IN-DEPTH: Beijing Is Using Economic Corridor to Assimilate Pakistan’s Economy: Foreign Policy Expert

A family rides past a decoration depicting the national flags of China and Pakistan ahead of the visit of Chinese Vice Premier He Lifeng, in Lahore, Pakistan, on July 30, 2023. Arif Ali/AFP via Getty Images

Under a new set of bilateral trade memorandums of understanding (MOUs) worth $10 billion, China received its first shipment of agricultural goods from Pakistan this week. The two countries, infrastructurally linked by Beijing’s China–Pakistan Economic Corridor (CPEC)—the flagship project of the Belt and Road Initiative (BRI)—also started operating this year along the first international road transport route between the two countries.

For economically depressed Pakistan, reeling under a massive debt of about $100 billion, one-third of which is owed to China, the new export-related MOUs with China in agriculture, textile, food, and car parts mean a “robust commitment” to the country’s economic growth, Pakistan’s national newspaper The Dawn reported last week.

Adding to this hope is the first international road transport route (TIR) between Xinjiang’s inland city of Kashgar and Pakistan’s capital city, Islamabad, along which the two allies started operating in late August. The TIR (Transports Internationaux Routiers) system is an international customs transit system.

However, the CPEC is much more than an economic project, a geopolitical analyst with special focus on Pakistan told The Epoch Times in an exclusive interview. Beijing is integrating Islamabad’s economy into its own.

“The China–Pakistan Economic Corridor (CPEC) is a flagship BRI initiative which is strategic, not economic, in nature—China’s companies are not making money in Pakistan; they are integrating the Pakistani economy with China’s and obtaining access to valuable real estate in South Asia that is close to Central Asia and the Gulf,” said Aparna Pande, a research fellow at The Hudson Institute and the author of multiple books.

Ms. Pande’s doctoral dissertation on Pakistan’s foreign policy was published as “Explaining Pakistan’s Foreign Policy: Escaping India.”

Pakistan, a nation with a strategic geography, was carved out of colonial British India in 1947. It cut through the rich and fertile Indus River basin and held in its international and disputed borders some of the most ancient trade routes linking South Asia with the Middle East on the one hand and with China on the other. Its strategic value increased with the increasing militarization of the region. China’s BRI formally entered the country in 2013, with an investment that rose to $65 billion by 2022.

However, despite CPEC’s big promises, for various reasons, Pakistan’s economic situation has only worsened in the past decade. This year, the situation became alarming as inflation rose to 29.4 percent in June—with food prices increasing by 40 percent and transport costs by 20 percent over the previous year, according to a report by the Lowy Institute, an Australian think tank, which forecast that the country’s poverty rate will reach an alarming 37.2 percent.

According to the report, the extra energy produced by CPEC projects can’t be afforded by many Pakistanis, who are “struggling to pay the high electricity prices, just as high fuel prices keep people from traveling on the CPEC-built highways.”

Amid such economic adversity, Pakistan’s reliance on China is increasing by the day. During the third Belt and Road Forum for International Cooperation in Beijing in October, Pakistan’s Prime Minister, Anwaar-ul-Haq Kakar, said Islamabad “will always stand with China” and trust it “blindly.”

“When Pakistan’s PM says Pakistan will trust China blindly, it reflects the widespread view prevalent in large segments of Pakistani society that China is the ‘all weather ally’ who has and will always stand by Pakistan,” Ms. Pande said.

A loaded truck travels through a newly built tunnel in northern Pakistan's Gojal Valley under the CPEC, on Sept. 29, 2015. Aamir Qureshi/AFP via Getty Images

Effect on Ties with the US

Nonetheless, Pakistan’s increasing closeness with Beijing hasn’t served its relationship with the United States. During this month’s trip to the United States by Pakistan’s army chief, Gen. Asif Munir, Washington asked Pakistan to “contain China and maintain peace and trade with India,” according to a report by Foreign Policy.

The United States wants a relationship with the Muslim-majority country of 240 million, Ms. Pande said. Although it has nuclear weapons and terror groups, Pakistan is located in a critical geographical area. However, there are conditions.

“The U.S. has no desire to go back to the heyday of the 1980s or even the early 2000s,” she said. Pakistan was a key strategic partner to the United States during its various military engagements in neighboring Afghanistan.

The situation is complicated, according to Ms. Pande, because today, Pakistan’s strong economic and military bonds with China and its overriding strategic imperative are too strong for it to downgrade its relationship with Beijing.

“The U.S. understands the driving force behind the China–Pakistan relationship, and while the U.S. would like a former ally—Pakistan—to be on the American side of the ledger in this global competition, the U.S. believes that it will be in Pakistan’s interests to do so,” Ms. Pande said.

She says Pakistan would instead like to be able to balance ties with China and the United States in such a way that it gets benefits from both sides.

“That is going to be increasingly difficult as Pakistan builds closer technological and military-intelligence ties with China, as the U.S. does not want to share technology or high-end military with countries which have strong bonds with China,” she said.

Pakistan has also shown interest in more American economic investment, but Ms. Pande said that for that investment to happen, Pakistan would need to provide a favorable economic environment, stable and consistent regulatory policies, promises to abide by contracts, return on investment, and a secure and stable political environment.

“Till that happens, the possibility of large investments by Western countries will be few and far between,” she said.

Foreign media cameramen film the newly manufactured multi-role lightweight fighter aircraft the JF-17 Thunder, jointly built by Pakistan and China, at the Kamra Aero-nautical Complex, 76 kilometers (46 miles) northwest of Islamabad, on March 30, 2007. Aamir Qureshi/AFP via Getty Images

India-Centric Geopolitics

One factor that plays a very important role in the increasing ties between China and Pakistan is Beijing’s desire to contain India in its backyard, according to Ms. Pande.

“China has invested a lot in its relationship with Pakistan, like it has with North Korea, because in both cases China wants to use its partnership with that country against a country it views as its rival,” she said. “In the case of North Korea, China is targeting Japan, and in the case of Pakistan, the target is India.”

When it comes to India and Pakistan, the geopolitical analyst opined that the “historical obstacle” has always been the Pakistani military-intelligence establishment, which views the improvement of relations with India as “antithetical to its interests.”

“Pakistan’s civilian leaders and businesses have, at least since the 1990s, wanted to boost trade with India,” she said. Pakistan has historically ignored American suggestions that Pakistan improve trade relations with India, but it is possible that given Pakistan’s current sustained economic crisis, the Pakistani military may be open to limited trade with India.”

The United States is encouraging both India and Pakistan to increase their bilateral trade so that they can move away from their increasing dependence on China, Ms. Pande added.

“The U.S. also wants countries that have historically had conflict-ridden relations to build economic bonds—using the Franco-German example—which is why the U.S. encouraged South Korea and Japan and has been encouraging Pakistan and India.”