Tuesday, April 21, 2015
China Picks Pakistan as First Stop on $40 Billion Silk Road
China picked a dam project in northern Pakistan for its first investment by a $40 billion Silk Road infrastructure fund as President Xi Jinping looks to expand the country’s influence across three continents.
The fund will become a shareholder of China Three Gorges South Asia Investment Ltd., which will construct the Karot dam on the Jhelum river, according to a statement on the Chinese Foreign Ministry’s website on Tuesday. The total investment will be $1.65 billion, according to the People’s Bank of China.
“We don’t subscribe to the view that a country expands hegemony when it becomes powerful,” Xi told Pakistani lawmakers on Tuesday. “Peaceful development is in China’s interest and also in the interest of Asia and the world.”
Xi’s visit is the first by a Chinese head of state in almost a decade to Pakistan, a nation that’s key to to his efforts to access the Indian Ocean over land and boost trade with Europe, Africa and the Middle East. China is Pakistan’s top trading partner, and they have a mutual distrust of India.
The two nations are planning $45 billion in projects along a 3,000-kilometer (1,850 miles) corridor stretching from Xinjiang in western China to Gwadar on the Arabian Sea. The investments -- $28 billion of which were announced this week -- would boost Pakistan’s economic growth and provide another route for China to import oil from the Middle East.
‘Great Match’
The Karot dam will be located in Rawalpindi near the capital Islamabad. It’s a “great match” between the development strategies of the two nations and a priority project in the China-Pakistan Economic Corridor, China’s central bank said in its statement.
The 720-megawatt run-of-river dam would take about six years to build, according to project disclosure documents filed by the World Bank’s International Finance Corp., which is investing $125 million in China Three Gorges South Asia Investment Ltd. The project would generate 75 percent of its energy during the summer months when water flow in the Jhelum river is at its highest, the documents show.
China Three Gorges Corp., the Beijing-based developer of the world’s largest dam, expects to become Pakistan’s biggest clean-energy company with plans for $5.5 billion of hydropower, solar and wind projects totaling more than 2,000 megawatts in capacity, according to the IFC. Pakistan requires as much as $20 billion in investments over the next five years to overcome a 10,000-megawatt shortfall in power capacity, it said.
‘All-Weather’ Friend
On Monday, Xi and Pakistani Prime Minister Nawaz Sharif signed pacts to build roads, ports and power plants, nearly equal to the amount of foreign aid the U.S. has provided to Pakistan over the past decade to support its war in Afghanistan.
If realized, the investments will help Sharif revive Pakistan’s economy, which suffers from chronic power failures and an insurgency that has killed more than 50,000 people since 2001. Sharif has received a loan from the International Monetary Fund to help put the country’s finances back on track.
“It’s very significant,” said Mohammed Sohail, chief executive officer of Topline Securities Ltd. in Karachi. “It can bring a big change for all our economic fundamentals, in particular in energy.”
Pakistan’s benchmark stock index has been among Asia’s best performers over the past six months. It fell 0.9 percent at 11:29 a.m. local time, the most in three weeks.
The 51 agreements included an “All-Weather” strategic partnership that seeks to formalize longstanding defense ties between the nations. They also pledged to fight terrorism and help bring peace to Afghanistan. The two nations may conclude the sale of eight Chinesesubmarines, more than doubling Pakistan’s fleet.
‘Iron Brothers’
Xi met the chiefs of Pakistan’s armed forces and called the operation against militants near the Afghan border a game changer in bringing peace, army spokesman Major General Asim Bajwa said on Twitter. Xi also pledged to contribute in the effort, Bajwa wrote, without providing details.
China is viewed more favorably in Pakistan than in any other Asian country, Pew Research Center found in a poll conducted last year. Pakistanis gave a 78 percent favorable rating to China, compared with 14 percent for the U.S., the poll showed.
“We are truly iron brothers,” Sharif said. “All political parties have one united stance -- Pakistan should have a robust bond with China.”
What China’s and Pakistan’s special friendship means
By Ishaan Tharoor
The friendship between China and Pakistan, read billboards in Chinese and English dotting Islamabad this week, "is higher than mountains, deeper than oceans, sweeter than honey, and stronger than steel." This sort of romantic sloganeering routinely bubbles up ahead of key bilateral summits between the two countries, and so it did this week as Chinese President Xi Jinping made his maiden visit to the South Asian nation.
"This will be my first trip to Pakistan, but I feel as if I am going to visit the home of my own brother," Xi wrote in an article published in Pakistani papers ahead of his arrival, adding another metaphor about how the relationship between the two countries "has flourished like a tree growing tall and strong."
It's easy to see such rhetoric as the cringe-worthy, cynical clap-trap that accompanies international diplomacy. After all, China and Pakistan may share a border, but cultural ties between the two nations and its people are thin, to put it mildly.
But the bond between Beijing and Islambad is indeed old and strong, stretching back to the 1970s and the Nixon administration's opening with China. Here's a primer of what you need to know.
What's happening now
Xi arrived in Islamabad on Monday bearing real gifts: an eye-popping $46 billion worth of planned energy and infrastructure investment to boost Pakistan's flagging economy. This would include adding some 10,400 megawatts to Pakistan's national grid through coal, nuclear and renewable energy projects.
Years of widespread power cuts have been a real drag on the country; energy shortages were one of the main popular grievances voiced ahead of the 2013 elections won by current Pakistani Prime Minister Nawaz Sharif.
At the center of what's being announced this week is a new economic "corridor" — railways, roads and pipelines — that would connect an existing mountainous highway from the far western Chinese region of Xinjiang through to the Chinese-developed port at Gwadar on the Arabian Sea.
It's an impressive proposal, on a scale that we've come to now associate with China's overseas footprint — more usually in corners of Africa. According to the BBC, the Chinese state and its banks would lend to Chinese companies to carry out the work, thereby making it a commercial venture with direct impact on China's slackening economy.
The project is also a key cog in China's own grand-historic vision of itself as a global power and the font of new sea and land "Silk Roads." The China-Pakistan Economic Corridor would link up a major land route in Central Asia to what China imagines will be a key maritime hub at Gwadar.
Sure, there remain real reasons to be skeptical. Much of the new construction would be done in the vast, restive Pakistani province of Baluchistan, where the army is still grappling with an entrenched separatist insurgency. Moreover, as Pakistani journalist and columnist Cyril Almeidapoints out, the proposed Chinese numbers stretch credulity, especially when set against the meager sums currently being invested from the outside into Pakistan's economy. The proof, in this case, will be in the building.
An unequal relationship
The saccharine statements of love and friendship belie a harsher truth. In many ways, this is not a relationship of equals.
A Pew survey conducted last year found that an impressive majority of Pakistanis — 78 percent — viewed China favorably. Compare that to the 14 percent of Pakistanis who looked positively upon the U.S., a figure larger only than the 13 percent who have favorable views of India, Pakistan's archrival.
Yet, the same number of Chinese hold favorable views of India and Pakistan — that is, a minority of 30 percent. Surging Pakistani admiration for China, it seems, laps up on the shores of Chinese indifference.
China is one of Pakistan's top trade partners. But the volume of trade with Pakistan is a drop in the bucket for Beijing.
China views Pakistan also through the lens of counter-terrorism: a number of extremist outfits allegedly linked to ethnic Uighur separatists within Xinjiang have training camps in Pakistan's rugged borderlands with Afghanistan. Curiously, in a country where there are frequent displays of solidarity with Muslims suffering elsewhere in the world, the Uighurs, a Turkic Muslim minority chafing under Chinese rule, rarely galvanize much Pakistani support.
The bigger chessboard
There are two elephants in the room whenever considering China-Pakistan ties: India and the United States.
Both China and Pakistan have fought wars with India in the past, and to this day squabble over disputed Himalayan territory. China helped Pakistan build its arsenal of nuclear weapons, and remains one of Islamabad's biggest arms suppliers — even as the U.S. continues to commit significant military aid to Pakistan.
After President Obama was India's guest of honor during its annual Republic Day commemoration last January, Pakistan extended a similar invitation to Xi to attend their National Day parade in February. The Chinese leader declined, perhaps wary of such unsubtle gestures.
As Andrew Small, an expert on China-Pakistan relations at the German Marshall Fund in Washington, writes, it would be an oversimplification to see China's expanding role in Pakistan as just a challenge to a U.S.-India consensus that's emerged in recent years. China, after all, likely values its bilateral relations with the U.S. and India as much — and likely more — than its ties with Pakistan.
While China has a more assertive stance in East Asia — its backyard — it's playing a different game to the west. China's recent offer to help mediate talks with the Taliban in Afghanistan, Small notes, marks a real departure from decades when Beijing's official policy has been that of non-interference in the politics of other countries.
Now, as the U.S. has technically withdrawn from Afghanistan, the Chinese have become stakeholders and not just bystanders. Guaranteeing stability in Afghanistan may involve China exerting its own leverage on Pakistan, which has a complicated relationship with the Afghan Taliban.
China, Small suggests, "is finally easing into its role as a great power." And, indeed, it's using Pakistan as a corridor.
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