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DAILY NEWS ANALYSIS

  • 07 February, 2023

  • 7 Min Read

China-Pakistan Economic Corridor (CPEC) - Aspire IAS

China-Pakistan Economic Corridor (CPEC)

  • A nuclear reactor worth USD 2.7 billion was commissioned in Pakistan as part of the China-Pakistan Economic Corridor (CPEC), offering some relief as the country struggles with an energy crisis.
  • This 1,100-megawatt power facility will produce some of the least expensive electricity in the country.
  • Recent statewide power disruptions in Pakistan were caused by a national grid malfunction.
  • Blackouts have been a long-standing problem in the nation, which is also dealing with rising energy prices, poor foreign exchange reserves, and pressure on its government budget.

Background of CPEC:

  • By signing a number of memorandums of understanding on economic cooperation in 2013, President Asif Ali Zardari and Premier Li Keqiang vowed to further improve their two countries' connectedness.
  • The Chinese-Pakistan Economic Corridor, which would initially be a part of the Silk Road Economic Belt, was to be created as part of a long-term plan that included these MOUs.
  • China and Pakistan agreed to start working on the $46 billion accord which is 20% of Pakistan's annual GDP

About the China-Pakistan Economic Corridor (CPEC):

  • The multibillion-dollar Belt and Road Initiative (BRI), a pet project of Chinese President Xi Jinping, aims to increase Beijing's influence throughout the world by funding infrastructure projects.
  • The China-Pakistan Economic Corridor (CPEC), which spans 3,000 km, is made up of pipelines, railroads, and roads.
  • Through a large network of roads and railroads, CPEC eventually hopes to connect the city of Gwadar in South Western Pakistan to Xinjiang in North Western China.
  • The proposed project will be paid for with significantly subsidized loans that Chinese banks will give to the Pakistani government.
  • In order to assist Pakistan's economic development as a manufacturing hub by 2030, it seeks to build and upgrade transportation networks, energy projects, the deep-water port at Gwadar, and Special Economic Zones (SEZs).
  • Through a huge network of roads and trains, the CPEC connects Gwadar (in South Western Pakistan) to Kashgar or Kashi in Xinjiang province (China's northwest area).
  • Chinese loans that are significantly subsidized are used to fund CPEC.

The benefit to China:

  • Unique position: Pakistan is strategically important to China because of its location. China might take advantage of Pakistan's potential as a regional crossroads for China, Central Asia, and the Middle East through CPEC.
  • Pakistan's stability is crucial for the success of China's Belt and Road Initiative (BRI).CPEC initiatives are related to Pakistani development, stability, and BRI success.
  • Access Africa & Middle East: Several Chinese businesses are currently working on construction projects in the continent of Africa and the Middle East.
  • There are thousands of Chinese workers working there. Access to those places is made simple by CPEC.
  • The Chinese activities in Africa and the Middle East may intensify as a result.
  • Energy & Economic Security: At the moment, the Malacca Strait is China's sole marine access point to the continents of Africa, the Middle East, and Europe.
  • Due to the delicate situation in the South China Sea, however, the journey is very long and there are risks of a blockage.
  • To get around this, China is looking for alternate channels through Pakistan or Myanmar to ensure the import of oil and to sell its inexpensive commodities.

Pakistan benefits through the project:

  • Economic expansion: Pakistan views the CPEC as a potential tool for enhancing its current economic situation. The largest foreign investment in Pakistan as well as in China has been made through the CPEC. The general economy of Pakistan will grow as a result of improvements to transportation routes, fibre optic connections, and energy supply routes.
  • Energy: Pakistan has been experiencing a significant power deficit, which would be remedied by the proposed power facilities along the economic corridor. The energy initiatives will hasten commercial and economic activities as well.
  • Modernization of the port: As part of CPEC, China is updating the Gwadar port. Pakistan expects that by stabilizing its economy, the port renovation will make it into a regional trans-shipment hub.

Challenges of CPEC for Pakistan and China:

For Pakistan:

  • Baluch insurgents: Because CPEC imperils the region's ethnic diversity, militant organisations in Baluchistan are opposing it. This puts CPEC at risk because the success of the corridor depends on the Baluchistan port of Gwadar.
  • Terrorism: The project is seriously threatened by Pakistan-based, outlawed terrorist groups. Long-term, it might also impact ties with China.
  • Costly loan: The Sri Lankan government has borrowed billions of dollars from China for projects in Hambantota that are also a part of the BRI initiative. Now, Sri Lanka's ability to repay China's huge loans depends on the IMF. Similarly, Pakistan can find itself in a similar predicament if interest rates and other clauses are not disclosed in a transparent manner.
  • Regional Inequities: Since the CPEC is concentrated in a few Pakistani provinces and regions, there are worries about regional disparities in investment and development.
  • Debt Trap: Due to the size of the projects funded by loans from China and Pakistan's capacity to repay these loans, the country's level of debt has come under scrutiny. According to the IMF, China will be Pakistan's largest creditor in 2021, receiving 27.4% of Pakistan's total external debt.
  • Impacts on the Environment: The extensive infrastructure projects that make up the CPEC may have adverse effects on the environment, such as deforestation, a loss of biodiversity, and air and water pollution.
For China:
  • Security Issues: The safety of Chinese employees and the peace in the region provide a significant obstacle to the success of CPEC.
  • Political resistance: There has been opposition from several political parties and organisations that are worried about the project's potential long-term effects on Pakistan's sovereignty as well as the perceived lack of transparency.
India’s concern:
  • Security: There is also concern that the recently built roads in the PoK region near the Indian border may make it easier for Pakistani anti-Indian groups to enter India.
  • Pakistan may become a regional market leader in the textile and construction material industries, which compete directly with those of India in the US and UAE — two of their top three trading partners — as the supply of raw materials from China becomes simpler.
  • Dominance over Eurasia: China's BRI initiative, which aims to increase trade connections between China and the rest of Eurasia through a system of ports, roads, and trains, has frequently been seen as part of China's political dominance strategy in the region.
  • UNSC Seat: As China becomes more accepted and integrated into the world economy, it will have more influence at the UN and with other countries, which might be problematic for India's quest for a permanent seat on the UN Security Council.
  • India formally declared its vehement objection to the CPEC and criticized it for impinging on its sovereignty. The corridor's route through Gilgit-Baltistan in PoK (Pakistan Occupied Kashmir), which India regards to be its territory, is the main source of concern for India. Pakistan's claim to the area would be strengthened by the development of the CPEC.
  • Chinese Control of Seaborne Trade: The East Coast of the United States relies on the Panama Canal for trade with China.
  • Once CPEC is fully operational, China will be able to offer a "shorter and more economical" trade route to the majority of North and Latin American businesses, giving China the authority to determine the conditions under which goods will be transported internationally between the Atlantic and Pacific oceans.
Way Forward
  • India could expedite work on the creation of its own strategic projects, such as the Chabahar Port, Bangladesh, China, India and Myanmar Economic Corridor (BCIM), the Mausam Project, and the Spice Route.
  • The India-Japan economic cooperation deal known as the Asia-Africa Growth Corridor can offer India significant strategic advantages and act as a counterbalance to China.
  • India is a member of the Quad, which consists of the US, Australia, Japan, and India. The Quad can serve as a viable option for nations looking for alternatives to Chinese infrastructure. The Quad's member nations have proposed various possibilities. For instance, the Build Back Better World (B3W) and Blue Dot Network initiatives.

Source: The Indian Express


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