silking the china-pakistan economic corridor (cpec)

Role of SCO in the Implementation of OBOR with

the Development of EAEU in Eurasia Asia Maqsood

Silking the China-Pakistan Economic

Corridor (CPEC) Gohar Ali Iftikhar & Shakeel Ahmad

Growing Strategic Relations between China

and Pakistan: An Analysis Syeda Saiqa Bukhari

Journal of Peace and Diplomacy

July 2018

Volume 1, No. 1

Editor

Farhat Asif

Assistant Editor

Saiqa Bukhari

Institute of Peace and Diplomatic Studies

Journal of Peace and Diplomacy

2018

Role of SCO in the Implementation of OBOR with the Development

of EAEU in Eurasia

Asia Maqsood

Abstract

Russia and China both have launched ambitious regional projects in recent

past years which have been promoted as a means to strengthen linkages with

neighboring states. One of them is Eurasian Economic Union in which the

member states joined in an integrated single market facilitating the free

movement of goods, capital, services and labor. The second largest project is

China’s One Belt One Road Initiative which is composed of two parallel

projects; Silk Road Economic Belt and 21st

Maritime Silk Route. This paper

will attempt to explore the role of Shanghai Cooperation Organization in the

implementation of these large scale projects in Eurasian region. It assesses

its role that it can play its role to harmonize the competing interests of the

participating countries along these projects.

Silking the China-Pakistan Economic Corridor (CPEC)

Gohar Ali Iftikhar & Shakeel Ahmad

Abstract

Originated from Chinese Han Dynasty and expanded by Tang Dynasty,

Byzantine and Roman Empires, Old Silk Road connected South and Central Asia

with Europe and Middle East for trade and cultural exchange. After an extensive

retro gradation, being integral part of Xi Jinping’s “China Dream” the road

received an international heed. Having an estimated cost of around 4 Trillion

Dollars, One Belt One Road (OBOR) will connect 50 landlocked countries to

enhance economic integration. Optical Fiber Cable Project has been declared to

be a “digital corridor”. While OBOR’s central enterprise, CPEC will be

strengthening bilateral connectivity between China and Pakistan by linking

Gwadar port to Xinjiang, resultantly, energy sector, road and railway

infrastructure development is ought to explicate the progress of Pakistan, yet, the

fruits wouldn’t ripen overnight. Counting on the challenges at Pakistan’s end,

the fiscal ambiguities, undue-anticipations, provincial competition and

confrontation on Special Economic Zones, Internal security, Cultural concerns,

burden of unserviceable debt, prioritization of development, import of raw

material and labor despite excessive domestic availability and absence of

revenue generation plan are serious questions and concerns regarding this

“Game Changer” project. Pakistan can only yield the benefits of CPEC if the

government recognize and vigilantly fulfill the responsibilities, letting the

provinces, small and medium enterprises seize the opportunities through CPEC.

Growing Strategic Relations between China and Pakistan: An

Analysis

Syeda Saiqa Bukhari

Abstract

China and Pakistan with different ideologies and backgrounds have remarkable

relations. Both countries developed their relations on the bases of mutual interest

rather than ideology. Bilateral cooperation between China and Pakistan is going

on Gwadar project, Free trade, Economic Corridor, Civil nuclear technology,

defence production etc. India has raised concerns over growing cooperation

between China and Pakistan in areas like Gwadar port development, Civil-

Nuclear cooperation, Sino-Pak Economic Corridor and military ties. The growing

cooperation between China and Pakistan has serious impact on Indian Security

and strategic calculations. The ever growing Sino-Pak cooperation has raised

challenges for India because it gives India a possible two front war threat in the

case of clash with either state. India has responded in many ways to the

aforementioned cooperation between the two states. The purpose of this study is to

examine the scope of the strategic relationship of China and Pakistan in South

Asian Region. The main motive of this study would be to identify the growing

strategic relations between China and Pakistan which has raised challenges for

Indian security.

Journal of Peace and Diplomacy Vol. 1 No.1 July 2018

Role of SCO in the implementation of OBOR with the Development of EAEU in Eurasia

Asia Maqsood1

Abstract

Russia and China both have launched ambitious regional projects in recent past

years which have been promoted as a means to strengthen linkages with

neighboring states. One of them is Eurasian Economic Union in which the

member states joined in an integrated single market facilitating the free

movement of goods, capital, services and labor. The second largest project is

China’s One Belt One Road Initiative which is composed of two parallel projects;

Silk Road Economic Belt and 21st

Maritime Silk Route. This paper will attempt to

explore the role of Shanghai Cooperation Organization in the implementation of

these large scale projects in Eurasian region. It assesses its role that it can play

its role to harmonize the competing interests of the participating countries along

these projects.

Eurasia Economic Union (EAEU)

The establishment of Eurasian Economic Union started with several steps. In the very first step,

Russia, Belarus and Kazakhstan formed a Custom Union in 2010 and signed a Declaration on

Eurasian Economic Integration in 2011. Later on they established a Eurasian Economic

Commission through a treaty. This Declaration called for transitioning to the next step of

integration to a Common Economic Space in 2012. Following these initiatives, the presidents of

Russia, Belarus and Kazakhstan signed an agreement establishing a Eurasian Economic Union in

Astana in May 2014 which entered in to force on January 1, 2015. Later on Kyrgyzstan

formalized its membership in August 2015.The EAEU is considered as an international

organization for regional economic integration providing free movement of goods, services,

capital and labor which pursues coordinated, harmonized and single policy in the sectors

determined within the Union. The EAEU is also considered an international organization

endowed with its own legal personality a radical improvement on earlier initiatives.

(Book)/Objectives

1 Asia Maqsood is an independent researcher.

1


China’s One Belt One Road Initiative

In recent years both Russia and China initiated two different projects with the objective of the

integration of Eurasian land mass. Russia has established EAEU which has been discussed above

in details with the hopes the hopes to create Russian dominated geopolitical bloc, on the other

hand China have been promoting One Belt One Road (OBOR) initiatives to integrate Eurasia

physically and economically using its financial power.

Throwing light on the OBOR, China’s President Xi Jinping’s ambition is to promote

connectivity from China to Europe which is contemporary is considered as part of China’s

Greater Neighborhood Policy (GNP).2

It has plans to be on front in investments in transport corridors including new rail and road

infrastructure projects. Xi has announced this OBOR initiative initially inn Astana, Kazakhstan

on Sep, 2013 during his tour in Central Asia. He characterized this as an “Economic Belt”

highlighting the China’s investment could bring prosperity in the respective regions. He

differentiated his vision from the Hillary Clinton’s words “New Silk Road” in her speech in

Chennai, by saying it an “Economic Belt”. Later on during Xi’s visit to Indonesia in October,

2014, he announced the will to build a “Maritime Silk Road” of the 21st

Century. This maritime

component of OBOR is expected to stretch across Southeast Asia, the Indian Ocean, Persian

Gulf and the Mediterranean.3 Though the word “road” is an inappropriate term to describe a

maritime corridor and emphasizes China’s claim of historical legacy in the region. since then the

overland “ Economic Belt” and “Maritime Silk Road” are referred to as One Belt One Road and “ Belt and Road” in official documents. The March, 2014 Government Work Report to the National People’s Congress and successive documents have stressed the importance of B& R as a priority of China’s external actions. On March, 2015, Foreign Minister Wang Yi indicated that

the B& R would be the focus of China’s diplomacy in 20154 and would lead to the “rejuvenation

of Eurasian continent”. This initiative reflects the common ideals and pursuits of mankind as a

positive endeavor to seek new ways of international cooperation and global governance and

include the new positive energy into world peace and development.5

China’s Aspirations behind the Building OBOR

2 Wang Yiwei, ‘‘China’s ‘New Silk Road’: A Case Study in EU-China Relations,’’ in Xi’s Policy Gambles: The

Bumpy Road Ahead, ed. A. Amighini and A. Berkofsky, 103–115 (Milan: ISPI, 2015), www.ispionline.it/it/pubblicazione/xispolicy- gambles/

3 Xi Jinping, ‘‘Regulations’’ (speech to Indonesian Parliament, Jakarta, October 2, 2013), http://www.asean-china-center/ 4 ‘‘China’s 2015 Diplomacy Focuses on ‘Belt and Road,”China Daily, March 8, 2015, http://www.chinadaily.com.cn/ china/2015twosession/2015-03/08/content_19750295_2.htm/

5 Nathan Beauchamp-Mustafaga, ‘‘Dispatch from Beijing: PLA Writings on the New Silk Road,’’ China Brief 15

(February 20, 2015), http://www.jamestown.org/single/?tx_ttnews%5Bswords%5D=8fd5893941d69d0be3f378576261ae3e&tx/ _

http://www.asean-china-center/




Various analyst have been raised various rationales for Why China is pursuing OBOR? Some of

them share the view that China often emphasize on the connection between the China’s concerns

over economic development and political stability. China’s Communist Party is concerned with

the safeguarding the political and regime stability by delivering continuous strong economic

growth as Beijing is one of the few remaining communist governments. From this view, OBOR

might be seen as the strategy to ensure economic growth and expansion in short to medium term,

as the Chinese economy undergoes a time period of transition from low-value export model to

model based on domestic consumption and higher value export. to fill this transition, Beijing

needs to ensure secure energy supply routes and open the new market opportunities for both its

volumes of low-value and high- value of goods. Belt and Road Initiative can reinforce and build

new partnerships with energy exporters in Central Asia, the Middle East and Africa.6

It is stated in government official document of 2015 that B&R initiative aims to connect the

vibrant East Asia economic circle on one hand and developed European Economic circle on

other hand.

Secondly, hopefully this mega project would develop new markets for China’s growing

diversified productions which allow Chinese companies to expand. For this purpose the

reduction in transportation costs and lowering tariffs is required for paving the ways for China’s

goods to make more competitive arrival into the foreign markets.

Thirdly, B& R can also be viewed as the updating the previous “GO WEST” strategy. This was

chased in 2000s, was seeking to better connect China’s western provinces to the economic

miracle, taking place in the eastern sea board. Meanwhile it was expected that the security threats

because of Uyghur in Xinjiang province could be eliminated. In this particular context, this

strategy seeks to connect Xinjiang to the rest of China. This would deliver economic

improvements to the whole region including non-Han populations. Thus by incentivizing these

populations as prioritizing them, the political challenges to the CCP’s regional policies can be

overcome.

Fourthly OBOR strategy has been pursuing on wider foreign policy goals. Beijing in the

contemporary international political arena seems to be placing itself as most influential actor on

the international stage. In this context, B&R is important in elaborating China’s views on what

the upcoming international order look like and how it should be governed. This rational is

undoubtedly a direct challenge to the existing international order. This is also be viewed as

establishing a regional leadership position, specifically on East Asia and in response to projects

6 The Silk Road Economic Belt’s Impacts on Central Asia, China US Focus, (2015-05-08), http://www.chinausfocus.com/finance-economy/the-silk-road-economic-belts-impacts-oncentral-asia/(accessed 2015-07-2015).

3


such as US-led Transpacific Partnership TPP.7 There are some apprehensions that OBOR as a

means to China’s regional geopolitical security interests. Specifically the land belt is to increase

its geopolitical influence over regions in which it has been peripheral including Europe.8

On the other hand, Maritime Silk Road would secure the vital shipping supply lines, enhance

China’s strategic leverage over the other states claiming on the on-going territorial disputes in

East and South China Sea and growing military interests in the Indian Ocean.9

These geopolitical interests are also linked with the opening of China’s economic miracle; the

accrual of huge currency reserves. Eventually China’s policy makers are said to seek such ways

to make productive usage of these reserves to assist its wider geopolitical interests in using them

to support to OBOR further enhancing China’s role as a major political international actor.

All these rationales discussed above conceivably explain the aspirations behind the OBOR

initiative. However, OBOR could be right now best interpreted as a policy tool with the multiple

objectives that overlap domestic and foreign affairs simultaneously.

A Land Bridge to Europe/ European Perspective

OBOR’s heart is the notion of connectivity between China and Europe specifically land-based

economic belt. It is pertinent to discuss here the China- Europe land bridge by the fact that there

are already several completed projects in this dimension. Chongqing-Duisburg railway line is the

example. The objective of this project is to reduce the shipping time to transport the goods

between China and Europe. There are multiple significant points in establishing such

infrastructure links to connect the flow of commodities between Europe and China. It would

provide greater and easier access to a huge market for European producers. However, it is yet to

be seen that how much benefit could be taken through B &R. coordination in trade is further

intricate to be on the same plat form to agree on the Free Trade Agreement.

In previous year, the Joint Russian-Chinese Declaration on the coordination between EEU and

OBOR shows the possibilities of many routes in the economic belt could go through Russia. This

aspect highlights the security situation of many countries along the alternative southern rout

which bypasses Russia. With reference to the trade imbalances, the OBOR route specifically

land based, is geopolitically difficult from the perspective of European Union. Besides this, the

connectivity between Europe and China seems like a geopolitically a threat because of the

Ukraine’s role as a transit state between Russia/EEU and Europe. Despite this concern, China

encourages the support for OBOR among European Union member states. In this context, the

7 Wang Yiwei, ‘‘Reviving the Silk Road: What Is Behind It’’(lunchtime debate), Madariaga-College of Europe Foundation, Brussels, April 24, 2015.

8 New Silk Road Fact Sheet (Washington, DC: U.S. Department of State, September 22, 2011), http://www.state.gov/r/pa/prs/ps/2011/09/173765.htm// 9 For a good discussion of the land vs. sea debate, see Wu Zhengyu, ‘‘Toward ‘Land’ or Toward ‘Sea’?,’’ Naval

War College Review 66, no. 3 (Summer 2013): 53–66.

http://www.state.gov/r/pa/prs/ps/2011/09/173765.htm/


EU-China Summit 2015 had incorporated Belt and Initiative into its agenda of cooperation.

Previously, China had formed the 16+1 (China) forum to engage directly with Central and

Eastern European countries which also includes some member countries of European Union.10

This forum provides an opportunity to some of the EU countries to enjoy some benefits from the

Silk Road Economic Belt passing through their territories connecting powerhouses of both China

and Western Europe. In previous year, Hungary was first European country to sign a bilateral

memorandum in the implementation of OBOR based on mutual interest.

China is investing in the construction of a new high-speed railway between Budapest and

Belgrade. Moreover, it has plans to extend this railway link to the Greek port of Piraeus, which

shows significant Chinese investment. It all depends upon how Europe responds towards the

OBOR instead it needs a full debate on this cooperation. It also indicates that it would be

advantageous for the Europeans to have their voices heard in the formative phase of its

development. To this end, the most effective way for all European states to amplify their voice

vis-à- vis OBOR is to coordinate their stances with one another.

Role of SCO in the implementation of these projects and their coordination with the

creation of EAEU

Since the inception of SCO in June 15, 2001, the member states have been working on the

successful mechanism of this organization. Its key characteristic is that it is an organization that

fosters dialogue, regional peace and security. The SCO’s 2002 Charter have outlined the main

areas of cooperation which includes regional security, confidence building measures, exploring

the mutual views on foreign policy issues , joint actions against terrorism, separatism,

extremism, drug trafficking, limiting the transnational crimes, establishing regional economic

cooperation, establish transportation and energy potentials, bring the joint environmental projects

and increase interstate coordination as the top priority fields of cooperation. In contemporary

times China was not an active participant in multilateral regional cooperation projects of SCO for

quite some time. However, today China and Russia along with other SCO member states

maintain closer political and economic engagement and participate in a number of regional

activities jointly. China pursues a consolidated strategy toward the region alongside with

bilateral relations. This strategy has both security and economic dimensions. China’s strategy for

the region pursued through SCO includes the fight against terrorism, extremism and separatism,

maintaining of border security, regional stability, participation in the economic development

activities and access to regional energy resources. China has also begun its “Belt and Road"

initiative, involving many SCO States.11

10 M. Golonka, Partners or Rivals? Chinese Investments in Central and Eastern Europe (Warsaw: Central & Eastern European Development Institute, 2012), 21–22.

11 Ye Zicheng, Inside China’s Grand Strategy: The Perspective from the People’s Republic (Lexington: University

Press of Kentucky), 74.

5


Chinese leadership in the SCO is considered to be based on three pillars. The first pillar is the

“Shanghai spirit,” or the principles, which form the conceptual framework for the SCO’s

development. The principles of the "Shanghai spirit", were formulated by the then Chairman of

the People’s Republic of China Jiang Zemin. They include mutual trust, mutual benefits,

equality, respect for different civilizational backgrounds and mutual prosperity. The other two

pillars of Chinese leadership include supporting the continued institutionalization of the SCO and

multilateral projects within the SCO. The discourse is such that most of the SCO members echo

Chinese terminology and speak of a battle against the “three evils” i.e. extremism, terrorism, and

separatism. It has been noted that over the past fifteen years a balance emerged in approaches

within the SCO, concerning the organization’s further development. China promoted closer

economic cooperation with SCO members, while Russia stressed the political and security

aspects of multilateral cooperation. The other SCO member states like Kazakhstan, Uzbekistan,

Kyrgyzstan and Tajikistan supported both approaches, while expressing cautious concern12

.

SCO in the Alignment of SREB and EAEU

According to the Russia’s Valdai Discussion Club experts that SCO is the most important

institute being a platform for international cooperation in Eurasia. It has also huge potential to

become the main platform for the interaction between China and EAEU and it could play a

sufficient role in the planned Greater Eurasian Community project with its active role. Chinese

Premier Li Keqiang and Russian Prime Minister Dmitry Medvedev had signed a Joint

Communiqué on December, 2015 in Beijing that clearly reveals that SCO is the most effective

platform for aligning the construction of Silk Road with the construction of Eurasian Economic

Union. In this context there are various reasons as it provides a facility in strengthening

connectivity in the areas of logistics, transport, infrastructure, intermodal transport, expanding

trade and investment cooperation, optimizing trade structures, rationalization of mutual

investment, development industrial cooperation, ways to simplify trade, improving the ways for

direct investment and lending, easing currency swaps/exchanges, strengthening cooperation

between different financial institutions and cooperation on bilateral plus multilateral forums. It is

important to discuss here that the landmass of the SCO includes all of the area of EAEU member

countries.13

As SCO member states are China, Russia, Kazakhstan, Uzbekistan, Tajikistan,

Kyrgyzstan and newly member states India and Pakistan. It also have observer states (Mongolia,

Belarus, Iran, Afghanistan), six dialogue partner states Turkey, Sri Lanka, Nepal, Cambodia,

Azerbaijan, and Armenia). Thus, these are all important along the path of the Silk Road

Economic belt and 21st

Century Maritime Silk Road. All along these are located in six economic

12

“Fifteen Years of Shanghai Cooperation Organization: Initiating New Regionalism”, available at http://greater-europe.org/archives/2971/ 13 Li Xin, “Chinese Perspective on the Creation of a Eurasian Economic Space” , Center for Russian and Central Asian Studies, Moscow November, 2016, available at file:///C:/Users/Asia/Downloads/importnt.pdf/

http://greater-europe.org/archives/2971/




corridors which have been outlined in “Vision and Actions on Jointly Building the Silk

Economic Belt and 21st-Century Maritime Silk Road.14

With reference to the previous SCO meetings in November 2013 and September 2014, China’s

Premier Li Keqiang and China’s President Xi Jinping have been stated clearly that all the SCO

member states should take part in the SREB to promote the regional integration and

industrialization process. Moreover, the Ufa Declaration which was issued at the SCO Summit in

Ufa in July, 2015 clearly stated that the member states support the China’s Belt and Road

initiative.15

In December, the Prime Ministers of the SCO stated that the reaffirm their support to

this initiative which is also in line with the goals of the SCO and persuaded that the mutual work

of all the member states with the observer states plus dialogue member states, could facilitate

gradual and stable economic growth to contribute in the regional peace and stability. Belt and

Road’s significant objective is coinciding with the regional economic cooperation that

demonstrates the SCO. The document namely “Vision and Actions on Jointly Building the Silk

Road Economic Belt and 21st

Century Maritime Silk Road” affirms that the construction of

SREB accords with the SCO’s Charter (adopted in 2002) to enhance regional cooperation in

spheres of trade, politics, transport, credit finances, social and cultural development in the region.

This document also cites that the connectivity projects under this initiative would coordinate in

the development strategies of the countries along the Belt and Road, tap market potential in this

region, promote consumption, generation of job opportunities, enhance people to people contact

through cultural exchanges, to develop mutual trust cum respect, and live in a harmonious,

peaceful and prosperous way. Secondly, the SREB is also coinciding with those fields in which

SCO member countries are cooperating aiming at promoting free flow of economic factors with

the efficient allocation of resources, integrated markets which would encourage the countries

coming under this belt to achieve inclusive and balanced regional economic cooperation

architecture which ultimately benefits all. Thirdly, both SCO and the SREB share a sufficient

and identical focus on the integrated infrastructure. The “Declaration of the Heads of State of the

Member States of the Shanghai Cooperation Organization on Building a Region of Lasting Peace

and Common Prosperity,” the SCO member states adhere to the importance of infrastructure

which connects Asia and Europe. Concurrently, the Belt and Road Initiative aims at promoting

the connectivity among three contents; Asia, Europe, Africa.

Fourthly, SCO Charter states that member states adhere to the eminent “Shanghai Spirit” which

is the mutual trust, mutual advantage, equality, respect for cultural diversity and aspiration for

14 Visions and Actions on Jointly Building Silk Road Economic Belt and 21st-Century Maritime Silk Road (Beijing: National Development and Reform Commission, Ministry of Foreign Affairs, and Ministry of Commerce of the

People’s Republic of China, March 28, 2015).

15 Anil Sasi, “Ufa declaration pledges cooperation in counter terrorism, core industries” Indian Express, available at http://indianexpress.com/article/business/business-others/ufa-declaration-pledges-cooperation-in-counter-terrorism-core-industries/

7

http://indianexpress.com/article/business/business-others/ufa-declaration-pledges-cooperation-in-counter-terrorism-core-industries/




joint ventures and development. To certain extent, both the SCO and Belt and Road Initiative

focus on economic cooperation in identical areas.

The B&R initiative have concentrated on five aspects which are interconnected namely political

coordination, the interconnection of infrastructure, uninterrupted trade, free movement of

capitals and strong people to people contact. SCO has identified some certain areas of

cooperation in 2001 namely the expansion of the scale of trade and investment, improvement of

trade and investment environment and in trade in investment which eventually would attain

smooth trade flow.

Cooperation in the Security within the SCO

Security has always been an important part of coordination within the SCO. Its member states

had signed the Charter of Shanghai Cooperation Organization along the Shanghai Convention to

combat terrorism, separatism and extremism in June 2001. The member state of this organization

had been signed more than 300 significant security related documents on ten different times

since last 15 years. Along the above mentioned three factors, SCO have been developing

mechanisms for multilateral cooperation and keep benefitting in fighting drug trafficking, border

security issues, cyber security and finance of the terrorism. These efforts showing that the SCO

is contributing significantly as a stabilizing force for the regional peace and security. This is well

known reality that the member states of both SCO and EAEU have been facing the vicious

effects of terrorism, religious extremism, and the rise of ISIS. To eradicate all of these threats, all

the member states are working in their capacity and also in the rehabilitation process in

Afghanistan. It is pertinent to discuss her that mere joint efforts are the prerequisite within the

framework of SCO can ensure the successful implementation of the Belt and Road initiative and

ultimately this can help out in the attainment of the SCO’s objectives of strengthened regional

stability. There are two alignments under the alignment of EAEU and SREB. First is the through

soft infrastructure and second is hard infrastructure. In first category in aligning soft

infrastructures, negotiations between China and EAEU states to align the two developments in

Aug 2016. Even that negotiation became to the point when economic partnership within the

framework of SCO. As Putin suggested that in initial stages such a partnership could focus on

the protection of capital investment, optimized flow of good across the borders, joint ventures in

technological development, equal/mutual access to service and capital markets. At this initial

stage, it was focused on the development of the regulatory environment based on the monitoring

rules. China and Russia are the leading member countries in SCO. The primary objective of this

alignment is to achieve the free movement of commodities, capital, services and technologies

gradually which was targeted till 2020 by SCO in 2001. Through consist efforts and expansion of

SCO, free trade zone could operate by 2025 and in second phase till 2030. This free trade zone

would ultimately transform immensely into a comprehensive economic partnership emanating

from the integration of three platforms which includes SCO, EAEU, BRICS. Russian First

Deputy Economic Development Minister said at the St. Petersburg International Economic


Forums in June 2015 that within the SCO, EAEU and BRICS we are seeking for those economic

factors which could merge or combine all these three major alliance on global scale, uniting them

into one powerful economic engine as one organization having shared economic zone without

peer in the world. This thing prerequisite requires the elimination of the internal barriers to trade

and unrestricted environment to invest and enhanced trade in services, goods, technology,

intellectual property, and resolution of the state-to state conflicts within these organizations.

Following these steps, Economic partnership with ASEAN or as a result of the creation of

Comprehensive Regional Economic Partnership, a greater Eurasian Economic Union can be

achieved by 2040.It is pertinent to discuss here that there are 8 trillion dollars are needed to

bridge the ASEAN countries’ infrastructural gap. 16

Ultimately this proposal of great economic cooperation would create a space to develop a system

of free trade, free movement of capital, common financial markets along with common energy

markets, universal trade rules and integrated transport system. This cooperation will enhance the

standard of living of the masses of the whole region.

Role of Economic Corridors in the Alignment of Silk Road Economic Belt and European

Economic Union

As far as the hard infrastructure is concerned, this refers to the strengthening the physical

connectivity, integrated transport system, energy cooperation and information networks

infrastructures amongst the participating countries in aligning the SREB and EAEU and the

development of the Asia-Europe transport and logistics system for the free flow of commodities,

services, information etc. In this context the Vision and Action document on jointly building the

Silk Road Economic Belt and 21st

Century Maritime Silk Road issued in March 2015, have been

called for the development of six economic corridors which would ultimately open up the

Eurasian Economic Space.17

One of them is the Sino-Mongolian-Russian economic corridor which dovetails with the

development strategies of these three countries and would facilitate the renewal of the Chinese

Northeast route and simultaneously would provide a range of infrastructures in Mongolia which

includes roads, railways, oil and gas pipelines, power lines, the mining of mineral resources and

all along the development of the processing industry. All along it would provide suitable

environment to develop a historic first which is the Trans-Siberian Asia-Europe land bridge that,

together with the Vostok oil pipeline and the Power of Siberia gas pipeline make up the TEPR –

16 ‘‘US $8 Trillion Needed to Bridge ASEAN’s Infrastructure Gap,’’ press release, World Economic Forum http://www.weforum.org/news/us-8-trillion-needed-bridge-aseans-infrastructure-gap/

17 Visions and Actions on Jointly Building Silk Road Economic Belt and 21st-Century Maritime Silk Road (Beijing: National Development and Reform Commission, Ministry of Foreign Affairs, and Ministry of Commerce of the

People’s Republic of China, March 28, 2015).

9


which would contribute greatly to the development of Eastern Siberia and the Russian Far East,

and help connect them to the rest of the world.

Furthermore, the construction of Sino-Russian of Northern Sea Route shows an alternative route

to the existing Asian-European maritime transport logistics with the opportunity to exploit the

natural resources of Russia. It is interesting to mention here that with the inclusion or the

participation of the Japan and Korea, this economic corridor would contribute in the regional

economic cooperation in North East Asia.

Another route starting from Xinjiang (China) passing through Kazakhstan, Russia, Belarus and

Poland would extend to the Baltic Sea and Europe would form a new Asian-European

Continental Bridge.( if it passes through or Kyrgyzstan, Uzbekistan, and Turkmenistan), the

Caspian Sea, the Caucasus, the Black Sea, Ukraine and Romania before continuing into Europe).

That corridor would center on Central Asia being a hub for the flow of goods, people,

information, capital and technology. All along it passes through all EAEU member countries

linking the Asia-Pacific economic ring – a modern engine of the world economy with the

European Union – world’s largest developed economy.

The Silk Road Economic Belt starting from the Xinjiang, passing through Kazakhstan (or

Kyrgyzstan, Uzbekistan, Iran, and Turkey and across the Mediterranean Sea to Europe, or else

passing through Iran to the Persian Gulf) would form another economic corridor amongst and

connecting China, Central Asia and Western Asia.

The Silk Road Economic Belt starting from Xinjiang, passing through Pakistan, China Pakistan

Economic Corridor (CPEC) a flagship project under China’s Belt and Road Initiative could turn

toward Iran, creating an important addition to the economic corridor amongst China, Central

Asia, and Western Asia. It also opens the door to the Indian Ocean – not only for Northwest

China, but also provides an access for the EAEU member states.

Through these developments this region ultimately would see the formation of a zone for

economic cooperation and strategic security that starts from Kashgar (Xinjiang) and stretches

3,000 km to Gwadar Port in Pakistan which aims to connect three main economic regions

namely Eastern, Central and South Asia with West Asia through the port of Gwadar.

Another economic corridor under Silk Road Economic Belt starts from southwestern China

passes through Myanmar, Bangladesh and India which boost economic cooperation linking not

only Southern Asia with Central Asia but have strong potential to integrate with Southeast Asia

heading by India. Consequently, an international division for labor which is based on shared

benefits.18

18 K. M. Seethi, ‘‘India’s ‘Connect Central Asia Policy,’’’ The Diplomat, December 13, 2013, thediplomat.com=2013= 12=indias-connect-central-asia-policy/


Another silk road, originating from Southwestern China, passes through Vietnam, Laos,

Cambodia, Thailand and Malaysia through Indochinese peninsula is extended all along to

Singapore. Ultimately, a transnational economic corridor amongst China and member countries

of ASEAN, emphasizing on key or central cities will be formed which would facilitate the flow

of commodities, services and information with the construction of roads, railways and other

forms of transport eventually would pave the way for regional mutual development.

11


Silking the China Pakistan Economic Corridor (CPEC)

Gohar Ali Iftikhar1

Shakeel Ahmad2

Abstract

Originated from Chinese Han Dynasty and expanded by Tang Dynasty, Byzantine and Roman

Empires, Old Silk Road connected South and Central Asia with Europe and Middle East for

trade and cultural exchange. After an extensive retro gradation, being integral part of Xi

Jinping’s “China Dream” the road received an international heed. Having an estimated cost of

around 4 Trillion Dollars, One Belt One Road (OBOR) will connect 50 landlocked countries to

enhance economic integration. Optical Fiber Cable Project has been declared to be a “digital

corridor”. While OBOR’s central enterprise, CPEC will be strengthening bilateral connectivity

between China and Pakistan by linking Gwadar port to Xinjiang, resultantly, energy sector, road

and railway infrastructure development is ought to explicate the progress of Pakistan, yet, the

fruits wouldn’t ripen overnight. Counting on the challenges at Pakistan’s end, the fiscal

ambiguities, undue-anticipations, provincial competition and confrontation on Special Economic

Zones, Internal security, Cultural concerns, burden of unserviceable debt, prioritization of

development, import of raw material and labor despite excessive domestic availability and

absence of revenue generation plan are serious questions and concerns regarding this “Game

Changer” project. Pakistan can only yield the benefits of CPEC if the government recognize and

vigilantly fulfill the responsibilities, letting the provinces, small and medium enterprises seize the

opportunities through CPEC. Keywords: CPEC, OBOR, Silking, Retrogradation, Regional Connectivity and Integration

Old Silk Route and “One Belt One Road” OBOR

The origin of the Old Silk Road can be traced back from the reign of the Han Dynasty (206 BC –

1 Gohar Iftikhar is Freelance Researcher.

2 Shakeel Ahmad is Visiting Lecturer - Anthropology, Department of Humanities COMSATS Institute of Information Technology, Lahore.

12

Journal of Peace and Diplomacy Vol.1 No.1 July 2018

220 BC) in China.3The Old Silk Route starts from the coast of East China, crossing Central Asia

and reaches Europe. It was a trade and commerce road that connected South and Central Asia

with Europe and Middle East. Modern day India and Pakistan were also the part of this Silk

Road.4 Resultantly, during that time, Central Asia had become the center that had connected East

and West through trade, commerce and culture. The road was further extended and expanded by

the Tang Dynasty (618- 907), Byzantine and Roman Empires.5 The Old Silk Road began to

abrogate due to new historical development. Firstly, the Mongol invasions and the Crusades

immensely affected trade and commerce. Secondly, in 16th

century, the emergence of maritime

routes and the dependence of Asian and European countries on trade through sea.6 Considering

the ancient routes and trade possibilities, Central Asian countries are economically weak and

dependent.

3 Muhammad Chawla, “Pakistan-China Relations from Distant Past to the Present: A History of the Silk Route,”

Journal of Political Studies 23, no. 2 (2016): 233. 4 Ibid., 233-234.

5 James Mcbride, “Building the New Silk Road,” Council on Foreign Relations, May 22, 2015, https://www.cfr.org/backgrounder/building-new-silk-road (accessed April, 25, 2017).

6Ibid.

13


Figure 1: Old Silk Road 7

One Belt One Road (OBOR)

In 2012, Xi Jinping gave the idea “China Dream”.8Its core idea was to promote “the economic

prosperity, nation revival, people’s happiness and social harmony”.9For the manifestation of

“China Dream” One Belt One Road, Silk Road Economic Belt and Maritime Silk Roads are the

main components in fact the integral part for of the dream. The brainchild of Xi Jinping, OBOR,

is called the part of China’s global economic strategy.10

There are two main components of

OBOR. First, the revival of China and the development of the Old Silk Route which is known as

the Silk Road Economic Belt. Second, is sea route starting from east coast of China to India,

from there via Mediterranean Sea to Europe. The China is seeking to establish free trade area in

Central and South Asia like ASEAN. In OBOR, there are total six corridors connecting different

7 Talmiz Ahmad, “Silk Road to (economic) Heaven,” Hearld, June 18, 2016, http://herald.dawn.com/news/1153432 (accessed March 15, 2017).

8 Xing Li and Wan Wang, “The “Silk Road Economic Belt” and “China Dream” Relationship: A Strategy or Tactic,” Sociology Study 5 (March 2015): 169-170.

9 Ibid., 169.

10 A Khattak,"OBOR and CPEC." Dawn, August 24, 2016.

14


countries and CPEC is one of them. China has planned to invest initial capital of 100 billion

through Asian Infrastructure Investment Bank (AIIB).11

The cost of OBOR is estimated to be

around 4 trillion dollars.12

It is projected that it will become fully functional after at least a

decade and China will be able to generate approximately a trade of 2.5 trillion dollars.

Silk Road Economic Belt

Silk Road Economic Belt is all about the infrastructure development in Central Asia to create

feasible atmosphere and capacity building for economic integration and connectivity.

Infrastructure development includes construction of roads, energy plants and railways. It will

boost up the Chinese economy and it will provide excess to the bigger trade hubs of Europe.13

President Xi announced to invest 30 billion in Kazakhstan, 3 billion in Kyrgyzstan and 15 billion

in Uzbekistan.14

Maritime Silk Road

Maritime Silk Road is the expansion and alternate sea routes passing through the sphere of

Indian Ocean and Persian Gulf. President Xi announced the plans for Maritime Silk Road in

2013 on the forum of Association of Southeast Asian Nations (ASEAN).15

In the 21st

century,

maritime trade is increasing day by day and it is the need of an hour to develop new ports in

different countries. For that purpose, China decided to invest in the development of ports through

Indian Ocean, Pakistan, Sri Lanka, Bangladesh and Maldives. To meet the development, the cost

11 “Our Bulldozers, Our Rules,” The Economist, July 2

nd, 2016, http://www.economist.com/news/china/21701505-

chinas-foreign-policy-could-reshape-good-part-world-economy-our-bulldozers-our-rules (accessed April 16, 2017).

12 Ibid.

13 Xing Li and Wan Wang, “The “Silk Road Economic Belt” and “China Dream” Relationship: A Strategy or Tactic,” Sociology Study 5 (March 2015): 170-171.


15 Ibid.

15


of 40 billion dollars Silk Road Fund has been announced.16

Figure 2: Proposed Map of One Belt One Road

17

16 “Our Bulldozers, Our Rules,” The Economist, July 2

nd, 2016, http://www.economist.com/news/china/21701505-

chinas-foreign-policy-could-reshape-good-part-world-economy-our-bulldozers-our-rules (accessed April 16, 2017).

17 Ibid.

16


Figure: 3

18

China Pakistan Economic Corridor (CPEC)

The China Pakistan Economic Corridor (CPEC) is Chinese investment of 62 Billion Dollars.

Connecting the Chinese markets with Europe, Asia, Africa and CPEC is an essential part of

China’s OBOR vision. The core idea of CPEC is to strengthen bilateral connectivity between

China and Pakistan by connecting Gwadar port to Xinjiang. The distance from Xinjiang to


17


Gwadar is almost 3000 km and if China opt the route of East Coast it is even longer. That is why

Gwadar and CPEC are most important part of OBOR due to geo-strategic importance.19

The major projects of CPEC are related to energy sector, roads and railways infrastructure

development. For Pakistan, it is an opportunity to minimize the concentration of electricity crisis.

CPEC is multi-dimensional project and its three main dimensions are transit trade, China

Pakistan Bilateral trade, investment and as a flagship for OBOR.20

In monetary terms, total investment on CPEC is distributed like 25% is equity and 75% is debt

but there are other figures floating and creating confusion.21

There are contradictory figures on

Return on Investment (ROI) and Return on Equity (ROE) from Government side, NEPRA and

newspapers.22

19 Ghulam Ali, China- Pakistan Relations A Historical Analysis (Karachi: Oxford University Press, 2017), 205-206.

20 Ibid., 205-206.

21 Khurram Husain, “CPEC Cost Build-up,” Dawn, December 15, 2016.

22 Ibid.

18


Table 1: Major Projects of CPEC

No CPEC Chinese Finance Number of Projects

Projects in Different Sectors

1 Energy Sector 17

2 Infrastructure 8

3 Gwadar 12

4 Cross Border Optical Fiber Cable 1

5 Pilot Project of Digital 1

Terrestrial Multimedia Broadcast

6 Rail Based Mass Transit 4

7 Provincial Projects 6

8 Special Economic Zones 9

(Proposed)

Total 60

23

CPEC and Development

There are four main components of CPEC.

Gwadar Port

Gwadar Port can be considered as the backbone of CPEC because of its geostrategic location in

23 China Pakistan Economic Corridor, “CPEC Projects,” http://cpec.gov.pk (accessed October 10, 2016).

19


Persian Gulf. Other near seaports are of Dubai and Iran. On East there is a seaport of Oman and

in South Saudi Arabia’s seaports.24

Geographically, all these countries are self-sufficient and no

other country is utilizing their ports. Whereas, Pakistan assists Western China and it has been

assisting landlocked countries of Central Asia for trade. Gwadar port is serving as a transit hub

for Middle East oil supply and is also the part of traditional sea route for trade in Europe.25

Pakistan had joined CPEC considering foreign heavy investment with bonus of development of

infrastructure in the region and admitting the fact that foreign investment leads to higher

economic stability while CPEC brought all those possibilities of bright and stable future of its

economy.

US remained consistent in containing China and her sphere of influence in South Asia by

supporting India. China had to find another way out for her secure survival and greater stability

in all parts of the country.26

Where many of the analytics rejected the move there many of the scholars compared the

development of Gwadar port with that of Hambantota of Sri Lanka.27

It is perhaps the lack of

insight to both the projects as development of Hambantota was a political move and Pakistan

entered to CPEC completely considering the economic motives. And in case of Sri Lanka,

developments were not that magnificent spreading across the country which would help the state

generate resources for payment of loans.28

Gwadar airport similar to Gwadar port holds a great potential of handling mass transit and it will

develop into one of the major commercial-cum-industrial cities of the world. Pakistan would be

24 Ghulam Ali, China- Pakistan Relations A Historical Analysis (Karachi: Oxford University Press, 2017), 206.

25 Ibid., 206-207.

26 MK Bhadrakumar, “Chinese naval ships at Gwadar port call for a rethink of India’s regional policy,” Dawn, November 28, 2016.

27 Irfan Husain, “View from Abroad: White Elephants in Srilanka,” Dawn, March 31, 2017.

28 Ibid.

20


able to gain much from all the projects once they all are fully operational. Furthermore, projects

in Gwadar also address long held grievances of the local population of Baluchistan as it will

increase employment and business opportunities.

Figure: 4 Details of Gwadar Port

29

Figure: 6 Importance of Gwadar Port in CPEC 29 “CPEC”,

https://www.facebook.com/CPEC.gov.pk/photos/a.1691060507781743.1073741828.1685144305040030/18750337

29384419/?type=3&theater (accessed March 25, 2017).

21

Institute of Peace and Diplomatic Studies 30

Energy Sector

Energy is a vital factor for the implementation of projects, there is a power supply shortage due

to high demand and less supply and it is a big hurdle for better economic growth in Pakistan. The

growth rate of Pakistan’s economy can be increased up-to 6 to 8 percent and energy sector has a

decisive role in it. Consequently, more than 30 billions of dollars has been allocated for the

30

Zofeen Ebrahim, “China’s silk road: What’s in it for Pakistan,” Dawn, April 20, 2015.

22


All the projects in energy sector are in IPP (Independent Power Production)

mode.32

Most of the electricity generation projects are early harvest projects which are to be

completed less than two years, and it is estimated that by the end of 2018 there would be

sufficient addition of electricity in the national grid to meet the requirement of the country.

Pakistan has a significant potential to produce electricity through Hydroelectricity projects.

Electricity produced by such source is of more significant owing to number of reasons. The

government and policy makers need to undertake such environment friendly pursuits.

Infrastructure Development

It aims to improve the connectivity of Pakistan with China. In the venture, China and Pakistan

won’t be building new infrastructure rather it will be done through improving existing roads,

constructing missing links and refining railways infrastructure of Pakistan.33

Different Routes

From Khunjrab, Karakorum highway is starting and it is connecting to Dera Ismail Khan, Zhob,

Qilla Saifullah, Quetta and Sohrab. From Sohrab to Gwadar, there was a missing link of about

650 km and it was the main hurdle in the functioning of Western route, Frontier Works

Organization (FWO) is completing the missing link. In All Parties Conference (APC), another

decision was taken to connect Dera Ismail Khan to Burhan to Karakorum Highway (KKH).34

Other route is from Basima to Khuzdar and Sukkar which aims to connect the deprived Baloch

areas to the Eastern route. Eastern Route is starting from Khunjerab to Peshawar, Islamabad,

Lahore, Multan and Sukkur. From this onwards, there are two major roads. First starts from

Sukkar and stretches to Khuzar, Basima, Panjgur, Hoshab to Gwadar. Second begins from

31 Ahsan Iqbal, “Debunking myths on CPEC,” The Express Tribune, May 25, 2017.

32 Ibid.

33 Ibid

34 Ashan Iqbal, “CPEC a Positive Outlook,” The Express Tribune, August 28, 2016.

23

energy sector.31


Sukkur and links Hyderabad, Karachi, Makran Coastal to Gwadar Port.35

Figure: 7 Road Infrastructure and Developmental Projects

36

Railways

Three major railway routes are planned in which Chinese government would be investing.

35 Ibid.

36 China Pakistan Economic Corridor, “CPEC Maps,” http://cpec.gov.pk/map-single/1 (accessed October 12, 2016).

24


ML 1: Karachi to Peshawar via Lahore (More than 70 of cargo and passenger and revenues).37

ML 2: is along the Indus River to Peshawar. (Mostly cargo and frats goes through this route).

3rd

route: from Jacobabad to Quetta which is not that functional.

Figure: 8 38

Controversy and Confusion about routes

Mostly, Eastern route covers Punjab and Sindh and these are the population dense cities of the

country. It was totally a misconception that the ongoing motorway project from Lahore to

37 Ibid.


25


Karachi is financed under CPEC. It is the mega project of developmental strategy of planning

commission39

while China has invested in three projects:

1. The missing link of Karakorum Highway (KKH) from Thakot to Burhan.

2. Starts from Multan and stretches to Sukkar.

3. Upgradation of the already existing road from Dera Ismail Khan to Sohrab.

These projects were selected on the principle step by step approach. All other road

developmental projects are payed through Public Sector Developmental Project (PSDP). On

Lahore – Karachi Motorway, the government is spending funds collected on account of toll tax.

Karachi - Hyderabad Motorway construction is on Build Operate Transfer (BOT) basis.

Optical Fiber Cable

The Pakistan-China Fiber Optic Project is one of the most significant project that is likely to be

completed by June 2018 and amounts to US dollars 44 million. 840 km long optic fiber cable is

supposed to pass through Karimabad, Gilgit, Babusar, Naran, Mansehra, and Jarkyas and reach

Rawalpindi city. Territory of Gilgit, KPK and parts of Punjab province will benefit from it.

The very high expectations of Special Communication Organization (SCO) chanting this project to

turn the trade corridor into “Digital Corridor”.40

The joint venture of Huawei - China and SCO

– Pakistan aims at providing safe and secure of foreign intervention passage of voice traffic to

both the countries. Generation of employment opportunities in the areas of Gilgit Baltistan is

also tied to this project. 41

In the final phase, optic fiber line is likely to connect to Gwadar and

finally terminating at Karachi. It will provide a great link from Gwadar to other international

sites. It will also serve the purpose of an alternative to consortium built by Indian companies and


40 “Fibre Optic Cable Project to Turn CPEC into a Digital Corridor,” PAK CHINA NEWS, September 20, 2016, http://pakchinanews.pk/optic-fibre-cable-project-to-turn-cpec-into-digital-corridor/ (accessed January 7, 2017).

41 Ibid.

26


partners as it involves greater risk for Pakistan’s security.42

Figure: 9 43

Rail Based Mass Transit Project and other Provincial Projects

There are four Rail based mass transit projects in four provinces of Pakistan. The provincial

capitals Quetta, Karachi, Peshawar and Lahore are selected for the development of these

projects. Other provincial projects include development of road infrastructure in Baluchistan,

42 Jamal Shahid, “Army seeks fibre optics cables along CPEC,” Dawn, January 12, 2017.


27


Gilgit and Kashmir. Furthermore, there is project design for the development of Keti Bunder Sea

Port, Water supply project in Quetta and lastly Iron Mining and Processing project at Chiniot.44

Special Economic Zones and Industrial Cooperation

Nine economic zones have been planned, one in each of KPK, Baluchistan, Punjab, FATA,

Gilgit Baltistan, Kashmir, Islamabad and two in Sindh.45

There is a controversy regarding

Special economic zones46

as the history of Economic Zones and Industrial Estates in Pakistan

has not been good. Starting from 1950s many economic zones and Industrial Zones were

established. 1952 in Tando Adam Khan, 1954 in Layyah, 1964 Larkana, 1963 Sukkar, 1960

Quetta, 1974 Mardan and since then almost 70 economic zones and Industrial Zones were

established across Pakistan.

Considering the history and the already carried out experiments, few questions are borne in

mind. Is dividing areas under “economic zones” has proved to be fruitful? What difference does

it make? Are they successful and why? What is their contribution in national economic trends?

Above all, how economic zones under CPEC are different than those which already existed?

Would they be successful? Perhaps, it’s a long way before we can get to know the answers of

these questions as the industrial cooperation between both the Pakistan and China is the soul of

CPEC.47

44 China Pakistan Economic Corridor, http://cpec.gov.pk/new-provincial-projects (accessed March 12, 2017).


46 Khurram Husain, “CPEC enclaves,” Dawn, January 12, 2017.

47 Ibid.

28


Table 2: Province Wise Distribution of all Projects of CPEC

No CPEC Balochistan Punjab Sindh KPK Kashmir Gilgit& Common

Chinese Baltistan Projects

Finance (Between

Projects in two

Different Provinces)

Sectors

1 Energy 2 3 7 1 1 3

Sector

2 Infrastructure 1 1 6

3 Gwadar 11

4 Cross Border 1

Optical Fiber

Cable

5 Rail Based 1 1 1 1

Mass Transit

6 Provincial 2 1 1 1 1

Projects

7 Special 1 2 1 1 1 1 (FATA)

Economic 1

Zones (Islamabad)

9 Social Sector 2

Total 17 7 10 2 1 2 13 + 2

29


Figure 10: Location and Brief information of all Project 48

48 https://tribune.com.pk/story/887949/china-pakistan-economic-/

30


Framework of Working

There is a joint working group on projects of CPEC. It explores and investigates different options

of the projects and possibilities relating to their execution. For the approval of any projects it is

necessary to create consensus between Chinese and Pakistani technical officials. It was decided

in Memorandum of Understanding (MOU) that CPEC will be based on the principle of scientific

planning and step by step approach, taking the easiest path first.49

It will include technical

studies and feasibility reports of all the projects. Hence, the core principle was to be maintained

which both the countries agreed upon. Consequently, in August 2013 first Chinese high profile

delegation came to Pakistan and first session of Joint Cooperation Committee (JCC) was held.

After a year and half blueprints of the projects were approved.

Figure 11: Working of Joint Cooperation Committee

50


50 China Pakistan Economic Corridor, “Institutional Framework of CPEC,” accessed October 15, 2016

31


Regional Connectivity and Integration

Basically, CPEC is a forward integration to boost up the Chinese economy. From the Chinese

perspective, it is a project of integration and connectivity and it is more like a geo economic

decision. Second, the regional integration of China is a policy choice and regional integration can

be seen as phase of globalizing. Like ASEAN was integrated and its positive impacts are visible

for China and as well as for other members. Third, it is a trans-border cooperation between

Xinjiang to Pakistan’s counterpart region.

From Pakistani Viewpoint, CPEC is opportunity to fulfill 7th

Pillar “Modernization

Transportation Infrastructure and Greater Regional Connectivity” Vision 2025.51

Located in the

center of South Asia, China and Central Asia, Pakistan can perform the role of bridge and to

carve out a regional block by developing infrastructure to connect north and south, east and

west.52

Pakistan is working in the framework of regional connectivity and CPEC is one part of it.

The other part is Central Asia Regional Economic Cooperation (CAREC). There are two

corridors in CAREC. First is from Quetta towards West. Peshawar towards West, which will

connect Afghanistan to Central Asia. The basic aim to create an Economic Block in West Asia is

to promote economic cooperation between China, Central Asian Countries, Afghanistan,

Pakistan and ultimately connection with South Asia.53


52 Nazir Hussain, “China Pakistan Economic Corridor and Regional Economic Development Challenges and

Opportunities,” China and Pakistan: Friends in Deed Islamabad: NUST Publication, (2016): 130-131.

53 Ibid,. 131.

32

Journal of Peace and Diplomacy Vol.1 No.1 July 2018 54

Geopolitical and Regional Connectivity and Integration

CPEC is of great importance to China for two major reasons. First it can boost economic growth

and expansion of China. Second, the most important, China will get an access through corridor to

West Asia through Gwadar, Central Asia through West Route via Afghanistan and through

Eastern Route to India. All these regions are the potential market for Chinese products. All these

route are to be linked with Xinjiang which is the part of Western China. Furthermore, China is

making road and Railway links in Central Asian (Kyrgyzstan, Tajikistan and Kazakhstan) oil

rich countries. Basically, it is an excess to oil rich markets. Before this initiative, China was

54

CPEC,

https://www.facebook.com/CPEC.gov.pk/photos/a.1691060507781743.1073741828.1685144305040030/17507956 45141562/?type=3&theater (accessed October January 16, 2017).

33


totally depending on long Maritime sea route of 10000 km only connected to Eastern China. One

of the major setback was to bring consumer goods in and out of Western China considering the

distance which was not that economically feasible. With the CPEC, China will be able to

transport its products from Xinjiang and Kashgar to Central Asian countries and with lower risk

and highly cost effectiveness. Earlier, Chinese trade with the world was dependent on the State

of Malacca and it has small part of sea which is between Indonesia and Malaysia, all the

shipments were carried out through them. It involved great risk to proper functioning of trade

mechanism considering fragility of the ports, little disturbance could end in sabotaging whole

trade flow and plan.

CPEC is likely to counter China’s dependency on Malacca and an availability of alternative to

it.55

US and India has a common interest in politics of South Asia that is to contain China. In

reaction to containment, China is making alternative routes for the survival and growth of

economy to expand her sphere of influence in the region and establish her significance.56

It is a golden opportunity to develop West China. Currently there are long held issues of

economic deprivation and Islamic radicalism in this particular region.57

Through the

development of this corridor, there are bright chances of development of these areas but they will

become a hub between Eastern China, Pakistan and three countries of Central Asia.58

Stability of Afghanistan is a great challenge and there is almost no possibility of transit rights

from Delhi to Kabul. India decided to collaborate with Iran for the development of Chabahar port

but on the same time,59

Iran wants to complete Iran-Pakistan gas pipeline projects. It clearly

55 “Special Report: Can China overcome the Malacca Dilemma through OBOR and CPEC? ,” Global Risk Insights, March 8, 2017 (accessed April 20, 2017).

56 Andrew Small, The China Pakistan Axis Asia’s New Geopolitics (Haryana: Random House India, 2015), 178.

57 Ibid.,168.

58 Ibid., 179.

59 Nazir Hussain, “China Pakistan Economic Corridor and Regional Economic Development Challenges and

Opportunities,” China and Pakistan: Friends in Deed Islamabad: NUST Publication, (2016): 134.

34


reflects that Iran doesn’t want total dependency on India.60

In Geostrategic context, for Pakistan, CPEC is an opportunity to minimize the dependence on the

US because if this CPEC becomes operational then it would help out to boost the economy of

Pakistan. Second, the issue of energy is going to be addressed. There is a positive sign that Iran

wants to be part of CPEC. Another main stakeholder is domestic private sector and they have

some concerns over the issue of import of raw material and tax relaxation for the importer and in

that case how a domestic can’t match with them without tax relaxation. All Pakistan needs to do

is to maximize her benefits through CPEC.

CONCLUSION

China Pakistan Economic Corridor (CPEC) holds great significance, historically it was a

traditional and central trade route from China to South Asia, Central Asia, Middle East and

Europe and vice versa. Previously known as the ‘Silk Road’, it has become the center of

attention for developed and developing countries owing to its increasing significance. The mega

plan draws its roots from Xi Jinping’s idea of “China Dream” that is meant to promote “the

economic prosperity, nation revival, people’s happiness and social harmony” of the people of

Republic of China.61

‘One Belt One Road’ (OBOR) is an integral component of the initiatives

incepted in pursuit of the ‘China Dream’. As an outcome of the OBOR, China is expecting its

revival by redeveloping Old Silk Route which is known as Silk Road Economic Belt. This

Global Economic Strategy of China to expand its trade by approaching new markets and

consumer horizons is being viewed and realized differently from across the world. The optimist

ones are inclined to be part of it while the one with fear of the consequences are opposing the

60 Peer Muhammad, ‘Iran agrees to consider being part of CPEC’ Express Tribune, September 2, 2015.

61 Xing Li and Wan Wang, “The “Silk Road Economic Belt” and “China Dream” Relationship: A Strategy or Tactic,” Sociology Study 5 (March 2015): 169.

35


Chinese Dream to be realized. Whatever the global or regional response is, the inception has

yielded the greater output by earning an excessive amount of economic-discourse and investment

urge from different states.

Under the umbrella of OBOR, China Pakistan Economic Corridor (CPEC) is one of the total six

corridors connecting different countries. Besides CPEC, Silk Road Economic Belt and Maritime

Silk Road are other important wits. CPEC holds significant value and worth because of its

geostrategic location, this is why it has been declared the flagship project of the OBOR. CPEC

would cater to develop Gwadar port to ensure efficient bilateral trade while it would also

undertake the promotion and development of trade via train. Having a capacity and future of

becoming the trade transit hub, resultantly Gwadar has caused many concerns for neighboring

country India and its ally USA.

Taking into account the domestic concerns over the CPEC, it is widespread among the opponents

that CPEC is more inclined to leave Pakistan burdened with unserviceable debt while further

exposing the fissures in its internal security. Once Pakistan repay the loans it takes from China

under the CPEC, this may worsen the situation, Hambantota initiative of Sir Lanka is quoted as

example in this regards. While the argument is quite substantial as under greater tax exemption

Inability of Pakistan in developing a comprehensive revenue generation plan, demanding right to

transit fee or toll tax and import of raw material has created serious question on this “Game

Changer” project.

Although CPEC is meant to develop the infrastructure by not only upgrading and restoring the

roads, motorways and railway tracks but also by constructing the missing road and track links

between different cities of the country. Yet, there are many domestic concerns and provincial

36


reservations over CPEC. The most significant concern besides the establishment of Special

Economic Zone is the prioritizing and concentration on Eastern route of the project as being

given more importance and resources while the Western one is being ignored. There are many

controversies and confusions about the linked projects as it was perceived that Lahore-Karachi

motorway is also being built under the CPEC while it is not true. Yes, mass transit projects in

provincial capitals are the subsidiary of the project under consideration. Despite the intake of

construction of missing link of railway track between Quetta and Peshawar and Quetta and Dera

Ismail Khan, economists and planners still question the viability of economic zones as we have

many failed examples of establishing such zones across the country in past. So, they claim that

CPEC without framing proper mutual framework from planning to revenue generation would

just be a forward integration to boost China’s economy and her policy of Trans-border

cooperation.

Cutting it short and putting it simple, provincial governments need to play active role in making

CPEC’s Special Economic Zones workable. The key for success of CPEC is political stability in

Pakistan especially Baluchistan. Similarly, success of CPEC will comprehensively enhance and

strengthen national security of Pakistan for long terms. It will not be out of the place to mention

that political stability of neighboring countries will matter too. The challenge for state institution

especially the planning and development commission would be to efficiently create our space in

the game of CPEC by not only creating a functioning of interdependence but also by learning

Chinese and knowing the nitty-gritty aspects of the project and associated ventures.

Responsibility also lies upon state institutions not to let anyone influence the planned and agreed

upon spirit of the collaboration, they must be responsible to let the integration and connectivity

prevail, let the economic diplomats play their significant role, let not make the credence

37


doubtful, because we must not give up something that is inevitable. We must be undoubtedly

agreeing that CPEC will only become game changer if Pakistani government acknowledge and

vigilantly fulfil the responsibilities arising from it. So, let the small and medium enterprises seize

the opportunities through CPEC.

CPEC is not the only available solution for problems haunting Pakistan although it will play a

significant and vital role toward regional connectivity, expansion of trade and increased

prosperity. Pakistan is not smitten by economic problems rather is preoccupied with problems of

diverse complicated and complex nature. Thus, seeking all solutions in premise of economic

development is a great folly. Economic stability does provide solution to problems but few issues

need other set of workable plan too. Issues having great link to socio-cultural dynamics cannot

find their solution in disguise of prosperity. Immediately, CPEC will not bring an overnight

change but over a period of time its fruits will be ripped.

One of the important thing that requires due attention is the fact that CPEC is the investment of

China in Pakistan and not an aid. Having said it is an investment, it indicates that there is a

potential economic return, geo-political and geostrategic objectives of the Chinese government in

the region. The opportunity for Pakistan to redefine her role in the region by developing trade

and economic stability cannot be ignored either. One of predicaments of the project is the

unfortunate politicization of the program. Politicians played a passive role in its initial stage and

this led to mass resentments and remained a central point of conflict in the provincial

governments. CPEC has become the agent of political gains in Pakistan and its role in upcoming

general elections of 2018 cannot be ignored.

38


The room for conspiracy is created owing to the lack in clarity of the whole project coupled with

non-transparent execution of the project. Unless these issues are addressed, it will continue to

create problems for the project and will remain a tool of political gains. Furthermore, the success

of the project is dependent upon its peaceful functioning. It can serve purpose to attract more

foreign investment by Chinese and other developed economies in the region. In the wake of the

CPEC, Pakistan should turn its foreign policy from geo-security to geo-economics.

39

Journal of Peace and Diplomacy Vol.1 No. 1 July 2018

Growing Strategic Relations between China and Pakistan: An Analysis Saiqa

Bukhari1

Abstract

China and Pakistan with different ideologies and backgrounds have remarkable

relations. Both countries developed their relations on the bases of mutual interest

rather than ideology. Bilateral cooperation between China and Pakistan is going

on Gwadar project, Free trade, Economic Corridor, Civil nuclear technology,

defence production etc. India has raised concerns over growing cooperation

between China and Pakistan in areas like Gwadar port development, Civil-

Nuclear cooperation, Sino-Pak Economic Corridor and military ties. India has

responded in many ways to the aforementioned cooperation between the two

states.

Key Words: Gwadar port, Free Trade Agreement, Defence Production,

Ideology

Introduction

China and Pakistan relations are as old as Pakistan itself. The relationship between People’s

Republic of China and Islamic Republic of Pakistan started at the beginning of Cold War

between USSR (Communism) and USA (Capitalism). At that time, China was an

underdeveloped and isolated state. Pakistan was the first Muslim country that recognized

China in 1950 and developed diplomatic relations in 1951.2

After recognition by Pakistan, both countries gave importance to developed and maintain

trustworthy bilateral relations. The first high-profile contact between China and Pakistan was

at Bandung (Indonesia) conference in 1955.3 Since then, the two Asian neighbors countries

have developed deep rooted friendship and increased their strategic cooperation in the field

of economy, defense, technology, science, education and energy. In the wake of 21st

century,

Sino-Pak strategic partnership is continuously expanding. China is the fourth largest export

market for Pakistan.

Most significant sign of long term strategic cooperation is the Gwadar Port of Pakistan which

is being built with Beijing technical and financial support. At present, Sino-Pak decided to

1 Saiqa Bukhari is Research Associate at Institute of Peace and Diplomatic Studies.

2 Sattar, A. (2007). Pakistan Foreign Policy 1947-2005 A Concise History. Karachi, Oxford University Press.

3 Hussain, A., Ahmad, I. (2013). “Pak-China Diplomatic and Military Relations: An Analysis”. Berkeley Journal of Social Sciences, 3, 1-7.

40


collaborate in the development of Economic Corridor which will connect Xinjiang to

Gwadar. Gwadar port and Economic Corridor have not only increase trade between two

states but may also economically integrate Central Asian Region and South Asian Region in

future. Pakistan was the first South Asian country who signed Free Trade Agreement with

Beijing. China is the second largest trading partner of Pakistan. China also assisted Pakistan

in Civil Nuclear sector since 1989 and both states decided to further boost their cooperation.

China and Pakistan have strong military relations from the last two decades and recent

defence agreements further strengthened this cooperation. Beijing and Islamabad has

involved in number of projects to develop strong defence system e.g. Joint venture of JF-17

aircraft, K-8 Karakorum training aircraft, AWACS system, Al-Khalid tanks. China is also the

largest arms supplier of Pakistan.

Relations between China and Pakistan are growing but have considerable implication for the

India. Sino-Pak Cooperation in the development of Gwadar port and its strategic location has

serious apprehensions for Indian security. Growing cooperation between China and Pakistan

in the establishment of Economic Corridor has also raised Indian concerns because it will

pass through disputed territory of Pakistan. Furthermore, Chinese growing maritime relations

with South Asian states have a threat for Indian hegemony in Indian Ocean Region.

India has responding in many ways as a reaction of Sino-Pak cooperation. India enhanced its

relations with USSR in Cold War. After disintegration of Soviet Union India has focusing on

strong relations with USA. Growing defence budget and modernization of its armed forces

also present India’s reaction. The most significant development in Indian Navy is nuclear

powered submarine Arihant. India support Iran financially for the development of Chabahar

port which is close to Gwadar port of Pakistan.

China-Pakistan Strategic Relations

The Sino-Pak strategic relationship has been based on mutual confidence, trust and

understanding. China and Pakistan are good friends and close neighbors. The former

President of Pakistan Pervez Musharraf in 2006 represented China-Pakistan friendship as

‘deeper than the oceans and higher than the Himalayas’.4 In the same way, the then President

of China Hu Jintao recognized that “Nothing could affect the decades old China-Pakistan

friendship despite the changes in global and regional situation”.5

Sino-Pak Economic Ties

For the last two decades trend of economic globalization have become intensified and states

are searching for economic opportunities globally. Free trade agreements are becoming a 4 Abbas, S. (2011). Regional and Global Scenario and Pak-China Relations”. Journal of political studies, 12 (1), 192-204.

5 Noor-ul-Haq. (2005). “China-Pakistan Relations a Profile of Friendship”. Islamabad Policy Research Institute.


trend in inter-state relations. Sino-Pak Political relations although get more attention, the

economic relations are also remarkable and noteworthy. Generally economic relations are

associated with two forms, one is aid and other is trade. Economic relations are playing very

vital role in determining the foreign policies of the states. Pakistan and China are trading

partner and growing economic ties between them is further strengthening their friendly

relations. In 2008, Chinese former President Hu Jintao said about Pakistan that “China is a

friend and strategic partner which is promoting economic progress and stability in Pakistan”.

In response of this statement former President of Pakistan Asif Ali Zardari in the same year

said that ‘It’s our belief that Pakistan can act as a force multiplier for China and we will

continue to work towards this end’.6

Before partition, trade existed between ancient India and Ancient China through Silk Road.

After the partition of subcontinent, Silk route between China and Pakistan was closed in

1949. After independence Pakistan was searching for a new trading partner to export their

cotton in return of oil, gas, iron and cement. In order to export their products Pakistan

established friendly relations with China and recognized it in 1950 as an independent state

and established formal diplomatic relations in 1951.7

During the Bandung Conference in April 1955, Chinese former Premier Zhou Enlai had a

meeting with Pakistani former Prime Minister Muhammad Ali Bogra and both countries

agreed to promote and enhance their bilateral relations.8 In 1963, a significant border

agreement and first formal Trade Agreement was signed between China and Pakistan.

Generally trade was conducted under 1963 agreement between two countries, according to

which both states gave Most Favored Nation (MFN) status to each other. The relations

between China and Pakistan were restricted to trade and economic till the end of 1964.9

In 1967, Silk route was re-opened for trade between China and Pakistan. In order to establish

a land connection between Beijing and Islamabad, the construction of a road link in 1969

across the Karakorum was started. China played vital role in the construction of Karakorum

Highway which further connected Gilgit Baltistan Region with Kashgar in Xinjiang province

of China. 10

In 1978, Karakoram Highway officially opened. In 1982, October Sino-Pak Joint

Committee of Economy, Trade and Technology were established. In 1996 the then Chinese

President Jiang Zemin visited Pakistan and both countries decided to establish

6 Peiris, V. (2010). “Zardari’s visit strengthens Pakistan-China relations”. World Socialist Web Site. Retrieved from https://www1.wsws.org/articles/2010/jul2010/pakij22.shtml

7 Noor, op.cit., p.

8 Sattar, op.cit., p.45

9 Akhtar, S. (2009). “Sino-Pakistani relations: an assessment”. Institute of Strategic Studies Islamabad (ISSI).

10 Sattar, op.cit., p.67

42


comprehensive partnership. In the beginning of 21st

century trade relations between China

and Pakistan entered into new phase.11

1n October 1999 General Pervez Musharraf took over the government and afterwards

cooperation in economic area become a key factor in China-Pakistan relationship. In 2000,

former President of Pakistan Pervez Musharraf visited Beijing and paid more emphasis on

economic collaboration between two countries, consequently both countries slowly and

gradually improved their cooperation in trade as well as in investment.12

China also gave

response in a positive manner through enhancing trade and economy activities. In 2001,

Chinese premier Zhu Rongji visited Pakistan and insisted to increase collaboration in

technology, infrastructure, and information via following the principle of common goal and

mutual benefits. Zhu Rongji during his visit to Pakistan signed six agreements e.g. Economic

and Technical collaboration, Lease agreement on Saindak Copper-Gold Project, Supply of

Locomotive to Pakistan railways, Tourism cooperation etc., and one Memorandum of

Understanding (MoU) between Chinese Zhong Xing Telecommunication Equipment (ZTE)

and Pakistan Telecommunication Corporation Limited.13

In 16 March 2002, Pakistani

government and Chinese government signed an agreement for the development of Gwadar

Port which was divided into two phases. It was another milestone in the collaboration of

China and Pakistan.14

China has a strategic interest in the development of Gwadar Port because it is heavily relying

on the oil which is coming from the Gulf Region. Presently, oil passes through Indian Ocean

and Malacca Strait which is a very narrow passage and also under the influence of US. In

order to safeguard their interest China supports Pakistan financially for this project. The total

cost of the Gwadar Project was estimated round about $1.16 billion and China gave $198

million to Pakistan for the construction of first phase of the Gwadar Port.15

China also gave

financial support to Pakistan for the development of Makran Coastal Highway which

connects Gwadar with Karachi. Chinese support for Gwadar Port and Makran Coastal

Highway projects has further enhanced economic ties between them. Makran coastal

Highway project will help Pakistan for the promotion of trade and commercial interest.16

General Pervez Musharraf signed “Joint Declaration on Direction of Bilateral Relations”

during his visit to China in November 2003. This declaration was a road map to define the

11 Zeb, R. (2012). “Pakistan-China Relations: Where They Go From Here”( Working Paper No. 29).Retrieved from http://www.redalyc.org/comocitar.oa?id=76724487004

12 Fazal-ur-Rahman. (2011). “Pakistan-China Trade and Investment Relations”. Institute of Strategic Studies Islamabad.

13 Ibid.

14 Shabir & Kazmi. (2007). “Economic Effects of the Recently Signed Pak-China Free Trade Agreement”. The Lahore Journal of Economics.

15 Anwar, Z. (2012). “Gwadar deep sea port’s emergence as regional trade and transportation hub: prospects and problems”. Journal of Political Studies, 1 (2).

16 Noor, op.cit., p.

http://www.redalyc.org/comocitar.oa?id=76724487004


direction of Sino-Pak bilateral ties in the future years. He further emphasized on enhancing

economic ties between the two states. In the same year “Preferential Trade Agreement”

(PTA) was signed between them in which Pakistan gave concession on 200 Chinese products

and in response China also gave concession on 839 Pakistani items. This agreement would

not only enhance economic and trade relations but also gave help in forming a well balance

trade between two. The real economic engagement between China and Pakistan were started

after this agreement. China and Pakistan took initiatives in order to strengthen and boost

economic relations. Both countries established an institute of joint study group for the

discussion on Free Trade Agreement.17

The former Prime Minister of Pakistan Shaukat Aziz signed seven agreements with Chinese

government in 2004. These agreements were rotated around the bilateral trade, setting joint

agro-based industries, further increasing Chinese investment in Pakistan. Free Market

Economy Status (FME) for China was announced by Pakistan. Preferential trade agreement

became operational in 2004.18

Early Harvest Program was the first step which was taken in

April 2005 in order to enhance economic ties.19

The 21 agreements and MoU were signed between China and Pakistan in April 2005 e.g.

Collaboration in economy, Cooperation in energy sector, Defence and many other fields. The

“Treaty of Friendship, Cooperation and Good Neighbourly Relations” was signed between

them. The “Treaty of Friendship” has great significance for both countries and it also

provides solid foundation for the long term and long lasting relations. According to

Friendship Treaty both countries bound themselves that neither party will join any alliance

which will affect the sovereignty, security and territorial integrity of both countries.20

“Early Harvest Program” came into force in January 2006 in order to encourage bilateral

trade and investment. According to which zero percent tariff on 767 products was reduced by

China and in response Pakistan also reduced tariff on 464 products. It was the first step

towards creating a free trade area between China and Pakistan. In 2006, Chinese President

Hu Jintao visited to Pakistan and signed 18 agreements in which Free Trade Agreement was

included. It covered trade in both i.e. in goods as well as in investment. According to FTA

China and Pakistan cut their tariffs on all the goods in two phases. In first phase tariff was

reduced on specific things which would be completed within next five years and in Phase II

17 Noor-ul-Haq., Khan, N. (2011). “Sixty years of Pak-China diplomatic relations (1951-2011)”. Islamabad Policy Research Institute.

18 Ibid.

19 Shabir & Kazmi. (2007). “Economic Effects of the Recently Signed Pak-China Free Trade Agreement”. The Lahore Journal of Economics.

20 Aneja, U. (2006). “Pakistan-China Relations Recent Developments”. International Peace and Conflict Studies.

44


tariff would be eliminated from 90% of products. After FTA “Early Harvest Program”

merged it.21

Graph 1.1 (Pakistan Bilateral Trade with China) 3500

3000

2500

2000

1500 Exports

1000 Imports

500

0 2000 2001 2002 2003 2004 2005 2006

Year

Kayani et.al, (2013). “China-Pakistan Economic Relations: Lessons for Pakistan”. Pakistan Journal

of Commerce and Social Sciences.

It is obvious from the above graph that from 2000 to 2006 the imports of Pakistan from

China have exceeded the Pakistan’s exports to China. In 2000, the exports were $244.65

million and Imports were $550.11 million. In 2006, the exports were $506.64 million and

imports were $ 2914.93 million.22

The joint efforts by both countries for enhancing trade

relations between them, trade volume between two countries was in constant growth, in 1997

trade volume between two countries was $ 1.07 billion which was further increasing to $3

billion in 2004 and in 2005 it was $4.26 billion. Although the trading relations are further

enhancing but the trade volume is still very low. The trade balance is always in the favor of

China because Pakistan imports more commodities from China than China import from

Pakistan.23

21 Kayani et.al, (2013). “China-Pakistan Economic Relations: Lessons for Pakistan”. Pakistan Journal of Commerce and Social Sciences.

22 Ibid.

23 Jabeen, M. (2012). “Development in Pak-China Strategic Alliances”. Berkeley Journal of Social Sciences, 2 (2), 5-

9.


Graph: 1.2 (China-Pak percentage of growth in trade volume 2001-2010 in

US $100mn)

45.00%

40.00%

39.05%

35.00% 35.00%

30.00%

29.00% 27.70%

25.00% 26.00% 25.00% 23.00% 20.00% 20.00%

Increase 15.00%

10.00%

7.00%

5.00%

0.00% -3.00%

-5.00% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

-10.00%

Source: Hamid, N., Hayat, S. (2012). “The Opportunities and Pitfalls of Pakistan’s Trade with China and other Neighbors”. The Lahore Journal of Economics, 17 (1), 274-79.

In 2008, President of Pakistan Asif Ali Zardari visited China and signed 13 agreements and

one MoU, in order to enhance bilateral economic and trade relations between them. These

agreements were related to economy, trade, energy, health, transportation and agriculture

etc.24

In 2009, Pakistan and China signed a number of agreements and MoU in various fields of

economy. In December 2010 both states signed a $300 million agreement to reconstruct the

Karakoram Highway which was submerged by land sliding.25

In 2010, the China-Pakistan

bilateral trade has increased to $8.7 billion from 1.8billion in 2002, which consider a

significant improvement.26

In 2011, Chinese vice Prime Minister Meng Jian Zhou visited Pakistan and signed six

agreements in which Currency Swap Agreement to further increase their trade and economic

cooperation was included. Additional agreement on Extension of Five Years Development

24 Khan, A. (2014). “Pak-China relations: Adding substance to slogan”. Regional Studies Journal.

25 Rakisits, C. (2012). “Pakistan-China bilateral relations 2001-2011: a deepening but cautious partnership”.

Security challenges, 8 (3), 83-101.

26 Khan, A. (September 24, 2013). “Linkage of Gwadar Port with Karakoram Highway will multiply Pakistan to China”. Pakistan Observer.

46


program on economic and trade collaboration was signed between both countries. China and

Pakistan celebrated 2011 as “China-Pakistan Friendship Year”.27

Moreover in June 2012, China and Pakistan signed three MoUs which covered supply of

water from Tarbela to Islamabad, establishment of Special Economic Zone in new city

Zulfikarabad (Sindh), building of round about 6000 flats and an agreement for the de-silting

of canals and barrages in Sindh.28

Further China and Pakistan signed eight agreements in

2013, in order to cooperate in various fields of economy in order to enhance trade relations

between themselves. In which the most important document was the China-Pakistan

economic corridor, according to which Gwadar Port in southern Pakistan will connect

China’s Western province Xinjiang through Railways and Highways. It will provide the

shortest and direct possible route from Gwadar Port to Chinese Xinxiang province which

plays very crucial role in enhancing economic ties between China and Pakistan.29

This track

will be shorter, safer and provide an alternative to the Sea route to China which passes

through Malacca Strait and Indian Ocean. China and Pakistan have been focusing on trade

cooperation and interaction through this corridor.30

Table 1.1 (2005-2011 Sino-Pak Trade in US $ Million)

Year Exports Imports Trade Balance

2005-06 437 1,843 -1,406

2006-07 548 2,321 -1,773

2007-08 685 3,029 -2,344

2008-09 661 2,708 -2,344

2009-10 1,211 3,284 -2.073

2010-11 1,645 4,145 -2,500

Memon, N. (2012). “Pak-China Trade Relations”. Pakistan Textile Journal.

China Imports from Pakistan increased from $685 million in 2007-08 to $1645

million in 2010-11 which is showing an average growth of 33% per annum. In sum, it can be

said that since the beginning of 21st

century the economic relations are enhancing and the

frequent visits of leaders from both sides shows that they want to boost their economic ties.

27 “Chinese vice prime minister arrives in Islamabad”. (September 26, 2011). Express Tribune.

28 “Pakistan, China sign mutual cooperation agreement”. (September 25, 2012). Express Tribune.

29 Ibid.

30 Shabbir, Op.cit., p. 179-81


Sino-Pak Growing Defence Relations

Growing security concerns and threats from New Delhi and development of its military and

economic supremacy were the compelling factor for Pakistan to search foreign defence

cooperation.31

After 1960’s, China and Pakistan enjoyed a solid strategic ties because US

imposed arms embargos on Pakistan with the wake of 1965 war with India and there was no

other country that helps Pakistan militarily and financially. In 1966, Beijing agreed to

provide equipment for ground forces and MIG aircraft for Air Force of Pakistan. China also

gave $ 60 million for development assistance in 1965, a further $40 million in 1969 and 200

million for the next five year. Beijing emphasized on the transfer of technology to help

Pakistan in getting self-reliance. The Heavy Mechanical Complex, the Heavy Rebuild

Factory, the Kamra Aeronautical Complex and several other projects were developed with

China’s help.32

At that time, Pakistan was completely depending on China for its defence

needs. In 1966 Chinese gave arms to Pakistan with the worth of $133 million in which

Chinese made F-6 fighter planes, T-59 tanks and anti-aircraft guns was also included.33

Beijing also helped Pakistan militarily and economically in the War of 1971. India gets

military assistance from Russia, at that time China’s support for Pakistan created balance

between them. During 1971 to 1978, China supported Pakistan in establishing two mega

projects which were related to defence e.g. building of Heavy Mechanical Factory for the

development of T-59 tanks and other was F-6 Aircraft Rebuild Factory.34

K-8 is a sophisticated and light attack aircraft planned and manufactured by the joint venture

of China and Pakistan. Beijing and Islamabad made a decision to jointly build Karakorum -8

(K-8) in 1986. In 1987, development of K-8 was started. Six K-8s were delivered to Navy of

Pakistan in 1994. Islamabad started development of MBT-2000 Al Khalid tank in 1988.

China-Pakistan signed military agreements in 1989 which included the acquisition of military

goods, joint research and cooperation and transfer of technology.35

An agreement was signed in January 1990 with Beijing to jointly develop, manufacture

system and design.36

In 1991, the spokesperson of Chinese Foreign Ministry said that

Pakistan’s Upper Space and Upper Atmosphere Research Commission and Chinese

Aerospace industry had signed a contract in order to cooperate for peaceful use of space

technology.37

With the execution of Pressler amendment in 1992, USA stopped financial and 31 Sattar,op.cit., p. 53

32 Ibid.

33 Hussian, op.cit., p.5

34 Akhtar, op.cit., p. 77-78

35 Rakisits, op.cit, p.86-7

36 Arthur, G. ( January 28, 2013). “ Main Battle Tanks in Asia”. Defence Review Asia. Retrieved on August 30, 2014.

37 Ali, G. (November 9, 2011). “China-Pakistan Space Technology Cooperation”. East Asia Forum. Retrieved from http://www.eastasiaforum.org/2011/09/09/china-pakistan-space-technology-cooperation/. Retrieved on May 5, 2018.

48


military assistance to Pakistan and at that time Pakistan had no other option except to rely on

Chinese support.38

The hallmark of China and Pakistan defence collaboration was joint

venture of JF-17 aircraft. In 1999, China’s Chengdu Aircraft Company and Pakistan Air

Force signed an agreement for the joint production of JF-17 aircraft.39

The plan was that JF-

17 eventually replaced the A-5C, Mirage III, Mirage 5 and F-7P combat aircraft. The

symbolic importance of joint venture of JF-17 aircraft is that it can be operated set with

Beyond Visual Range Air to Air Missile (BVRAAM) ability.

In 2001, Al-Khalid tank was introduced in Pakistan army and this induction further

strengthened the operating ability of Pakistan military now have more than 300 Al-Khalid

tanks. In order to enhance their military ties Pakistan and China conducted a joint search and

rescue exercise near Shanghai in 2003. In 2005 China and Pakistan concluded a deal in

which China Dockyard in Shanghai which build four F-22P Frigates for Pakistan’s Navy and

also transfer its technology to Pakistan. The JF-17 is a joint China-Pak venture that planned

to reduce Pakistan’s reliance on Western companies for advanced fighters.40

Strategic relations were blossomed when Pakistan signed a $ 600million defence agreement

with Beijing in May 2006. In which Chinese assistance to Islamabad in building four F-22P

frigates for the Pakistan Navy, transference of technology and up gradation of Karachi

dockyard. According to this agreement three ships were constructed in Beijing and one in

Pakistan with China’s assistance.41

In 2008, Beijing and Islamabad signed a deal with the

worth of $278 million for four China’s KJ-2000/ZDK03 airborne early warning aircraft

(AEW). Beijing offered to sell thirty six advanced frontline fighter jet named as Chengdu J- 10 Vigorous Dragon. The easy availability of Chinese made J-10 and J-17 aircraft means that

Islamabad is less dependent on American and Western aircraft to fulfil its Air force

requirement.42

Islamabad planned to buy six submarines from Beijing in order to enhance

and boost its undersea capabilities (The Hindu, March 9, 2011).43

Beijing and Islamabad also signed another agreement in the same year to get existing mutual

military cooperation to new level.44

Soon after the US raid in Abbottabad in May 2011

without giving notification to Pakistan’s government, former Prime Minister Syed Yousaf

Raza Gilani visited China. Beijing was agreed for release of 50 JF-17 aircraft in 2nd

Bach. In 38 Hali, S. (2013, April 10). “Sino-Pak naval cooperation reiterated”. The Nation. Retrieved From http://www.nation.com.pk/columns/10-Apr-2013/sino-pak-naval-cooperation-reiterated.

39 Jetly, R. (2012). “Sino-Pakistan Entente: Implications for Regional Security”. Institute of South Asian Studies. Retrieved from http://www.isn.ethz.ch/DigitalLibrary/Publications/Detail/?id=137392&lg=n

40 Akhtar, op.cit., p. 81

41 Zeb, op.cit., p.51

42 Rakisits, op.cit., p.89

43 44 Zeb, op.cit., p. 53


2011 Beijing officially started the construction of two fast attack missiles crafts for the Navy

of Pakistan.45

In addition, China and Pakistan signed a deal for the introduction of radar controlled guns

and low level air defence radars for the fatal air defence of its important installations.46

In

2011 militaries of two states began joint military exercise named as YOUYI-IV in order to

exchange information and experiences with each other. According to ISPR, joint military

exercise is a brigade level between the armies of two countries.47

In 2012, Mutual Military Cooperation Agreement was signed between General Ma Xiaotion

of China and Pakistani General Ishfaq Pervez Kayani. Pakistan became a valued purchaser of

China’s arms. In order to enhance defence relations both countries are engaged in different

defence deals and agreements. Now all three forces of Pakistan army, Navy and Air force are

well equipped with Chinese weapons structures. Pakistan is the largest importer of arms of

China. They are continuously supporting their friendly neighbour Pakistan in order to

modernize its military.48

In April 2014, joint military exercise between armies of two states

began named as “Peace Angel 2014” in order to further enhance bilateral relations between

militaries of two countries.49

Sino-Pak Cooperation for Energy Security

China is the major partner in energy sector with Pakistan.50

According to the Water and Power

Development Authority of Pakistan, the country is facing power shortage between 3000 to 6000

MW. In order to overcome this power shortage Pakistan and China are cooperating in many

projects. The Diamir Bhasha dam was one step that was taken by Pakistani government to

enhance their energy capability.51

According to the secretary of Ministry of Water and Powers

Himayatullah Khan that Beijing may not be able to give full financial support for the

construction of Basha dam but it can help major portion of funs which is needed for the

construction.52

Chinese agreed to give full financial support for the construction of dam and provided $ 8.5

billion assistance to Pakistan. China has also offered for providing labor for the construction

work. Sino Hydro Corporation a Chinese firm wants to invest in Pakistan through

constructing Kohala hydropower with the capacity of 1100 MW. The Cost of this project is

45 Rakisits, op.cit., p. 91

46 Hali, ibid.

47 Kabraji, R. (2012). “The China-Pakistan Alliance: Rhetoric and Limitations”. Chatham House. Retrieved from http://www.chathamhouse.org/sites/files/chathamhouse/public/Research/sia1212pp_kabraji.pdf

48 “Pakistan, China sign mutual cooperation agreement”. (September 25, 2012). Express Tribune.

49 “Pakistan, China begins joint military exercise”. (April 20, 2014). Dawn.

50 Kayani, op.cit., p.459

51 Fazal-ur-Rehman, op.cit., p.7

52 Bhutta, Z. (December 1, 2012). “Diamer Bhasha Dam: Turned away from elsewhere, government to now knock on China’s doors”. Express Tribune.

50


estimated to be $ 2 billion. There are some other energy related programs which were

established with the assistance of Beijing e.g. construction of Allai Khwar hydropower

project, Dubair power station, the Jinnah hydro station, the GomalZam dam and Mangla

dam. Chinese International Water and Electricity Corporation show its intension to invest $

1.7 billion in Pakistan for hydro power generation.53

Pakistan Nuclear Capability and Chinese role

Beijing-Islamabad nuclear collaboration began in 1971. After Indian nuclear explosion in

1974, Pakistan perceived it as a security threat and decided to build nuclear weapon in order

to create balance within South Asia. In 1986 formal civil nuclear cooperation agreement was

signed between China and Pakistan.54

Chinese subsequently helped Pakistan’s government

in the construction of Chashma I and Chashma II nuclear power generation facilities with the

capacity of 300 MW. 55

Beijing supplied heavy water Khusab reactor in 1990’s to Islamabad,

which played significant role in production of plutonium. China also contributed in

Islamabad to enlarge its Uranium enrichment capability through providing 5000 ring magnets

which is used in centrifuges.56

Nuclear cooperation between China and Pakistan gradually increased during 1986 to 1996.57

China assisted in building Pakistan’s nuclear weapon capability and civilian energy program.

China signed a civil-nuclear agreement with Pakistan in 1986 and has subsequently supplied

it with two nuclear power plants. Chashma I became operational in 2001 and Chashma II

inaugurated in 2011.58

Both countries also informed IAEA that they would go for further

expansion of their civil nuclear energy cooperation. In 2009 China and Pakistan signed an

agreement for the construction of Chashma III and Chashma IV. Chashma II was inaugurated

in 2011. In 2013 Sino-Pak decided to build Chashma V power plant.59

In order to deal with

the future challenges, Pakistan decided to start work on two nuclear power plants (Kanupp II

and Kanupp III) in Karachi with the capacity of 1100 MW with the help of Beijing.60

Chashma III and Chashma IV would become operational in 2016 and 2017 respectively.61

53 Fazal-ur-Rahman, op.cit., p.9

54 Ramana, S. (2011). “China-Pakistan Nuclear Alliance”. Institute of Peace and Conflict Studies.

55 Jabeen, op.cit., p.7

56 Akhtar, S. (2009). “Sino-Pakistani relations: an assessment”. Institute of Strategic Studies Islamabad (ISSI).

57 Ramana, op.cit.

58 Jabeen, op.cit., p.9

59 Hamid, N., Hayat, S. (2012). “The Opportunities and Pitfalls of Pakistan’s Trade with China and other Neighbors”. The Lahore Journal of Economics, 17 (1), 274-79.

60 Syed, B. (January 2, 2014). “8,900 MW nuclear power generations planned”. Dawn. Retrieved on August 20, 2014.

61 Hamid, op.cit., p.276


Sino-Pak Diplomatic Ties

In 1951, when China entered into Korean War in order to save their security and sovereignty,

Pakistan was the country who withdrew from resolution of General Assembly, in which they

called China as an aggressor state. This stance of Pakistan for China further strengthened

their relations. In order to enhance their friendly relations, China-Pak signed border

agreement on March 1963.62

In 1965 Pakistan-India war, Beijing extended full assistance to

Islamabad, both implicitly and explicitly. Beijing condemned New Delhi ‘Criminal

aggression’ against Pakistan.63

After the separation of East Pakistan from West Pakistan in 1971, People’s Republic of

China assisted West Pakistan financially and diplomatically. China have used a veto power in

Security Council so that Beijing did not allowed Bangladesh (East Pakistan) to became a

member of United Nations until Pakistan accepted it as a sovereign state in 1973.64

China

always respects the territorial sovereignty, integrity and independence of Pakistan. It always

gave its full support on Kashmir issue in which Pakistan has its rivalry with India. Both sates

are collaborating with each other to create and maintain peace and stability in South Asian

Region. China is always remained supportive state for Pakistan in the time of crises and

played vital role in its development. That’s the reason China-Pak relations are known as

“Higher than Himalayas and deeper than Oceans”.

Sino-Pak Scientific and Technical Cooperation

Technical and scientific collaboration began in 1963 between China and Pakistan. Beijing

and Islamabad has shared wide range of scientific cooperation which covers all sectors such

as energy, health, agriculture, communication, environment, information technology etc.

China-Pakistan has very deep and close collaboration in the sector of science and technology

also. One of the Chinese diplomat in Pakistan embassy said that scientific and technical

partnership between Beijing and Islamabad is being followed under the structure of 1976

agreement on scientific and technical assistance under which mutual advantage has increased

satisfactorily. Through seventeen protocols 300 items of assistance included study visits,

mutual research projects and training programs were started.65

China and Pakistan signed different agreements and protocols in the field of science and

technology. In 1988, Beijing and Islamabad signed protocol for technical and scientific

cooperation in mapping and surveying. Chinese National Natural Science Foundation and

Pakistan’s Science Foundation signed an agreement in 1992 for the cooperation in scientific

62 Hussain, op.cit., p.7

63 Sattar, A. (2007). Pakistan Foreign Policy 1947-2005 A Concise History. Karachi, Oxford University Press.

64 Zeb, op.cit., p.57

65 “Science and Technology Section”. (2013), “Scientific and Technical Cooperation between China and Pakistan”.

Embassy of Peoples Republic of China in Islamic Republic of Pakistan. Retrieved from http://pk.chineseembassy.org/eng/scientechcooperation/t191006.htm.

52


field. In 1993 MoU was signed between Pakistan and China in order to enhance their

collaboration in science and technology. Another MoU was signed for the establishment of

fund for the mutual research and development in December 2001. In November 2011, the

most recent protocol was signed between China and Pakistan at Beijing for cooperation in the

area of science and technology.66

Sino-Pak Social and Cultural Cooperation

The two Friendly countries China and Pakistan have close connection in the field of culture.

After the establishment of diplomatic ties, both states have sent cultural groups and held

cultural exhibitions. Cultural cooperation agreement was signed between Beijing and

Islamabad in 1965.67

“Pak-China Friendship Centre” in Islamabad is seen as a sign of both

states commitment to further expand cultural relations.68

In 2003, Education cooperation

program was began between China and Pakistan. Under which Higher Education

Commission of Pakistan selected capable students which would be fully financed by Pakistan

government for MBBS in China.69

In 2008, Beijing and Islamabad signed a MoU for the

establishment of permanent campus of China-Pakistan university of Engineering, Science

and Technology but the university not yet inaugurated. In 2010, during Chinese former

Premier Wen Jiabao visited to Pakistan ‘China-Pak Friendship Centre’ was inaugurated.70

In short, strategic co-operation between China and Pakistan has increasing rapidly. The ever

growing partnership in economy, defence, civil nuclear sector, diplomacy, science and

technology has provided a solid foundation for the future cooperation.

Conclusion

Relations between China and Pakistan have grown admirably since 1950 when Pakistan

recognized China as a sovereign state. Both states supported each other on defence

cooperation, joint venture of weapon system, economic and trade cooperation etc. Economic

relations between Beijing and Islamabad are expanding rapidly and Free Trade Agreement

was signed between them. China and Pakistan have undertaken several economic projects in

Pakistan such as development of Gwadar Port, Coastal Highway links Karachi with Gwadar,

China-Pakistan Economic Corridor, Chashma nuclear power plants. Gwadar port is

constructed with Chinese technical and financial support.

66 Akhtar, J. (December, 2013). “Pakistan China a model of friendly relations between two opposing ideology states”. Associated Press of Pakistan.

67 “China-Pakistan Relations”. (November 14, 2006). China Daily. Retrieved from http://www.chinadaily.com. Retrieved on April 24, 2014.

68 Saddique, Q. (2014). “Deeper than the Indian Ocean? An Analysis of Pakistan-China Relations”. Centre for International and Strategic Analysis. Retrieved from http://strategiskanalyse.no/Publikasjoner%202014/2014-02-27_SISA16_Sino-Pak_QS.pdf

69 Khan, op.cit., p.13

70 Khan, op.cit., p.17


In China-Pakistan Economic Corridor, Gwadar port (Pakistan) will be connected

through Highways and Railway with Xinjiang (China). Both states are focusing on

expanding bilateral economic and trade cooperation. Defence and security is another

important area of cooperation between China and Pakistan.

A landmark agreement between China and Pakistan is the joint venture of JF-17

thunder aircraft. Both states are looking towards future areas of mutual cooperation and

previous mutual agreements are JF-17 aircraft, Al-Khalid tanks, K-8 Karakoram etc.

Another significant area of relationship between China and Pakistan is using nuclear

technology for the peaceful purposes. The development of Chashma I and Chashma II power

plants are the significant example of such cooperation and both states also decided to further

expand cooperation in this sector. Both states wanted to increase bilateral relation in all

spheres.

The ever growing Sino-Pak cooperation has raised challenges for India because it

gives India a possible two front war threat in the case of clash with either state. New Delhi

shows concerns over Chinese involvement and assistance in Gwadar port. As India is of the

view that, port will facilitate both states to look world energy resources and Indian oil

tankers. China-Pakistan cooperation for the development of Economic Corridor has security

implications for India because it may passes through disputed land of Pakistan. Sino-Pak

cooperation for the development of civil nuclear reactor at Pakistan also alarm bells in New

Delhi because according to Indian policy makers that Pakistan is not committed to separate

civil nuclear reactor from military facilities.

New Delhi showing apprehensions over China growing maritime relations with South

Asian states because it may challenge for Indian superiority in Indian Ocean Region.

Growing Sino-Pak defence cooperation has become a source of concerns for India because

both shares mutual rivalry with it. India considers itself as a sandwich between China-

Pakistan nexus.

India has responded as a reaction of Sino-Pak cooperation through increasing

strategic relations with USSR and USA. Despite being a leading member of Non-Alignment

Movement, New Delhi signed “Friendship Treaty” with USSR in order to counter Beijing in

the time of clash with Pakistan. Indo-Soviet treaty is one of the leading examples of Indian

response.

Since the start of 21st

century, India is focusing on strong relations with United State

of America. Both states also signed Civil Nuclear Cooperation which is a significant

agreement in Indo-US relations. India changed its previous military doctrine with Cold Start

in order to react against Pakistan more aggressively and rapidly.

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Development of Gwadar port has some implications for India which it wants to

neutralize by helping Iran for the construction of Chabahar port. India also financially

assisted Iran for the development of land connection from Chabahar port to Afghanistan.

Defence budget of New Delhi rapidly growing from the start of 21st

century. India

modernizes its armed forces with sophisticated weaponry in order to make its defence

stronger. Therefore, to sum up the ever increasing strategic cooperation between China and

Pakistan has a considerable impact on the security policies of India.

silking the china-pakistan economic corridor (cpec)

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