China-Pakistan Economic Corridor, Pakistan Enters China’s “New Silk Road”

China Pakistan Economic Corridor

Now how do you top this as a geopolitical entrance? Eight JF-17 Thunder fighter jets escorting Chinese President Xi Jinping on board an Air China Boeing as he entered Pakistani air space. And these JF-17s were built as a China-Pakistan joint project. Silk Road? Better yet; silk skyway.

Just to drive the point home — and into everyone’s home — a little further, Xi penned a column widely distributed to Pakistani media before his first overseas trip in 2015.
He stressed:

“We need to form a ‘1+4’ cooperation structure with the Economic Corridor at the center and the Gwadar Port, energy, infrastructure and industrial cooperation being the four key areas to drive development across Pakistan and deliver tangible benefits to its people.”

Quick translation: China is bringing Pakistan into the massive New Silk Road(s) project with a bang.

The Chinese Foreign Ministry, also on cue, stressed that Pakistan would be in the frontline to benefit from the $40 billion Silk Road Fund, which will help in financing the Silk Road Economic Belt and Maritime Silk Road projects; or, in Chinese jargon, “One Belt, One Road”, that maze of roads, high-speed rail, ports, pipelines and fiber optics networks bound to turbo-charge China’s links to Europe through Russia, Central Asia and the Indian Ocean.

The Silk Road Fund will disburse funds in parallel with the new Asian Infrastructure Investment Bank (AIIB), which has already enticed no less than 57 countries. China’s assistant foreign minister, Liu Jianchao, has not delved into detailed numbers, but he assures China “stands ready to provide financing.”

So, no wonder Pakistani media was elated. A consensus is also fast emerging that China is becoming “Pakistan’s most important ally” from either West or East.

Beijing’s carefully calibrated commercial offensive mixing Chinese leadership concepts such as harmonious society and Chinese dream with a “win-win” neighbourhood policy seduces by the numbers alone: $46 billion in investment in Pakistan ($11 billion in infrastructure, $35 billion in energy), compared to a US Congress’s $7.5 billion programme that’s been in place since 2008.

The meat of the matter is that Washington’s “help” to Islamabad is enveloped in outdated weapons systems, while Beijing is investing in stuff that actually benefits people in Pakistan; think of $15.5 billion in coal, wind, solar and hydro energy projects bound to come online by 2017, or a $44 million optical fibre cable linking China and Pakistan.

According to the Center for Global Development, between 2002 and 2009 no less than 70% of US aid was about “security” — related to the never-ending GWOT (global war on terror). As a Pakistani analyst wrote me, “just compare Xi’s vision for his neighbours and the history of America in Latin America. It is like the difference between heaven and hell.”

That “X” Factor

At the heart of the action is the China-Pakistan Economic Corridor (CPEC), whose embryo had already been discussed when Prime Minister Nawaz Sharif visited Beijing in the Summer of 2013. The economic corridor, across 3,000 km, will link the port of Gwadar, in the Arabian Sea, not far from the Iranian border, with China’s Xinjiang.

China Pakistan Economic Corridor 1China is already in Gwadar; China Overseas Port Holding Company is operating it for two years now, after helping to build the first phase. Gwadar has been formally opened recently, but a first-class highway and railway linking it to the rest of Pakistan still needs to be built (mostly by Chinese companies), not to mention an international airport, scheduled to open by 2017.

All this action implies a frenzy of Chinese workers building roads, railways and power plants. Their security must be assured. And that means solving the “X” factor; “X” as in Xinjiang, China’s vast far west, home to only 22 million people including plenty of disgruntled Uyghurs.

Beijing-based analyst Gabriele Battaglia has detailed how Xinjiang has been addressed according to the new guiding principle of President Xi’s ethnic policy. The key idea is to manage the ethnic conflict between Han Chinese and Uyghurs by applying the so-called three “J”: jiaowang, jiaoliu, jiaorong, that is, “inter-ethnic contact”, “exchange” and “mixage”.

Yet what is essentially a push towards assimilation coupled with some economic incentives is far from assured success; after all the bulk of Xinjiang’s day-to-day policy is conducted by unprepared Han cadres who tend to view most Uyghurs as “terrorists”.

Many of these cadres identify any separatist stirring in Xinjiang as CIA-provoked, which is not totally true. There is an extreme Uyghur minority which actually entered Wahabi-driven jihadism and has gone to fight everywhere from Chechnya to Syria. But what the overwhelming majority really wants is an economic shot at the Chinese dream.

The Pakistani counterpart to Xinjiang is Balochistan, inhabited by a little over 6 million people. There have been at least three different separatist factions/movements in Balochistan fighting Islamabad and what they call “Punjabis” with a vengeance. Former provincial minister Jaffar Khan Mandokhel, for instance, is already warning there will be a “strong reaction” across Balochistan to changes in the corridor’s routes, which, he says “are meant to give maximum benefit to Punjab, which is already considered the privileged province.” Islamabad denies any changes.

The corridor is also bound to bypass most of the key, northwestern province of Khyber Pakhtunkhwa. Opposition political star Imran Khan — whose party is on top in Khyber — has already condemned it as an injustice.

Beijing, for its part, has been very explicit to Islamabad; the Pakistani Taliban must be defeated, or at least appeased. That explains why since June 2014 the Pakistani army has been involved in a huge military campaign — Operation Zarb-e Azb — againt the Haqqani network and other hardcore militants. The Pakistani army has already set up a special division-sized force — 10,000- strong — to be dedicated by the Pakistan army for the protection of Chinese citizens in Pakistan, and the corridor.

Karakoram or Bust

It will be absolutely fascinating to watch how China and Pakistan, simultaneously, may be able to keep the peace in both Xinjiang and Balochistan to assure booming trade along the corridor. Geographically though, this all makes perfect sense.

Xinjiang is closer to the Arabian Sea than Shanghai. Shanghai is twice more distant from Urumqi than Karachi. So no wonder Beijing thinks of Pakistan as a sort of Hong Kong West, as I examined in some detail here.

This is also a microcosm of East and South Asia integration, and even Greater Asia integration, if we include China, Iran, Afghanistan and even Myanmar.

The spectacular Karakoram Highway, from Kashgar to Islamabad, a feat of engineering completed by the Chinese working alongside the Pakistan Army Corps of engineers, will be upgraded, and extended all the way to Gwadar. A railway will also be built. And in the near future, yet another key Pipelineistan stretch.

Pipelineistan is linked to the corridor also in the form of the Iran-Pakistan (IP) gas pipeline, which Beijing will help Islamabad to finish to the tune of $2 billion, after successive US administrations relentlessly tried to derail it. The geopolitical dividends of China blessing a steel umbilical cord between Iran and Pakistan are, of course, priceless.

The end result is that early in the 2020s China will be connected in multiple ways practically with the mouth of the Persian Gulf. Large swathes of massive China-Europe trade will be able to avoid the Strait of Malacca. China will be turbo-charging trade with the Middle East and Africa. China-bound Middle East oil will be offloaded at Gwadar and transported to Xinjiang via Balochistan — before a pipeline is finished. And Pakistan will profit from more energy, infrastructure and transit trade.

Talk about a “win-win”. And that’s not even accounting for China’s thirst for gold. Balochistan is awash with gold, and there have been new discoveries in Punjab.

New Silk Road action is nothing short than frantic. The Bank of China is already channelling $62 billion of its immense foreign exchange reserves to three policy banks supporting New Silk Road(s) projects; $32 billion to China Development Bank (CDB) and $30 billion to Export-Import Bank of China (EXIM). The Agricultural Development Bank of China (ADBC) will also get its share.

And it’s not only Pakistan; the five Central Asian “stans” — Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan — the countries rich in oil, gas, coal, agricultural land, gold, copper, uranium, are also targeted.

There’s a new highway from Kashgar to Osh, in Kyrgyzstan, and a new railway between Urumqi and Almaty, in Kazakhstan. We may be a long way away from the new high-speed Silk Rail, but trade between, for instance, the mega cities of Chongqing or Chengdu in Sichuan with Germany now moves in only 20 days; that’s 15 days less than the sea route.

So it’s no wonder a “special leading group” was set up by Beijing to oversee everything going on in the “One Road, One Belt” galaxy. The crucial action plan is here. Those who’re about to go silk, we salute you.

China-Pakistan Economic Corridor: Highlights

Chinese Premier Li Keqiang emphasized the construction of the CPEC during his May 2013 visit to Pakistan.

The corridor will connect Gwadar Port in Balochistan (Pakistan) to Kashgar in north-western China, which will make Gwadar a key deep sea port in the region.

Opened for operations in 2007, the control of Gwadar Port was transferred to China’s state-owned China Overseas Ports Holding in February 2013.

When the corridor is constructed, it will serve as a primary gateway for trade between China and the Middle East and Africa.

The corridor is expected to cut the 12,000-kilometre route that Middle East oil supplies must now take to reach Chinese ports.

Major physical infrastructure to be built includes 2,700-kilometre highway stretching from Kashgar to Gwadar through Khunjerab, railways links for freight trains between Gwadar and Khunjerab linking to China and having possible regional connectivity with Afghanistan, Iran and India, and the Karachi-Lahore motorway.

The project will also undertake the revival and extension of the Karakoram Highway that links Xinjiang with Pakistan’s northern region Gilgit–Baltistan and Khyber Pakhtunkhwa.

Besides physical links connecting Pakistan and China, the project also envisages establishing several economic zones along the corridor.

An Energy Planning Working Group of the CPEC has been established that will undertake fast-track implementation of power projects related to the CPEC.

Those projects of 21,690 MW power productions will be undertaken with the assistance of China under the CPEC plan.

The “One Belt, One Road” project to connect inner China with the Middle East and Europe is linked to $33bn worth of energy projects and coal-fired electricity plants and almost $10bn on road and rail projects.

Money received by Pakistan from China for this project is greater than twice the amount of FDI Pakistan has received since 2008. It is also more than the entire assistance from the US which was Pakistan’s largest donor in 2002.

Project will take between 1 to 3 years to complete while infrastructure projects could take between 10 to 15 years to finish.

Job creation and economic growth will be indirect benefits of this project by Pakistan

This marks the first opportunity for Pakistan to change its economic geography since the 1960 Indus Waters Treaty.

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