping finally made it to Islamabad this week was a relief for the Pakistani government. As a rule, the China-Pakistan relationship rarely hinges on major bilateral visits, but each time Xi’s trip was pushed back, it seemed to reflect another hitch that might jeopardise China’s large-scale investment plans. Even now, there is understandable scepticism about whether the ambitions for a $46 billion China-Pakistan Economic Corridor will actually come off. Security risks, logistical challenges and political controversies abound for what would be the largest overseas development-focused investment effort that China has ever attempted. But banking on another failure would be a mistake. This time, Beijing intends to press ahead with the initiatives despite Pakistan’s problems, and even partly because of them.

China-Pakistan economic ties have long been the weakest leg of their relationship. Total investment figures remain in the single digits despite far larger headline announcements, while bilateral trade is modest in comparison with Chinese trading partners of similar size. Overland commerce down the Karakoram Highway was running at barely a few hundred million dollars even before a landslide in 2010 left the road blocked by an enormous lake. It is yet to reopen. Previous plans for a “transport and energy corridor” connecting Xinjiang to Gwadar go back over a decade, but the port has still not become fully functional. China has pulled out of other major investments due to security concerns and has, at times, even threatened to withdraw all its workers from Pakistan. There are certainly many good reasons to anticipate that the inflated expectations generated by Xi’s visit will not be lived up to.

Yet the context for the China-Pakistan Economic Corridor is very different from past efforts. Where previous “corridors” were largely pushed on an ambivalent Beijing by Islamabad, this venture lies at the heart of Xi’s signature initiative for a Silk Road Economic Belt and Maritime Silk Road, connecting China by land and sea to Central Asia, South Asia, its markets in Europe and its resource suppliers in the Middle East and Africa. Described as a “flagship” project that will bridge the land and maritime routes, the infrastructure plans in Pakistan will be one of its frontline ventures.

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The logic for the “One Road, One Belt” strategy is partly economic. During a period when China’s growth model is changing, it needs to outsource its excess industrial capacity and find new drivers of growth in its relatively underdeveloped interior provinces. The initiative is also motivated by China’s concerns about the dependence of its trade on specific sea lines of communication and choke-points such as the Malacca Strait. Diversified maritime routes, new access points to the Indian Ocean and viable land corridors reduce these risks. There is an even more direct security rationale, too. With the United States withdrawing from Afghanistan, and a worsening terrorist threat in Xinjiang, China’s anxieties about militancy in its western periphery have grown. Rightly or not, Beijing believes that economic development plans will be part of the long-term solution to stabilising its neighbourhood.

Pakistan lies at the heart of many of these concerns. Yet, where a few years ago, terrorist threats and broader security worries might have derailed China’s investments, now they are part of the motivation for the major economic commitments that it is making. Beijing wants a capable, stable Pakistan to act as its partner in the region for an assortment of strategic purposes and is willing to do its bit to help shore up the country’s economy. The investments are also a major incentive for Pakistan to curb some of its adventurist instincts. When Pakistan Prime Minister Nawaz Sharif publicly noted that he had “told the Chinese president that Pakistan desires a peaceful neighbourhood to focus on pursuing growth”, it was a reassurance that China had been seeking. A serious deterioration in Afghanistan’s situation, participation in a conflict-by-proxy with Iran in Yemen or a spike in India-Pakistan tensions would all pose threats to Beijing’s wider regional agenda.

The two sides are not wagering everything on the most difficult parts of the economic corridor anyway. While much attention naturally falls on the more grandiose ambitions for railways, pipelines, and lines being drawn on maps between Kashgar and Gwadar, most of the projects envisaged do not hinge on security in Balochistan or tunnels through mountains. Nuclear power plants, hydropower projects, road upgrades, motorways, and others in the long list of MoUs signed during Xi’s visit still add up to a large and realisable package of investments. Recent years have been spent figuring out which projects China can confidently expect to be protected by Pakistani security forces and which will hinge on a broader improvement in Pakistan’s internal situation.

None of this is to suggest that doubts aren’t warranted. Many in Pakistan are concerned about the government’s capacity to execute the plans, even if it deserves credit for getting the initiative to this stage. A number of the investments will take a long time to come to fruition — if they happen at all. Unlike the close security relationship between China and Pakistan, the history of economic relations between the two sides might suggest that disappointment is to be expected. But there is also another lesson to be drawn from it. From civil nuclear plants to the Karakoram Highway, when a serious enough strategic rationale has underpinned Sino-Pakistani economic initiatives, even the most politically and logistically difficult of them has succeeded in the end.

The writer is a transatlantic fellow with the Asia programme of the German Marshall Fund of the United States.

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First published on: 22-04-2015 at 12:21:45 am
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