Pakistani government officials are hailing as a success a recent five-day visit to China by Prime Minister Shehbaz Sharif. Observers, however, say that despite the usual display of warm relations from both sides, hurdles remain in improving the economic partnership between Beijing and Islamabad, largely because of Pakistan’s poor policies.
Prime Minister Sharif’s visit to China late last week comes as Pakistan is seeking more foreign investment and looking to boost exports to help with its economic crisis amid security concerns.
At a press conference Monday, Information Minister Attaullah Tarar called the visit “extremely successful and historic.”
“The fruits of the historic visit to China will reach the people of Pakistan,” Tarar said.
Sharif visited China at the invitation of his Chinese counterpart, Premier Li Qiang, with whom he held delegation-level talks in Beijing. Sharif also visited Shenzhen and Xi’an to help build business-to-business ties and to observe China’s advancements in agriculture, technology, and business facilitation.
China-Pakistan economic corridor
In China, both sides committed to “forging an upgraded version” of the multi-billion-dollar China-Pakistan Economic Corridor, or CPEC, by boosting construction, mining and exploration, and industrial cooperation.
Some critics say in its bid to ramp up CPEC, Pakistan is ignoring some harsh lessons from the first decade of the energy and infrastructure project.
“The corridor’s original sin was that Pakistan signed up for a large number of projects that added obligations in foreign currencies and this conflicted with Pakistan’s domestic-oriented exchange rate and industrial policies,” said economist Ali Hasanain. “Those obligations have gradually and predictably narrowed Pakistan’s fiscal space,” added Hasanain, an associate professor at Lahore University of Management Sciences.
Pakistan owes more than $7.5 billion in project debt to power plants set up under CPEC. The country also owes nearly $2 billion in circular debt, or unpaid bills, to Chinese power producers.
Unable to boost exports on the back of new roads and added power generation capacity acquired through CPEC, Pakistan now faces a debt crisis where it is seeking new loans to pay past debt.
Many Pakistani economists blame Islamabad for the crisis.
Hasanain pointed to the Sharif government’s push to upgrade a crumbling cross-country railway line as an example of CPEC projects that will add to the country’s debt burden. The scope of the much-delayed Mainline-1 or ML-1 project has been reduced to bring down the cost, but the roughly $6.8 billion project is struggling to attract Chinese investment.
“While this upgradation will eventually be needed, there has been little consideration of the financial stress it will cause, and how the country will honor resultant obligations in the future,” Hasanain told VOA.
Economic cooperation
According to a joint statement issued at the end of the visit, China and Pakistan signed 23 agreements and Memoranda of Understanding, or MOUs, in a myriad of fields including cooperation on agriculture, infrastructure, industrial cooperation, inter-governmental development assistance, market regulation, surveying and mapping, media, and film.
Ammar Habib Khan, a Karachi-based business affairs expert, says Chinese firms are interested in investing in Pakistan because it is a strategic partner.
“Economic impact extends much longer into the future, maybe 30, 40, even 50 years. With a 30-year horizon or a 20-year horizon it makes sense to continue to invest in Pakistan,” Khan said, adding that the first phase of CPEC has been successful given the infrastructure development it brought.
More than 100 Pakistani business leaders accompanied Sharif on the trip that included a convention with Chinese businesses.
“There is an opportunity here to bring lots of Chinese energy-intensive industry to Pakistan where a lot of surplus power can essentially be used,” Khan said. “CPEC 2.0 will actually be more about utilizing the infrastructure that is in the country and how it can be optimized.”
Khan acknowledged that the renewed focus on CPEC would require Pakistan to first fix its finances.
The joint statement noted Beijing will encourage companies to invest in Pakistan in accordance with the market and commercial principles, signaling that it will not push firms to take unwanted risks or to give any concession to Pakistani companies.
Debt relief
Pakistan’s nearly $375 billion economy is facing a debt burden of almost $290 billion. According to data compiled by CEIC, an online economic database, Pakistan's foreign debt is close to $130 billion.
Chinese officials say around 13 percent of Pakistan’s external debt is owed to China, but the International Monetary Fund put the figure at almost 30 percent in a 2022 report.
Experts believe China will have to restructure the debt Pakistan owes. During Sharif’s visit, however, no public statement was issued on the topic.
“The Pakistani side entered these meetings with realistically low expectations about winning concessions in the form of restructuring Pakistan’s outstanding debt to China. Some form of relief may yet come, but is unlikely to be significant,” said Hasanain.
Khan believes, even if China agrees to much-needed debt restructuring with Pakistan, it will do so quietly.
“They [the Chinese] are dealing with around 50 countries, all needing some kind of debt relief. If they [Chinese] give public statements, that basically becomes a precedence,” he said.
Security
During the visit, the Pakistani leader, along with the country’s powerful army chief, Gen. Asim Munir, held talks with Chinese President Xi Jinping for more than three hours.
The security of Chinese nationals in Pakistan is a key concern for Beijing. Five Chinese workers died in a suicide attack in northwest Pakistan in March, while at least a dozen more have died in targeted attacks in recent years.
“The fact that the army chief accompanied the prime minister shows that we are taking security issues seriously,” Tarar told the press Monday. “We did not spare any effort in satisfying China’s security concerns.”
Naghmana Hashmi, a former Pakistani ambassador to China, told VOA that Beijing is talking tough with Islamabad on the security of Chinese nationals to avoid a backlash from its own people.
“Their people ask questions, their journalists ask questions that here is our best friend and we don’t have people dying anywhere except when they go to Pakistan,” Hashmi said. “Now, everybody does not understand the politics of it so the optics of it are very bad,” the former diplomat said, reiterating Pakistani officials’ stance that adversaries want to derail CPEC.
In the joint statement at the end of the visit, Beijing appreciated Pakistan’s probe of the March 26 attack.
“[The Chinese side] … hoped that the Pakistani side would continue to make every effort to hunt down any perpetrators and make sure they receive deserved severe punishment.”
“The Pakistani side was committed to enhancing security forces deployment,” the statement continued.
Pakistan has blamed the attack on militants based in Afghanistan. In the joint statement, both sides called on Afghanistan to “firmly combat terrorism, including not allowing its territory to be used for terrorist acts.”
The ruling Afghan Taliban have rejected Pakistan’s assertion that militants based in Afghanistan attacked Chinese nationals, saying Islamabad is attempting to poison Kabul’s relations with Beijing.
