Wednesday, 22 April 2015

As Xi Jinping concludes Pakistan visit, the dollars do not obscure the questions

Xi Jinping addresses a joint session of parliament in "the house of his brother"

By Ajai Shukla
Business Standard, 22nd Apr 15

China’s President Xi Jinping left Pakistan on Tuesday after a two-day state visit with the Nishan-e-Pakistan --- the Islamic Republic’s highest civilian honour --- pinned to his breast, having provided badly-needed infrastructure funding to a beleaguered and cash-strapped Pakistan.

Even so, the euphoria over the signing of more than 50 agreements during Xi’s visit, committing some $46 billion in Chinese funding for the China-Pakistan Economic Corridor, is tempered with apprehension.

Both sides know this 3000-kilometre passage from Kashgar in China’s restive Xinjiang Autonomous Region to Gwadar in Pakistan’s insurgency-affected Baluchistan, passes through these countries’ most chronically unstable areas.

Beijing fears for the security of its engineers and workers in Pakistan, several of whom have been killed in terrorist attacks, especially in Baluchistan. Earlier this decade Beijing had insisted on deploying People’s Liberation Army (PLA) soldiers in the Northern Areas for safeguarding Chinese labour there. New Delhi had strongly protested the stationing of PLA troops on Indian-claimed territory.

With Islamabad eager to reassure Beijing about safety of its personnel, Pakistani President Mamnoon Hussain told Xi in a one-on-one meeting on Tuesday that Pakistan would raise a 10,000-man security division dedicated to protecting Chinese workers in Pakistan.

According to Dawn newspaper, a major general would head this force, reporting directly to General Headquarters (GHQ), as Pakistan calls its army headquarters.

President Xi’s announcement of $46 billion in funding in Pakistan is the tip of the spear for Beijing’s so-called “Silk Road Economic Belt” project, which aims to extend Chinese infrastructure to South and Central Asia. First announced in Kazakhstan in 2013 and since renamed “One Belt, One Road”, this infrastructure development strategy has multiple aims.

At the security level, it aims to tamp down rising Islamist radicalism in Xinjiang, Pakistan and Afghanistan through economic development. Bringing development to Baluchistan is also expected to cool the decades-old insurgency there.

At the macro-economic level, extending infrastructure through Asia into Europe is expected to open up new markets to Chinese producers, whose domestic markets are stagnating in the face of overcapacity.

Finally, this provides China with a more remunerative use for its massive foreign currency reserves, much of which currently stagnates in low-yielding US treasury bonds. China’s foreign exchange reserves stand at $3.7 trillion, according to Beijing’s March-end figures.

Beijing dispenses this infrastructure funding through its so-called “policy banks” --- three government lenders that focus on financing infrastructure development in China and abroad. These are China Development Bank (CDG); Export-Import Bank of China (Ex-Im Bank); and Agricultural Development Bank of China.

The Financial Times quotes the Chinese financial website, Caixin, that China’s central bank has already disbursed $62 billion to two of these banks for the “One Belt, One Road” initiative. The CDB has received $32 billion in forex reserves, while Ex-Im Bank has received $30 billion.

China’s generous chequebook diplomacy has provided Pakistanis an opportunity to ridicule America, which has never come close to dispensing such largesse.

Even in arms supplies, Beijing has clearly overhauled Washington. Earlier this month, Washington notified the US Congress of its intention to sell Pakistan $952 million worth of defence equipment, including 15 AH-1Z attack helicopters and 1,000 fire-and-forget Hellfire missiles.

China, however, has bigger deals in the making. Beijing and Islamabad are in the final stages of negotiating the purchase of eight Chinese conventional submarines --- these could be either the Yuan-class Type 039A or Type 041; or the Qing-class Type 032. This $4-5 billion deal was expected to be signed during President Xi’s visit, but was eventually a notable omission.

Stationed in Gwadar with suitable reserves of spare parts and maintenance facilities and personnel, these submarines would allow the Pakistan Navy to support Chinese submarines of the same type whilst they operate in the Indian Ocean.

The authoritative Stockholm International Peace Research Institute (SIPRI) says Pakistan sourced 51 per cent of its arms imports from China during the period 2010-14. The US was in second place with 30 per cent, says SIPRI.

A significant part of China’s arms sales to Pakistan are accounted for by the JF-17 Thunder light fighter, which has been “co-developed” by both, but still has a large part supplied by China. President Xi’s flight was symbolically escorted by a detachment of eight JF-17s as he arrived in Pakistan and on his way out.


Anonymous said...

The Great Punjabi... pride... army... serves... Han feet... 2.4 billion foot precise... Insha'Allah...

Stephen said...

china and pakistan friendship is real big concern for India ... added to that china also buildina an airport in Xinjiang which is near to Pakistan Ocupied Kashmir (POK) ... some thing fishy over here?????

Jean Luc Picard said...

Just as a FYI..

Wikipedia and Trishul.trident Blog also report that Pakistan has ordered 20 of China's WZ-10 Thunderbird Heavy attack helicopters.

It is also reported that Pakistan already has 3 at one of its Army Aviation bases undergoing evaluation.

raw13 said...

This is a game changer. The article below adds to the article here. Basically this will allow Pakistan to continue to check mate India.

Depending how it is implemented it may even pull Pakistan ahead. Pakistan's role becomes even more pivotal, from ME, CA to SA. India will have to ask nicely to be allowed into this club. Pakistan's answer will be Yes off course, but lets first sort out the elephant in room, Kashmir.

Pakistani society has changed, they want serious progress now. While india basks under the glory of BJP, Pakistan and China have changed the game.

Anonymous said...

After kargil Porkies have not ventured for any misadventure. They know the consequences. Same applies to terrorists acts.

pandey said...

what the *bleep* does that first comment by anon even mean?

Anonymous said...

Isn't is better to see economic development rather than purely military related "aid"? There are people living in Pakistan too, and they are entitle to a better future too. Just like everyone in India and in every neighbouring countries.

If you look for the worst in people, you will definitely find it. Same will be true if you look for the best in people. The right question to ask, is which would you prefer? Granded that you cannot purely rely on one aspect and totally ignore the other. Having said that, isn't it more interesting to see the possibilities rather than simply be entrenched in constant fear?

The Kashgar-Gwadar corridor can potentially allow access to a deep water port for people living in Central Asia. In particular, the people living in and around the Fergana Valley. It will be a boon to the future of the region as a whole if the Indian-Iranian collaberation at the Iranian port of Chabahar also become operational, allowing access to the sea for Turkmenistan.

captainjohann said...

Pakistan is using its geography to enhance its own security and economic interests while we have this attitude of twiddling our thumb.Pakistan has understood two things and that is China is going to be number one power and USA does not have the stomach to fight land wars in Asia.Why not we allow China to send its goods to a port in west or east through our territory.We are a bigger nation and we must show self confidence and get warped about Chinese due to our 1962 war.We must show self confidence and must allow emerging young Chinese to know about US through direct contact.These guys want western clothes and goodies but are patriotic and ofcourse abhorr terror.