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  • 23 August, 2022

  • 10 Min Read

China-Pakistan Economic Corridor

China-Pakistan Economic Corridor

China's recent investments in infrastructure projects under its Belt and Road Initiative (BRI) have decreased, while it's short- and medium-term support to partner nations has increased, according to research from the Green Finance and Development Centre.

Outcomes of the report:

Reduced Investments

  • China's engagement in 147 nations through contracts and financial investments totalled $28.4 billion in the first half of 2022, an increase of 47% from the previous year.
  • From $48.5 billion in the same time in 2019, this represented a decrease.

Three distinct tendencies in the BRI were observed in the report:

  • Chinese state-owned enterprises' expanding involvement
  • Project contract sizes decreased on average last year, from $558 million in 2021 to $325 million.
  • An engagement pattern that is becoming more unequal.

Assistance for cooperating nations

  • In the first half of the year, China had no interaction with a number of nations, including Russia, Sri Lanka, and Egypt, while Pakistan had a 56% decline in Chinese engagement.
  • China's international commitment has changed from funding infrastructure to providing emergency relief in the last five years, as seen by the almost $26 billion in short- and medium-term loans it has granted to Pakistan and Sri Lanka alone.

About the CPEC Authority

A 2019 ordinance formed the China-Pakistan Economic Corridor (CPEC) Authority.

Its objectives included quickening the speed of CPEC-related initiatives, identifying fresh sources of growth, and releasing the potential of global value chains and interconnected production networks through regional and international connections.

Suspension grounds:

  • Local protests against the Pakistan Army over land issues have been on the rise in Gilgit Baltistan, which is occupied by Pakistan.
  • The army's "land grabbing" rampage in the name of CPEC has incensed the local populace.
  • The Baloch Liberation Army (BLA), which opposed Chinese investments in Balochistan, carried out a suicide attack in Karachi University in April 2022 that resulted in the deaths of three Chinese.
  • According to reports, China is pressuring Pakistan to allow Chinese agencies to provide protection for its people, but Islamabad is reportedly objecting because it would mean Chinese armed troops would have boots on the ground.
  • Due to the previous administration's modification of taxation policy in contravention of pledges made to China, the CPEC projects were also experiencing delays.

What is the China-Pakistan Economic Corridor?

  • CPEC is a 3,000 km network of infrastructure projects linking the Gwadar Port in Pakistan's western region of Balochistan with the Xinjiang Uygur Autonomous Region in northwest China.
  • It is a bilateral initiative between Pakistan and China that aims to improve connectivity throughout Pakistan by building a network of roads, railroads, and pipelines along with other infrastructure development initiatives in the energy, industrial, and other sectors.
  • China will be able to access the Indian Ocean through Gwadar Port, opening up access to the Middle East and Africa.
  • In exchange, China will finance Pakistani development projects to help Pakistan overcome its energy crisis and stabilize its ailing economy.

The Belt and Road Initiative includes CPEC.

The 2013 launch of the BRI intends to establish a network of land and maritime connections connecting Southeast Asia, Central Asia, the Gulf area, Africa, and Europe.

Concern for India

India's Sovereignty:

  • Since the project crosses through the Gilgit-Baltistan region of Kashmir, which Pakistan claims as its own, India has consistently opposed it.
  • It will also pass nearby Kashmir Valley, which is located on the Indian side of the border, and might lead to the rising of illicit ways of connectivity via the corridor.

Chinese Control of Seaborne Trade:

  • The East Coast of the United States relies on the Panama Canal for trade with China.
  • When CPEC is completely operational, China will be able to provide most North and Latin American businesses with a "shorter and more inexpensive" trading route that avoids travelling via the whole Western Hemisphere.
  • As a result, China will have the authority to determine the rules governing the international trade of products between the Atlantic and Pacific oceans.

Chinese String of Pearls: As part of its "String of Pearls" initiative, China has been stepping up its presence in the Indian Ocean. A term used frequently by Indian defence strategists to describe the Chinese strategy of encircling India with a network of airfields and ports. It was originated by the Americans.

  • With a foothold already in the ports of Bangladesh's Chittagong, Sri Lanka's Hambantota, Sudan's Port Sudan, the Maldives, Somalia, and Seychelles, the Communist country's control of Gwadar port solidifies its total dominance of the Indian Ocean.

Stronger BRI and Chinese Dominance in Trade Leadership:

  • China’s BRI project that focuses on the trading connectivity between China and the rest of Eurasia through a network of ports, roads, and railways has been often seen as China’s plan to dominate the region politically.

Challenges associated with the plan

  • Execution delays: The CPEC projects have experienced delays as a result of the previous administration's violation of obligations made to China by altering its taxation laws.
  • Failure by Pakistan: Pakistan's failure to uphold its contractual responsibilities under the CPEC framework infuriated the Chinese authorities.
  • Financial crisis: China is also concerned about the severe financial crisis Pakistan is currently experiencing, which has prompted it to regularly intervene to help Pakistan out by introducing foreign exchange loans.
  • Earlier, Pakistan criticized the China-Pakistan Economic Corridor (CPEC) for its secrecy and uneven investment, which neglected certain of the nation's provinces.
  • India has voiced disapproval of the CPEC to China as it is being built across Pakistan-occupied Kashmir (PoK)
  • According to a report by the US-based international development research group AidData, a sizable portion of Chinese development financing under the CPEC is made up of loans with interest rates that are at or close to market rates rather than grants.
  • Lack of transparency: The government's accounts do not reflect up to 40% of China's lending to Pakistan.
  • Laxity: Only three of the 15 projects that were announced have been finished so far, and the project is behind schedule.
  • The debt trap in China: Additionally, given the high-interest rates on Chinese loans and Pakistan's weak economic indicators, critics fear that Pakistan may not be able to make its debt repayments

What India can do?

Maintain Communication:

  • According to experts, India should keep in touch with its neighbours and cultivate friendly connections with them.
  • In such a situation, India has done well to continue taking part in organizations like the Shanghai Cooperation Organization in order to keep in touch with both China and Pakistan.

Collaboration across borders:

  • It is well acknowledged that India cannot compete with China in the financing of development initiatives like CPEC in other developing nations.
  • Security worries: Developing nations, particularly those in Southeast Asia, are looking to India to challenge China's predominance in the area.
  • The Indo-Pacific region's power balance needs to be maintained, and India must build on alliances like Quad to achieve this.

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Source: The Indian Express

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