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Role of SCO in the Implementation of OBOR with
the Development of EAEU in Eurasia Asia Maqsood
Silking the China-Pakistan Economic
Corridor (CPEC) Gohar Ali Iftikhar & Shakeel Ahmad
Growing Strategic Relations between China
and Pakistan: An Analysis Syeda Saiqa Bukhari
Journal of Peace and Diplomacy
July 2018
Volume 1, No. 1
Editor
Farhat Asif
Assistant Editor
Saiqa Bukhari
Institute of Peace and Diplomatic Studies
Journal of Peace and Diplomacy
2018
Role of SCO in the Implementation of OBOR with the Development
of EAEU in Eurasia
Asia Maqsood
Abstract
Russia and China both have launched ambitious regional projects in recent
past years which have been promoted as a means to strengthen linkages with
neighboring states. One of them is Eurasian Economic Union in which the
member states joined in an integrated single market facilitating the free
movement of goods, capital, services and labor. The second largest project is
China’s One Belt One Road Initiative which is composed of two parallel
projects; Silk Road Economic Belt and 21st
Maritime Silk Route. This paper
will attempt to explore the role of Shanghai Cooperation Organization in the
implementation of these large scale projects in Eurasian region. It assesses
its role that it can play its role to harmonize the competing interests of the
participating countries along these projects.
Silking the China-Pakistan Economic Corridor (CPEC)
Gohar Ali Iftikhar & Shakeel Ahmad
Abstract
Originated from Chinese Han Dynasty and expanded by Tang Dynasty,
Byzantine and Roman Empires, Old Silk Road connected South and Central Asia
with Europe and Middle East for trade and cultural exchange. After an extensive
retro gradation, being integral part of Xi Jinping’s “China Dream” the road
received an international heed. Having an estimated cost of around 4 Trillion
Dollars, One Belt One Road (OBOR) will connect 50 landlocked countries to
enhance economic integration. Optical Fiber Cable Project has been declared to
be a “digital corridor”. While OBOR’s central enterprise, CPEC will be
strengthening bilateral connectivity between China and Pakistan by linking
Gwadar port to Xinjiang, resultantly, energy sector, road and railway
infrastructure development is ought to explicate the progress of Pakistan, yet, the
fruits wouldn’t ripen overnight. Counting on the challenges at Pakistan’s end,
the fiscal ambiguities, undue-anticipations, provincial competition and
confrontation on Special Economic Zones, Internal security, Cultural concerns,
burden of unserviceable debt, prioritization of development, import of raw
material and labor despite excessive domestic availability and absence of
revenue generation plan are serious questions and concerns regarding this
“Game Changer” project. Pakistan can only yield the benefits of CPEC if the
government recognize and vigilantly fulfill the responsibilities, letting the
provinces, small and medium enterprises seize the opportunities through CPEC.
Growing Strategic Relations between China and Pakistan: An
Analysis
Syeda Saiqa Bukhari
Abstract
China and Pakistan with different ideologies and backgrounds have remarkable
relations. Both countries developed their relations on the bases of mutual interest
rather than ideology. Bilateral cooperation between China and Pakistan is going
on Gwadar project, Free trade, Economic Corridor, Civil nuclear technology,
defence production etc. India has raised concerns over growing cooperation
between China and Pakistan in areas like Gwadar port development, Civil-
Nuclear cooperation, Sino-Pak Economic Corridor and military ties. The growing
cooperation between China and Pakistan has serious impact on Indian Security
and strategic calculations. The ever growing Sino-Pak cooperation has raised
challenges for India because it gives India a possible two front war threat in the
case of clash with either state. India has responded in many ways to the
aforementioned cooperation between the two states. The purpose of this study is to
examine the scope of the strategic relationship of China and Pakistan in South
Asian Region. The main motive of this study would be to identify the growing
strategic relations between China and Pakistan which has raised challenges for
Indian security.
Journal of Peace and Diplomacy Vol. 1 No.1 July 2018
Role of SCO in the implementation of OBOR with the Development of EAEU in Eurasia
Asia Maqsood1
Abstract
Russia and China both have launched ambitious regional projects in recent past
years which have been promoted as a means to strengthen linkages with
neighboring states. One of them is Eurasian Economic Union in which the
member states joined in an integrated single market facilitating the free
movement of goods, capital, services and labor. The second largest project is
China’s One Belt One Road Initiative which is composed of two parallel projects;
Silk Road Economic Belt and 21st
Maritime Silk Route. This paper will attempt to
explore the role of Shanghai Cooperation Organization in the implementation of
these large scale projects in Eurasian region. It assesses its role that it can play
its role to harmonize the competing interests of the participating countries along
these projects.
Eurasia Economic Union (EAEU)
The establishment of Eurasian Economic Union started with several steps. In the very first step,
Russia, Belarus and Kazakhstan formed a Custom Union in 2010 and signed a Declaration on
Eurasian Economic Integration in 2011. Later on they established a Eurasian Economic
Commission through a treaty. This Declaration called for transitioning to the next step of
integration to a Common Economic Space in 2012. Following these initiatives, the presidents of
Russia, Belarus and Kazakhstan signed an agreement establishing a Eurasian Economic Union in
Astana in May 2014 which entered in to force on January 1, 2015. Later on Kyrgyzstan
formalized its membership in August 2015.The EAEU is considered as an international
organization for regional economic integration providing free movement of goods, services,
capital and labor which pursues coordinated, harmonized and single policy in the sectors
determined within the Union. The EAEU is also considered an international organization
endowed with its own legal personality a radical improvement on earlier initiatives.
(Book)/Objectives
1 Asia Maqsood is an independent researcher.
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Institute of Peace and Diplomatic Studies
China’s One Belt One Road Initiative
In recent years both Russia and China initiated two different projects with the objective of the
integration of Eurasian land mass. Russia has established EAEU which has been discussed above
in details with the hopes the hopes to create Russian dominated geopolitical bloc, on the other
hand China have been promoting One Belt One Road (OBOR) initiatives to integrate Eurasia
physically and economically using its financial power.
Throwing light on the OBOR, China’s President Xi Jinping’s ambition is to promote
connectivity from China to Europe which is contemporary is considered as part of China’s
Greater Neighborhood Policy (GNP).2
It has plans to be on front in investments in transport corridors including new rail and road
infrastructure projects. Xi has announced this OBOR initiative initially inn Astana, Kazakhstan
on Sep, 2013 during his tour in Central Asia. He characterized this as an “Economic Belt”
highlighting the China’s investment could bring prosperity in the respective regions. He
differentiated his vision from the Hillary Clinton’s words “New Silk Road” in her speech in
Chennai, by saying it an “Economic Belt”. Later on during Xi’s visit to Indonesia in October,
2014, he announced the will to build a “Maritime Silk Road” of the 21st
Century. This maritime
component of OBOR is expected to stretch across Southeast Asia, the Indian Ocean, Persian
Gulf and the Mediterranean.3 Though the word “road” is an inappropriate term to describe a
maritime corridor and emphasizes China’s claim of historical legacy in the region. since then the
overland “ Economic Belt” and “Maritime Silk Road” are referred to as One Belt One Road and “ Belt and Road” in official documents. The March, 2014 Government Work Report to the National People’s Congress and successive documents have stressed the importance of B& R as a priority of China’s external actions. On March, 2015, Foreign Minister Wang Yi indicated that
the B& R would be the focus of China’s diplomacy in 20154 and would lead to the “rejuvenation
of Eurasian continent”. This initiative reflects the common ideals and pursuits of mankind as a
positive endeavor to seek new ways of international cooperation and global governance and
include the new positive energy into world peace and development.5
China’s Aspirations behind the Building OBOR
2 Wang Yiwei, ‘‘China’s ‘New Silk Road’: A Case Study in EU-China Relations,’’ in Xi’s Policy Gambles: The
Bumpy Road Ahead, ed. A. Amighini and A. Berkofsky, 103–115 (Milan: ISPI, 2015), www.ispionline.it/it/pubblicazione/xispolicy- gambles/
3 Xi Jinping, ‘‘Regulations’’ (speech to Indonesian Parliament, Jakarta, October 2, 2013), http://www.asean-china-center/ 4 ‘‘China’s 2015 Diplomacy Focuses on ‘Belt and Road,”China Daily, March 8, 2015, http://www.chinadaily.com.cn/ china/2015twosession/2015-03/08/content_19750295_2.htm/
5 Nathan Beauchamp-Mustafaga, ‘‘Dispatch from Beijing: PLA Writings on the New Silk Road,’’ China Brief 15
(February 20, 2015), http://www.jamestown.org/single/?tx_ttnews%5Bswords%5D=8fd5893941d69d0be3f378576261ae3e&tx/ _
Journal of Peace and Diplomacy Vol. 1 No.1 July 2018
Various analyst have been raised various rationales for Why China is pursuing OBOR? Some of
them share the view that China often emphasize on the connection between the China’s concerns
over economic development and political stability. China’s Communist Party is concerned with
the safeguarding the political and regime stability by delivering continuous strong economic
growth as Beijing is one of the few remaining communist governments. From this view, OBOR
might be seen as the strategy to ensure economic growth and expansion in short to medium term,
as the Chinese economy undergoes a time period of transition from low-value export model to
model based on domestic consumption and higher value export. to fill this transition, Beijing
needs to ensure secure energy supply routes and open the new market opportunities for both its
volumes of low-value and high- value of goods. Belt and Road Initiative can reinforce and build
new partnerships with energy exporters in Central Asia, the Middle East and Africa.6
It is stated in government official document of 2015 that B&R initiative aims to connect the
vibrant East Asia economic circle on one hand and developed European Economic circle on
other hand.
Secondly, hopefully this mega project would develop new markets for China’s growing
diversified productions which allow Chinese companies to expand. For this purpose the
reduction in transportation costs and lowering tariffs is required for paving the ways for China’s
goods to make more competitive arrival into the foreign markets.
Thirdly, B& R can also be viewed as the updating the previous “GO WEST” strategy. This was
chased in 2000s, was seeking to better connect China’s western provinces to the economic
miracle, taking place in the eastern sea board. Meanwhile it was expected that the security threats
because of Uyghur in Xinjiang province could be eliminated. In this particular context, this
strategy seeks to connect Xinjiang to the rest of China. This would deliver economic
improvements to the whole region including non-Han populations. Thus by incentivizing these
populations as prioritizing them, the political challenges to the CCP’s regional policies can be
overcome.
Fourthly OBOR strategy has been pursuing on wider foreign policy goals. Beijing in the
contemporary international political arena seems to be placing itself as most influential actor on
the international stage. In this context, B&R is important in elaborating China’s views on what
the upcoming international order look like and how it should be governed. This rational is
undoubtedly a direct challenge to the existing international order. This is also be viewed as
establishing a regional leadership position, specifically on East Asia and in response to projects
6 The Silk Road Economic Belt’s Impacts on Central Asia, China US Focus, (2015-05-08), http://www.chinausfocus.com/finance-economy/the-silk-road-economic-belts-impacts-oncentral-asia/(accessed 2015-07-2015).
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Institute of Peace and Diplomatic Studies
such as US-led Transpacific Partnership TPP.7 There are some apprehensions that OBOR as a
means to China’s regional geopolitical security interests. Specifically the land belt is to increase
its geopolitical influence over regions in which it has been peripheral including Europe.8
On the other hand, Maritime Silk Road would secure the vital shipping supply lines, enhance
China’s strategic leverage over the other states claiming on the on-going territorial disputes in
East and South China Sea and growing military interests in the Indian Ocean.9
These geopolitical interests are also linked with the opening of China’s economic miracle; the
accrual of huge currency reserves. Eventually China’s policy makers are said to seek such ways
to make productive usage of these reserves to assist its wider geopolitical interests in using them
to support to OBOR further enhancing China’s role as a major political international actor.
All these rationales discussed above conceivably explain the aspirations behind the OBOR
initiative. However, OBOR could be right now best interpreted as a policy tool with the multiple
objectives that overlap domestic and foreign affairs simultaneously.
A Land Bridge to Europe/ European Perspective
OBOR’s heart is the notion of connectivity between China and Europe specifically land-based
economic belt. It is pertinent to discuss here the China- Europe land bridge by the fact that there
are already several completed projects in this dimension. Chongqing-Duisburg railway line is the
example. The objective of this project is to reduce the shipping time to transport the goods
between China and Europe. There are multiple significant points in establishing such
infrastructure links to connect the flow of commodities between Europe and China. It would
provide greater and easier access to a huge market for European producers. However, it is yet to
be seen that how much benefit could be taken through B &R. coordination in trade is further
intricate to be on the same plat form to agree on the Free Trade Agreement.
In previous year, the Joint Russian-Chinese Declaration on the coordination between EEU and
OBOR shows the possibilities of many routes in the economic belt could go through Russia. This
aspect highlights the security situation of many countries along the alternative southern rout
which bypasses Russia. With reference to the trade imbalances, the OBOR route specifically
land based, is geopolitically difficult from the perspective of European Union. Besides this, the
connectivity between Europe and China seems like a geopolitically a threat because of the
Ukraine’s role as a transit state between Russia/EEU and Europe. Despite this concern, China
encourages the support for OBOR among European Union member states. In this context, the
7 Wang Yiwei, ‘‘Reviving the Silk Road: What Is Behind It’’(lunchtime debate), Madariaga-College of Europe Foundation, Brussels, April 24, 2015.
8 New Silk Road Fact Sheet (Washington, DC: U.S. Department of State, September 22, 2011), http://www.state.gov/r/pa/prs/ps/2011/09/173765.htm// 9 For a good discussion of the land vs. sea debate, see Wu Zhengyu, ‘‘Toward ‘Land’ or Toward ‘Sea’?,’’ Naval
War College Review 66, no. 3 (Summer 2013): 53–66.
Journal of Peace and Diplomacy Vol. 1 No.1 July 2018
EU-China Summit 2015 had incorporated Belt and Initiative into its agenda of cooperation.
Previously, China had formed the 16+1 (China) forum to engage directly with Central and
Eastern European countries which also includes some member countries of European Union.10
This forum provides an opportunity to some of the EU countries to enjoy some benefits from the
Silk Road Economic Belt passing through their territories connecting powerhouses of both China
and Western Europe. In previous year, Hungary was first European country to sign a bilateral
memorandum in the implementation of OBOR based on mutual interest.
China is investing in the construction of a new high-speed railway between Budapest and
Belgrade. Moreover, it has plans to extend this railway link to the Greek port of Piraeus, which
shows significant Chinese investment. It all depends upon how Europe responds towards the
OBOR instead it needs a full debate on this cooperation. It also indicates that it would be
advantageous for the Europeans to have their voices heard in the formative phase of its
development. To this end, the most effective way for all European states to amplify their voice
vis-à- vis OBOR is to coordinate their stances with one another.
Role of SCO in the implementation of these projects and their coordination with the
creation of EAEU
Since the inception of SCO in June 15, 2001, the member states have been working on the
successful mechanism of this organization. Its key characteristic is that it is an organization that
fosters dialogue, regional peace and security. The SCO’s 2002 Charter have outlined the main
areas of cooperation which includes regional security, confidence building measures, exploring
the mutual views on foreign policy issues , joint actions against terrorism, separatism,
extremism, drug trafficking, limiting the transnational crimes, establishing regional economic
cooperation, establish transportation and energy potentials, bring the joint environmental projects
and increase interstate coordination as the top priority fields of cooperation. In contemporary
times China was not an active participant in multilateral regional cooperation projects of SCO for
quite some time. However, today China and Russia along with other SCO member states
maintain closer political and economic engagement and participate in a number of regional
activities jointly. China pursues a consolidated strategy toward the region alongside with
bilateral relations. This strategy has both security and economic dimensions. China’s strategy for
the region pursued through SCO includes the fight against terrorism, extremism and separatism,
maintaining of border security, regional stability, participation in the economic development
activities and access to regional energy resources. China has also begun its “Belt and Road"
initiative, involving many SCO States.11
10 M. Golonka, Partners or Rivals? Chinese Investments in Central and Eastern Europe (Warsaw: Central & Eastern European Development Institute, 2012), 21–22.
11 Ye Zicheng, Inside China’s Grand Strategy: The Perspective from the People’s Republic (Lexington: University
Press of Kentucky), 74.
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Institute of Peace and Diplomatic Studies
Chinese leadership in the SCO is considered to be based on three pillars. The first pillar is the
“Shanghai spirit,” or the principles, which form the conceptual framework for the SCO’s
development. The principles of the "Shanghai spirit", were formulated by the then Chairman of
the People’s Republic of China Jiang Zemin. They include mutual trust, mutual benefits,
equality, respect for different civilizational backgrounds and mutual prosperity. The other two
pillars of Chinese leadership include supporting the continued institutionalization of the SCO and
multilateral projects within the SCO. The discourse is such that most of the SCO members echo
Chinese terminology and speak of a battle against the “three evils” i.e. extremism, terrorism, and
separatism. It has been noted that over the past fifteen years a balance emerged in approaches
within the SCO, concerning the organization’s further development. China promoted closer
economic cooperation with SCO members, while Russia stressed the political and security
aspects of multilateral cooperation. The other SCO member states like Kazakhstan, Uzbekistan,
Kyrgyzstan and Tajikistan supported both approaches, while expressing cautious concern12
.
SCO in the Alignment of SREB and EAEU
According to the Russia’s Valdai Discussion Club experts that SCO is the most important
institute being a platform for international cooperation in Eurasia. It has also huge potential to
become the main platform for the interaction between China and EAEU and it could play a
sufficient role in the planned Greater Eurasian Community project with its active role. Chinese
Premier Li Keqiang and Russian Prime Minister Dmitry Medvedev had signed a Joint
Communiqué on December, 2015 in Beijing that clearly reveals that SCO is the most effective
platform for aligning the construction of Silk Road with the construction of Eurasian Economic
Union. In this context there are various reasons as it provides a facility in strengthening
connectivity in the areas of logistics, transport, infrastructure, intermodal transport, expanding
trade and investment cooperation, optimizing trade structures, rationalization of mutual
investment, development industrial cooperation, ways to simplify trade, improving the ways for
direct investment and lending, easing currency swaps/exchanges, strengthening cooperation
between different financial institutions and cooperation on bilateral plus multilateral forums. It is
important to discuss here that the landmass of the SCO includes all of the area of EAEU member
countries.13
As SCO member states are China, Russia, Kazakhstan, Uzbekistan, Tajikistan,
Kyrgyzstan and newly member states India and Pakistan. It also have observer states (Mongolia,
Belarus, Iran, Afghanistan), six dialogue partner states Turkey, Sri Lanka, Nepal, Cambodia,
Azerbaijan, and Armenia). Thus, these are all important along the path of the Silk Road
Economic belt and 21st
Century Maritime Silk Road. All along these are located in six economic
12
“Fifteen Years of Shanghai Cooperation Organization: Initiating New Regionalism”, available at http://greater-europe.org/archives/2971/ 13 Li Xin, “Chinese Perspective on the Creation of a Eurasian Economic Space” , Center for Russian and Central Asian Studies, Moscow November, 2016, available at file:///C:/Users/Asia/Downloads/importnt.pdf/
Journal of Peace and Diplomacy Vol. 1 No.1 July 2018
corridors which have been outlined in “Vision and Actions on Jointly Building the Silk
Economic Belt and 21st-Century Maritime Silk Road.14
With reference to the previous SCO meetings in November 2013 and September 2014, China’s
Premier Li Keqiang and China’s President Xi Jinping have been stated clearly that all the SCO
member states should take part in the SREB to promote the regional integration and
industrialization process. Moreover, the Ufa Declaration which was issued at the SCO Summit in
Ufa in July, 2015 clearly stated that the member states support the China’s Belt and Road
initiative.15
In December, the Prime Ministers of the SCO stated that the reaffirm their support to
this initiative which is also in line with the goals of the SCO and persuaded that the mutual work
of all the member states with the observer states plus dialogue member states, could facilitate
gradual and stable economic growth to contribute in the regional peace and stability. Belt and
Road’s significant objective is coinciding with the regional economic cooperation that
demonstrates the SCO. The document namely “Vision and Actions on Jointly Building the Silk
Road Economic Belt and 21st
Century Maritime Silk Road” affirms that the construction of
SREB accords with the SCO’s Charter (adopted in 2002) to enhance regional cooperation in
spheres of trade, politics, transport, credit finances, social and cultural development in the region.
This document also cites that the connectivity projects under this initiative would coordinate in
the development strategies of the countries along the Belt and Road, tap market potential in this
region, promote consumption, generation of job opportunities, enhance people to people contact
through cultural exchanges, to develop mutual trust cum respect, and live in a harmonious,
peaceful and prosperous way. Secondly, the SREB is also coinciding with those fields in which
SCO member countries are cooperating aiming at promoting free flow of economic factors with
the efficient allocation of resources, integrated markets which would encourage the countries
coming under this belt to achieve inclusive and balanced regional economic cooperation
architecture which ultimately benefits all. Thirdly, both SCO and the SREB share a sufficient
and identical focus on the integrated infrastructure. The “Declaration of the Heads of State of the
Member States of the Shanghai Cooperation Organization on Building a Region of Lasting Peace
and Common Prosperity,” the SCO member states adhere to the importance of infrastructure
which connects Asia and Europe. Concurrently, the Belt and Road Initiative aims at promoting
the connectivity among three contents; Asia, Europe, Africa.
Fourthly, SCO Charter states that member states adhere to the eminent “Shanghai Spirit” which
is the mutual trust, mutual advantage, equality, respect for cultural diversity and aspiration for
14 Visions and Actions on Jointly Building Silk Road Economic Belt and 21st-Century Maritime Silk Road (Beijing: National Development and Reform Commission, Ministry of Foreign Affairs, and Ministry of Commerce of the
People’s Republic of China, March 28, 2015).
15 Anil Sasi, “Ufa declaration pledges cooperation in counter terrorism, core industries” Indian Express, available at http://indianexpress.com/article/business/business-others/ufa-declaration-pledges-cooperation-in-counter-terrorism-core-industries/
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Institute of Peace and Diplomatic Studies
joint ventures and development. To certain extent, both the SCO and Belt and Road Initiative
focus on economic cooperation in identical areas.
The B&R initiative have concentrated on five aspects which are interconnected namely political
coordination, the interconnection of infrastructure, uninterrupted trade, free movement of
capitals and strong people to people contact. SCO has identified some certain areas of
cooperation in 2001 namely the expansion of the scale of trade and investment, improvement of
trade and investment environment and in trade in investment which eventually would attain
smooth trade flow.
Cooperation in the Security within the SCO
Security has always been an important part of coordination within the SCO. Its member states
had signed the Charter of Shanghai Cooperation Organization along the Shanghai Convention to
combat terrorism, separatism and extremism in June 2001. The member state of this organization
had been signed more than 300 significant security related documents on ten different times
since last 15 years. Along the above mentioned three factors, SCO have been developing
mechanisms for multilateral cooperation and keep benefitting in fighting drug trafficking, border
security issues, cyber security and finance of the terrorism. These efforts showing that the SCO
is contributing significantly as a stabilizing force for the regional peace and security. This is well
known reality that the member states of both SCO and EAEU have been facing the vicious
effects of terrorism, religious extremism, and the rise of ISIS. To eradicate all of these threats, all
the member states are working in their capacity and also in the rehabilitation process in
Afghanistan. It is pertinent to discuss her that mere joint efforts are the prerequisite within the
framework of SCO can ensure the successful implementation of the Belt and Road initiative and
ultimately this can help out in the attainment of the SCO’s objectives of strengthened regional
stability. There are two alignments under the alignment of EAEU and SREB. First is the through
soft infrastructure and second is hard infrastructure. In first category in aligning soft
infrastructures, negotiations between China and EAEU states to align the two developments in
Aug 2016. Even that negotiation became to the point when economic partnership within the
framework of SCO. As Putin suggested that in initial stages such a partnership could focus on
the protection of capital investment, optimized flow of good across the borders, joint ventures in
technological development, equal/mutual access to service and capital markets. At this initial
stage, it was focused on the development of the regulatory environment based on the monitoring
rules. China and Russia are the leading member countries in SCO. The primary objective of this
alignment is to achieve the free movement of commodities, capital, services and technologies
gradually which was targeted till 2020 by SCO in 2001. Through consist efforts and expansion of
SCO, free trade zone could operate by 2025 and in second phase till 2030. This free trade zone
would ultimately transform immensely into a comprehensive economic partnership emanating
from the integration of three platforms which includes SCO, EAEU, BRICS. Russian First
Deputy Economic Development Minister said at the St. Petersburg International Economic
Journal of Peace and Diplomacy Vol. 1 No.1 July 2018
Forums in June 2015 that within the SCO, EAEU and BRICS we are seeking for those economic
factors which could merge or combine all these three major alliance on global scale, uniting them
into one powerful economic engine as one organization having shared economic zone without
peer in the world. This thing prerequisite requires the elimination of the internal barriers to trade
and unrestricted environment to invest and enhanced trade in services, goods, technology,
intellectual property, and resolution of the state-to state conflicts within these organizations.
Following these steps, Economic partnership with ASEAN or as a result of the creation of
Comprehensive Regional Economic Partnership, a greater Eurasian Economic Union can be
achieved by 2040.It is pertinent to discuss here that there are 8 trillion dollars are needed to
bridge the ASEAN countries’ infrastructural gap. 16
Ultimately this proposal of great economic cooperation would create a space to develop a system
of free trade, free movement of capital, common financial markets along with common energy
markets, universal trade rules and integrated transport system. This cooperation will enhance the
standard of living of the masses of the whole region.
Role of Economic Corridors in the Alignment of Silk Road Economic Belt and European
Economic Union
As far as the hard infrastructure is concerned, this refers to the strengthening the physical
connectivity, integrated transport system, energy cooperation and information networks
infrastructures amongst the participating countries in aligning the SREB and EAEU and the
development of the Asia-Europe transport and logistics system for the free flow of commodities,
services, information etc. In this context the Vision and Action document on jointly building the
Silk Road Economic Belt and 21st
Century Maritime Silk Road issued in March 2015, have been
called for the development of six economic corridors which would ultimately open up the
Eurasian Economic Space.17
One of them is the Sino-Mongolian-Russian economic corridor which dovetails with the
development strategies of these three countries and would facilitate the renewal of the Chinese
Northeast route and simultaneously would provide a range of infrastructures in Mongolia which
includes roads, railways, oil and gas pipelines, power lines, the mining of mineral resources and
all along the development of the processing industry. All along it would provide suitable
environment to develop a historic first which is the Trans-Siberian Asia-Europe land bridge that,
together with the Vostok oil pipeline and the Power of Siberia gas pipeline make up the TEPR –
16 ‘‘US $8 Trillion Needed to Bridge ASEAN’s Infrastructure Gap,’’ press release, World Economic Forum http://www.weforum.org/news/us-8-trillion-needed-bridge-aseans-infrastructure-gap/
17 Visions and Actions on Jointly Building Silk Road Economic Belt and 21st-Century Maritime Silk Road (Beijing: National Development and Reform Commission, Ministry of Foreign Affairs, and Ministry of Commerce of the
People’s Republic of China, March 28, 2015).
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which would contribute greatly to the development of Eastern Siberia and the Russian Far East,
and help connect them to the rest of the world.
Furthermore, the construction of Sino-Russian of Northern Sea Route shows an alternative route
to the existing Asian-European maritime transport logistics with the opportunity to exploit the
natural resources of Russia. It is interesting to mention here that with the inclusion or the
participation of the Japan and Korea, this economic corridor would contribute in the regional
economic cooperation in North East Asia.
Another route starting from Xinjiang (China) passing through Kazakhstan, Russia, Belarus and
Poland would extend to the Baltic Sea and Europe would form a new Asian-European
Continental Bridge.( if it passes through or Kyrgyzstan, Uzbekistan, and Turkmenistan), the
Caspian Sea, the Caucasus, the Black Sea, Ukraine and Romania before continuing into Europe).
That corridor would center on Central Asia being a hub for the flow of goods, people,
information, capital and technology. All along it passes through all EAEU member countries
linking the Asia-Pacific economic ring – a modern engine of the world economy with the
European Union – world’s largest developed economy.
The Silk Road Economic Belt starting from the Xinjiang, passing through Kazakhstan (or
Kyrgyzstan, Uzbekistan, Iran, and Turkey and across the Mediterranean Sea to Europe, or else
passing through Iran to the Persian Gulf) would form another economic corridor amongst and
connecting China, Central Asia and Western Asia.
The Silk Road Economic Belt starting from Xinjiang, passing through Pakistan, China Pakistan
Economic Corridor (CPEC) a flagship project under China’s Belt and Road Initiative could turn
toward Iran, creating an important addition to the economic corridor amongst China, Central
Asia, and Western Asia. It also opens the door to the Indian Ocean – not only for Northwest
China, but also provides an access for the EAEU member states.
Through these developments this region ultimately would see the formation of a zone for
economic cooperation and strategic security that starts from Kashgar (Xinjiang) and stretches
3,000 km to Gwadar Port in Pakistan which aims to connect three main economic regions
namely Eastern, Central and South Asia with West Asia through the port of Gwadar.
Another economic corridor under Silk Road Economic Belt starts from southwestern China
passes through Myanmar, Bangladesh and India which boost economic cooperation linking not
only Southern Asia with Central Asia but have strong potential to integrate with Southeast Asia
heading by India. Consequently, an international division for labor which is based on shared
benefits.18
18 K. M. Seethi, ‘‘India’s ‘Connect Central Asia Policy,’’’ The Diplomat, December 13, 2013, thediplomat.com=2013= 12=indias-connect-central-asia-policy/
Journal of Peace and Diplomacy Vol. 1 No.1 July 2018
Another silk road, originating from Southwestern China, passes through Vietnam, Laos,
Cambodia, Thailand and Malaysia through Indochinese peninsula is extended all along to
Singapore. Ultimately, a transnational economic corridor amongst China and member countries
of ASEAN, emphasizing on key or central cities will be formed which would facilitate the flow
of commodities, services and information with the construction of roads, railways and other
forms of transport eventually would pave the way for regional mutual development.
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Silking the China Pakistan Economic Corridor (CPEC)
Gohar Ali Iftikhar1
Shakeel Ahmad2
Abstract
Originated from Chinese Han Dynasty and expanded by Tang Dynasty, Byzantine and Roman
Empires, Old Silk Road connected South and Central Asia with Europe and Middle East for
trade and cultural exchange. After an extensive retro gradation, being integral part of Xi
Jinping’s “China Dream” the road received an international heed. Having an estimated cost of
around 4 Trillion Dollars, One Belt One Road (OBOR) will connect 50 landlocked countries to
enhance economic integration. Optical Fiber Cable Project has been declared to be a “digital
corridor”. While OBOR’s central enterprise, CPEC will be strengthening bilateral connectivity
between China and Pakistan by linking Gwadar port to Xinjiang, resultantly, energy sector, road
and railway infrastructure development is ought to explicate the progress of Pakistan, yet, the
fruits wouldn’t ripen overnight. Counting on the challenges at Pakistan’s end, the fiscal
ambiguities, undue-anticipations, provincial competition and confrontation on Special Economic
Zones, Internal security, Cultural concerns, burden of unserviceable debt, prioritization of
development, import of raw material and labor despite excessive domestic availability and
absence of revenue generation plan are serious questions and concerns regarding this “Game
Changer” project. Pakistan can only yield the benefits of CPEC if the government recognize and
vigilantly fulfill the responsibilities, letting the provinces, small and medium enterprises seize the
opportunities through CPEC. Keywords: CPEC, OBOR, Silking, Retrogradation, Regional Connectivity and Integration
Old Silk Route and “One Belt One Road” OBOR
The origin of the Old Silk Road can be traced back from the reign of the Han Dynasty (206 BC –
1 Gohar Iftikhar is Freelance Researcher.
2 Shakeel Ahmad is Visiting Lecturer - Anthropology, Department of Humanities COMSATS Institute of Information Technology, Lahore.
12
Journal of Peace and Diplomacy Vol.1 No.1 July 2018
220 BC) in China.3The Old Silk Route starts from the coast of East China, crossing Central Asia
and reaches Europe. It was a trade and commerce road that connected South and Central Asia
with Europe and Middle East. Modern day India and Pakistan were also the part of this Silk
Road.4 Resultantly, during that time, Central Asia had become the center that had connected East
and West through trade, commerce and culture. The road was further extended and expanded by
the Tang Dynasty (618- 907), Byzantine and Roman Empires.5 The Old Silk Road began to
abrogate due to new historical development. Firstly, the Mongol invasions and the Crusades
immensely affected trade and commerce. Secondly, in 16th
century, the emergence of maritime
routes and the dependence of Asian and European countries on trade through sea.6 Considering
the ancient routes and trade possibilities, Central Asian countries are economically weak and
dependent.
3 Muhammad Chawla, “Pakistan-China Relations from Distant Past to the Present: A History of the Silk Route,”
Journal of Political Studies 23, no. 2 (2016): 233. 4 Ibid., 233-234.
5 James Mcbride, “Building the New Silk Road,” Council on Foreign Relations, May 22, 2015, https://www.cfr.org/backgrounder/building-new-silk-road (accessed April, 25, 2017).
6Ibid.
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Figure 1: Old Silk Road 7
One Belt One Road (OBOR)
In 2012, Xi Jinping gave the idea “China Dream”.8Its core idea was to promote “the economic
prosperity, nation revival, people’s happiness and social harmony”.9For the manifestation of
“China Dream” One Belt One Road, Silk Road Economic Belt and Maritime Silk Roads are the
main components in fact the integral part for of the dream. The brainchild of Xi Jinping, OBOR,
is called the part of China’s global economic strategy.10
There are two main components of
OBOR. First, the revival of China and the development of the Old Silk Route which is known as
the Silk Road Economic Belt. Second, is sea route starting from east coast of China to India,
from there via Mediterranean Sea to Europe. The China is seeking to establish free trade area in
Central and South Asia like ASEAN. In OBOR, there are total six corridors connecting different
7 Talmiz Ahmad, “Silk Road to (economic) Heaven,” Hearld, June 18, 2016, http://herald.dawn.com/news/1153432 (accessed March 15, 2017).
8 Xing Li and Wan Wang, “The “Silk Road Economic Belt” and “China Dream” Relationship: A Strategy or Tactic,” Sociology Study 5 (March 2015): 169-170.
9 Ibid., 169.
10 A Khattak,"OBOR and CPEC." Dawn, August 24, 2016.
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Journal of Peace and Diplomacy Vol.1 No.1 July 2018
countries and CPEC is one of them. China has planned to invest initial capital of 100 billion
through Asian Infrastructure Investment Bank (AIIB).11
The cost of OBOR is estimated to be
around 4 trillion dollars.12
It is projected that it will become fully functional after at least a
decade and China will be able to generate approximately a trade of 2.5 trillion dollars.
Silk Road Economic Belt
Silk Road Economic Belt is all about the infrastructure development in Central Asia to create
feasible atmosphere and capacity building for economic integration and connectivity.
Infrastructure development includes construction of roads, energy plants and railways. It will
boost up the Chinese economy and it will provide excess to the bigger trade hubs of Europe.13
President Xi announced to invest 30 billion in Kazakhstan, 3 billion in Kyrgyzstan and 15 billion
in Uzbekistan.14
Maritime Silk Road
Maritime Silk Road is the expansion and alternate sea routes passing through the sphere of
Indian Ocean and Persian Gulf. President Xi announced the plans for Maritime Silk Road in
2013 on the forum of Association of Southeast Asian Nations (ASEAN).15
In the 21st
century,
maritime trade is increasing day by day and it is the need of an hour to develop new ports in
different countries. For that purpose, China decided to invest in the development of ports through
Indian Ocean, Pakistan, Sri Lanka, Bangladesh and Maldives. To meet the development, the cost
11 “Our Bulldozers, Our Rules,” The Economist, July 2
nd, 2016, http://www.economist.com/news/china/21701505-
chinas-foreign-policy-could-reshape-good-part-world-economy-our-bulldozers-our-rules (accessed April 16, 2017).
12 Ibid.
13 Xing Li and Wan Wang, “The “Silk Road Economic Belt” and “China Dream” Relationship: A Strategy or Tactic,” Sociology Study 5 (March 2015): 170-171.
14 James Mcbride, “Building the New Silk Road,” Council on Foreign Relations, May 22, 2015, https://www.cfr.org/backgrounder/building-new-silk-road (accessed April, 25, 2017).
15 Ibid.
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of 40 billion dollars Silk Road Fund has been announced.16
Figure 2: Proposed Map of One Belt One Road
17
16 “Our Bulldozers, Our Rules,” The Economist, July 2
nd, 2016, http://www.economist.com/news/china/21701505-
chinas-foreign-policy-could-reshape-good-part-world-economy-our-bulldozers-our-rules (accessed April 16, 2017).
17 Ibid.
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Journal of Peace and Diplomacy Vol.1 No.1 July 2018
Figure: 3
18
China Pakistan Economic Corridor (CPEC)
The China Pakistan Economic Corridor (CPEC) is Chinese investment of 62 Billion Dollars.
Connecting the Chinese markets with Europe, Asia, Africa and CPEC is an essential part of
China’s OBOR vision. The core idea of CPEC is to strengthen bilateral connectivity between
China and Pakistan by connecting Gwadar port to Xinjiang. The distance from Xinjiang to
18 James Mcbride, “Building the New Silk Road,” Council on Foreign Relations, May 22, 2015, https://www.cfr.org/backgrounder/building-new-silk-road (accessed April, 25, 2017).
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Gwadar is almost 3000 km and if China opt the route of East Coast it is even longer. That is why
Gwadar and CPEC are most important part of OBOR due to geo-strategic importance.19
The major projects of CPEC are related to energy sector, roads and railways infrastructure
development. For Pakistan, it is an opportunity to minimize the concentration of electricity crisis.
CPEC is multi-dimensional project and its three main dimensions are transit trade, China
Pakistan Bilateral trade, investment and as a flagship for OBOR.20
In monetary terms, total investment on CPEC is distributed like 25% is equity and 75% is debt
but there are other figures floating and creating confusion.21
There are contradictory figures on
Return on Investment (ROI) and Return on Equity (ROE) from Government side, NEPRA and
newspapers.22
19 Ghulam Ali, China- Pakistan Relations A Historical Analysis (Karachi: Oxford University Press, 2017), 205-206.
20 Ibid., 205-206.
21 Khurram Husain, “CPEC Cost Build-up,” Dawn, December 15, 2016.
22 Ibid.
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Journal of Peace and Diplomacy Vol.1 No.1 July 2018
Table 1: Major Projects of CPEC
No CPEC Chinese Finance Number of Projects
Projects in Different Sectors
1 Energy Sector 17
2 Infrastructure 8
3 Gwadar 12
4 Cross Border Optical Fiber Cable 1
5 Pilot Project of Digital 1
Terrestrial Multimedia Broadcast
6 Rail Based Mass Transit 4
7 Provincial Projects 6
8 Special Economic Zones 9
(Proposed)
Total 60
23
CPEC and Development
There are four main components of CPEC.
Gwadar Port
Gwadar Port can be considered as the backbone of CPEC because of its geostrategic location in
23 China Pakistan Economic Corridor, “CPEC Projects,” http://cpec.gov.pk (accessed October 10, 2016).
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Persian Gulf. Other near seaports are of Dubai and Iran. On East there is a seaport of Oman and
in South Saudi Arabia’s seaports.24
Geographically, all these countries are self-sufficient and no
other country is utilizing their ports. Whereas, Pakistan assists Western China and it has been
assisting landlocked countries of Central Asia for trade. Gwadar port is serving as a transit hub
for Middle East oil supply and is also the part of traditional sea route for trade in Europe.25
Pakistan had joined CPEC considering foreign heavy investment with bonus of development of
infrastructure in the region and admitting the fact that foreign investment leads to higher
economic stability while CPEC brought all those possibilities of bright and stable future of its
economy.
US remained consistent in containing China and her sphere of influence in South Asia by
supporting India. China had to find another way out for her secure survival and greater stability
in all parts of the country.26
Where many of the analytics rejected the move there many of the scholars compared the
development of Gwadar port with that of Hambantota of Sri Lanka.27
It is perhaps the lack of
insight to both the projects as development of Hambantota was a political move and Pakistan
entered to CPEC completely considering the economic motives. And in case of Sri Lanka,
developments were not that magnificent spreading across the country which would help the state
generate resources for payment of loans.28
Gwadar airport similar to Gwadar port holds a great potential of handling mass transit and it will
develop into one of the major commercial-cum-industrial cities of the world. Pakistan would be
24 Ghulam Ali, China- Pakistan Relations A Historical Analysis (Karachi: Oxford University Press, 2017), 206.
25 Ibid., 206-207.
26 MK Bhadrakumar, “Chinese naval ships at Gwadar port call for a rethink of India’s regional policy,” Dawn, November 28, 2016.
27 Irfan Husain, “View from Abroad: White Elephants in Srilanka,” Dawn, March 31, 2017.
28 Ibid.
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able to gain much from all the projects once they all are fully operational. Furthermore, projects
in Gwadar also address long held grievances of the local population of Baluchistan as it will
increase employment and business opportunities.
Figure: 4 Details of Gwadar Port
29
Figure: 6 Importance of Gwadar Port in CPEC 29 “CPEC”,
https://www.facebook.com/CPEC.gov.pk/photos/a.1691060507781743.1073741828.1685144305040030/18750337
29384419/?type=3&theater (accessed March 25, 2017).
21
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Energy Sector
Energy is a vital factor for the implementation of projects, there is a power supply shortage due
to high demand and less supply and it is a big hurdle for better economic growth in Pakistan. The
growth rate of Pakistan’s economy can be increased up-to 6 to 8 percent and energy sector has a
decisive role in it. Consequently, more than 30 billions of dollars has been allocated for the
30
Zofeen Ebrahim, “China’s silk road: What’s in it for Pakistan,” Dawn, April 20, 2015.
22
Journal of Peace and Diplomacy Vol.1 No.1 July 2018
All the projects in energy sector are in IPP (Independent Power Production)
mode.32
Most of the electricity generation projects are early harvest projects which are to be
completed less than two years, and it is estimated that by the end of 2018 there would be
sufficient addition of electricity in the national grid to meet the requirement of the country.
Pakistan has a significant potential to produce electricity through Hydroelectricity projects.
Electricity produced by such source is of more significant owing to number of reasons. The
government and policy makers need to undertake such environment friendly pursuits.
Infrastructure Development
It aims to improve the connectivity of Pakistan with China. In the venture, China and Pakistan
won’t be building new infrastructure rather it will be done through improving existing roads,
constructing missing links and refining railways infrastructure of Pakistan.33
Different Routes
From Khunjrab, Karakorum highway is starting and it is connecting to Dera Ismail Khan, Zhob,
Qilla Saifullah, Quetta and Sohrab. From Sohrab to Gwadar, there was a missing link of about
650 km and it was the main hurdle in the functioning of Western route, Frontier Works
Organization (FWO) is completing the missing link. In All Parties Conference (APC), another
decision was taken to connect Dera Ismail Khan to Burhan to Karakorum Highway (KKH).34
Other route is from Basima to Khuzdar and Sukkar which aims to connect the deprived Baloch
areas to the Eastern route. Eastern Route is starting from Khunjerab to Peshawar, Islamabad,
Lahore, Multan and Sukkur. From this onwards, there are two major roads. First starts from
Sukkar and stretches to Khuzar, Basima, Panjgur, Hoshab to Gwadar. Second begins from
31 Ahsan Iqbal, “Debunking myths on CPEC,” The Express Tribune, May 25, 2017.
32 Ibid.
33 Ibid
34 Ashan Iqbal, “CPEC a Positive Outlook,” The Express Tribune, August 28, 2016.
23
energy sector.31
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Sukkur and links Hyderabad, Karachi, Makran Coastal to Gwadar Port.35
Figure: 7 Road Infrastructure and Developmental Projects
36
Railways
Three major railway routes are planned in which Chinese government would be investing.
35 Ibid.
36 China Pakistan Economic Corridor, “CPEC Maps,” http://cpec.gov.pk/map-single/1 (accessed October 12, 2016).
24
Journal of Peace and Diplomacy Vol.1 No.1 July 2018
ML 1: Karachi to Peshawar via Lahore (More than 70 of cargo and passenger and revenues).37
ML 2: is along the Indus River to Peshawar. (Mostly cargo and frats goes through this route).
3rd
route: from Jacobabad to Quetta which is not that functional.
Figure: 8 38
Controversy and Confusion about routes
Mostly, Eastern route covers Punjab and Sindh and these are the population dense cities of the
country. It was totally a misconception that the ongoing motorway project from Lahore to
37 Ibid.
38 China Pakistan Economic Corridor, “CPEC Maps,” http://cpec.gov.pk/map-single/2 (accessed October 12, 2016).
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Karachi is financed under CPEC. It is the mega project of developmental strategy of planning
commission39
while China has invested in three projects:
1. The missing link of Karakorum Highway (KKH) from Thakot to Burhan.
2. Starts from Multan and stretches to Sukkar.
3. Upgradation of the already existing road from Dera Ismail Khan to Sohrab.
These projects were selected on the principle step by step approach. All other road
developmental projects are payed through Public Sector Developmental Project (PSDP). On
Lahore – Karachi Motorway, the government is spending funds collected on account of toll tax.
Karachi - Hyderabad Motorway construction is on Build Operate Transfer (BOT) basis.
Optical Fiber Cable
The Pakistan-China Fiber Optic Project is one of the most significant project that is likely to be
completed by June 2018 and amounts to US dollars 44 million. 840 km long optic fiber cable is
supposed to pass through Karimabad, Gilgit, Babusar, Naran, Mansehra, and Jarkyas and reach
Rawalpindi city. Territory of Gilgit, KPK and parts of Punjab province will benefit from it.
The very high expectations of Special Communication Organization (SCO) chanting this project to
turn the trade corridor into “Digital Corridor”.40
The joint venture of Huawei - China and SCO
– Pakistan aims at providing safe and secure of foreign intervention passage of voice traffic to
both the countries. Generation of employment opportunities in the areas of Gilgit Baltistan is
also tied to this project. 41
In the final phase, optic fiber line is likely to connect to Gwadar and
finally terminating at Karachi. It will provide a great link from Gwadar to other international
sites. It will also serve the purpose of an alternative to consortium built by Indian companies and
39 Ahsan Iqbal, “Debunking myths on CPEC,” The Express Tribune, May 25, 2017.
40 “Fibre Optic Cable Project to Turn CPEC into a Digital Corridor,” PAK CHINA NEWS, September 20, 2016, http://pakchinanews.pk/optic-fibre-cable-project-to-turn-cpec-into-digital-corridor/ (accessed January 7, 2017).
41 Ibid.
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partners as it involves greater risk for Pakistan’s security.42
Figure: 9 43
Rail Based Mass Transit Project and other Provincial Projects
There are four Rail based mass transit projects in four provinces of Pakistan. The provincial
capitals Quetta, Karachi, Peshawar and Lahore are selected for the development of these
projects. Other provincial projects include development of road infrastructure in Baluchistan,
42 Jamal Shahid, “Army seeks fibre optics cables along CPEC,” Dawn, January 12, 2017.
43 China Pakistan Economic Corridor, “CPEC Maps,” http://cpec.gov.pk/map-single/3 (accessed October 12, 2016).
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Gilgit and Kashmir. Furthermore, there is project design for the development of Keti Bunder Sea
Port, Water supply project in Quetta and lastly Iron Mining and Processing project at Chiniot.44
Special Economic Zones and Industrial Cooperation
Nine economic zones have been planned, one in each of KPK, Baluchistan, Punjab, FATA,
Gilgit Baltistan, Kashmir, Islamabad and two in Sindh.45
There is a controversy regarding
Special economic zones46
as the history of Economic Zones and Industrial Estates in Pakistan
has not been good. Starting from 1950s many economic zones and Industrial Zones were
established. 1952 in Tando Adam Khan, 1954 in Layyah, 1964 Larkana, 1963 Sukkar, 1960
Quetta, 1974 Mardan and since then almost 70 economic zones and Industrial Zones were
established across Pakistan.
Considering the history and the already carried out experiments, few questions are borne in
mind. Is dividing areas under “economic zones” has proved to be fruitful? What difference does
it make? Are they successful and why? What is their contribution in national economic trends?
Above all, how economic zones under CPEC are different than those which already existed?
Would they be successful? Perhaps, it’s a long way before we can get to know the answers of
these questions as the industrial cooperation between both the Pakistan and China is the soul of
CPEC.47
44 China Pakistan Economic Corridor, http://cpec.gov.pk/new-provincial-projects (accessed March 12, 2017).
45 Ahsan Iqbal, “Debunking myths on CPEC,” The Express Tribune, May 25, 2017.
46 Khurram Husain, “CPEC enclaves,” Dawn, January 12, 2017.
47 Ibid.
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Journal of Peace and Diplomacy Vol.1 No.1 July 2018
Table 2: Province Wise Distribution of all Projects of CPEC
No CPEC Balochistan Punjab Sindh KPK Kashmir Gilgit& Common
Chinese Baltistan Projects
Finance (Between
Projects in two
Different Provinces)
Sectors
1 Energy 2 3 7 1 1 3
Sector
2 Infrastructure 1 1 6
3 Gwadar 11
4 Cross Border 1
Optical Fiber
Cable
5 Rail Based 1 1 1 1
Mass Transit
6 Provincial 2 1 1 1 1
Projects
7 Special 1 2 1 1 1 1 (FATA)
Economic 1
Zones (Islamabad)
9 Social Sector 2
Total 17 7 10 2 1 2 13 + 2
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Figure 10: Location and Brief information of all Project 48
48 https://tribune.com.pk/story/887949/china-pakistan-economic-/
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Framework of Working
There is a joint working group on projects of CPEC. It explores and investigates different options
of the projects and possibilities relating to their execution. For the approval of any projects it is
necessary to create consensus between Chinese and Pakistani technical officials. It was decided
in Memorandum of Understanding (MOU) that CPEC will be based on the principle of scientific
planning and step by step approach, taking the easiest path first.49
It will include technical
studies and feasibility reports of all the projects. Hence, the core principle was to be maintained
which both the countries agreed upon. Consequently, in August 2013 first Chinese high profile
delegation came to Pakistan and first session of Joint Cooperation Committee (JCC) was held.
After a year and half blueprints of the projects were approved.
Figure 11: Working of Joint Cooperation Committee
50
49 Ahsan Iqbal, “Debunking myths on CPEC,” The Express Tribune, May 25, 2017.
50 China Pakistan Economic Corridor, “Institutional Framework of CPEC,” accessed October 15, 2016
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Regional Connectivity and Integration
Basically, CPEC is a forward integration to boost up the Chinese economy. From the Chinese
perspective, it is a project of integration and connectivity and it is more like a geo economic
decision. Second, the regional integration of China is a policy choice and regional integration can
be seen as phase of globalizing. Like ASEAN was integrated and its positive impacts are visible
for China and as well as for other members. Third, it is a trans-border cooperation between
Xinjiang to Pakistan’s counterpart region.
From Pakistani Viewpoint, CPEC is opportunity to fulfill 7th
Pillar “Modernization
Transportation Infrastructure and Greater Regional Connectivity” Vision 2025.51
Located in the
center of South Asia, China and Central Asia, Pakistan can perform the role of bridge and to
carve out a regional block by developing infrastructure to connect north and south, east and
west.52
Pakistan is working in the framework of regional connectivity and CPEC is one part of it.
The other part is Central Asia Regional Economic Cooperation (CAREC). There are two
corridors in CAREC. First is from Quetta towards West. Peshawar towards West, which will
connect Afghanistan to Central Asia. The basic aim to create an Economic Block in West Asia is
to promote economic cooperation between China, Central Asian Countries, Afghanistan,
Pakistan and ultimately connection with South Asia.53
51 Ahsan Iqbal, “Debunking myths on CPEC,” The Express Tribune, May 25, 2017.
52 Nazir Hussain, “China Pakistan Economic Corridor and Regional Economic Development Challenges and
Opportunities,” China and Pakistan: Friends in Deed Islamabad: NUST Publication, (2016): 130-131.
53 Ibid,. 131.
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Journal of Peace and Diplomacy Vol.1 No.1 July 2018 54
Geopolitical and Regional Connectivity and Integration
CPEC is of great importance to China for two major reasons. First it can boost economic growth
and expansion of China. Second, the most important, China will get an access through corridor to
West Asia through Gwadar, Central Asia through West Route via Afghanistan and through
Eastern Route to India. All these regions are the potential market for Chinese products. All these
route are to be linked with Xinjiang which is the part of Western China. Furthermore, China is
making road and Railway links in Central Asian (Kyrgyzstan, Tajikistan and Kazakhstan) oil
rich countries. Basically, it is an excess to oil rich markets. Before this initiative, China was
54
CPEC,
https://www.facebook.com/CPEC.gov.pk/photos/a.1691060507781743.1073741828.1685144305040030/17507956 45141562/?type=3&theater (accessed October January 16, 2017).
33
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totally depending on long Maritime sea route of 10000 km only connected to Eastern China. One
of the major setback was to bring consumer goods in and out of Western China considering the
distance which was not that economically feasible. With the CPEC, China will be able to
transport its products from Xinjiang and Kashgar to Central Asian countries and with lower risk
and highly cost effectiveness. Earlier, Chinese trade with the world was dependent on the State
of Malacca and it has small part of sea which is between Indonesia and Malaysia, all the
shipments were carried out through them. It involved great risk to proper functioning of trade
mechanism considering fragility of the ports, little disturbance could end in sabotaging whole
trade flow and plan.
CPEC is likely to counter China’s dependency on Malacca and an availability of alternative to
it.55
US and India has a common interest in politics of South Asia that is to contain China. In
reaction to containment, China is making alternative routes for the survival and growth of
economy to expand her sphere of influence in the region and establish her significance.56
It is a golden opportunity to develop West China. Currently there are long held issues of
economic deprivation and Islamic radicalism in this particular region.57
Through the
development of this corridor, there are bright chances of development of these areas but they will
become a hub between Eastern China, Pakistan and three countries of Central Asia.58
Stability of Afghanistan is a great challenge and there is almost no possibility of transit rights
from Delhi to Kabul. India decided to collaborate with Iran for the development of Chabahar port
but on the same time,59
Iran wants to complete Iran-Pakistan gas pipeline projects. It clearly
55 “Special Report: Can China overcome the Malacca Dilemma through OBOR and CPEC? ,” Global Risk Insights, March 8, 2017 (accessed April 20, 2017).
56 Andrew Small, The China Pakistan Axis Asia’s New Geopolitics (Haryana: Random House India, 2015), 178.
57 Ibid.,168.
58 Ibid., 179.
59 Nazir Hussain, “China Pakistan Economic Corridor and Regional Economic Development Challenges and
Opportunities,” China and Pakistan: Friends in Deed Islamabad: NUST Publication, (2016): 134.
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reflects that Iran doesn’t want total dependency on India.60
In Geostrategic context, for Pakistan, CPEC is an opportunity to minimize the dependence on the
US because if this CPEC becomes operational then it would help out to boost the economy of
Pakistan. Second, the issue of energy is going to be addressed. There is a positive sign that Iran
wants to be part of CPEC. Another main stakeholder is domestic private sector and they have
some concerns over the issue of import of raw material and tax relaxation for the importer and in
that case how a domestic can’t match with them without tax relaxation. All Pakistan needs to do
is to maximize her benefits through CPEC.
CONCLUSION
China Pakistan Economic Corridor (CPEC) holds great significance, historically it was a
traditional and central trade route from China to South Asia, Central Asia, Middle East and
Europe and vice versa. Previously known as the ‘Silk Road’, it has become the center of
attention for developed and developing countries owing to its increasing significance. The mega
plan draws its roots from Xi Jinping’s idea of “China Dream” that is meant to promote “the
economic prosperity, nation revival, people’s happiness and social harmony” of the people of
Republic of China.61
‘One Belt One Road’ (OBOR) is an integral component of the initiatives
incepted in pursuit of the ‘China Dream’. As an outcome of the OBOR, China is expecting its
revival by redeveloping Old Silk Route which is known as Silk Road Economic Belt. This
Global Economic Strategy of China to expand its trade by approaching new markets and
consumer horizons is being viewed and realized differently from across the world. The optimist
ones are inclined to be part of it while the one with fear of the consequences are opposing the
60 Peer Muhammad, ‘Iran agrees to consider being part of CPEC’ Express Tribune, September 2, 2015.
61 Xing Li and Wan Wang, “The “Silk Road Economic Belt” and “China Dream” Relationship: A Strategy or Tactic,” Sociology Study 5 (March 2015): 169.
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Chinese Dream to be realized. Whatever the global or regional response is, the inception has
yielded the greater output by earning an excessive amount of economic-discourse and investment
urge from different states.
Under the umbrella of OBOR, China Pakistan Economic Corridor (CPEC) is one of the total six
corridors connecting different countries. Besides CPEC, Silk Road Economic Belt and Maritime
Silk Road are other important wits. CPEC holds significant value and worth because of its
geostrategic location, this is why it has been declared the flagship project of the OBOR. CPEC
would cater to develop Gwadar port to ensure efficient bilateral trade while it would also
undertake the promotion and development of trade via train. Having a capacity and future of
becoming the trade transit hub, resultantly Gwadar has caused many concerns for neighboring
country India and its ally USA.
Taking into account the domestic concerns over the CPEC, it is widespread among the opponents
that CPEC is more inclined to leave Pakistan burdened with unserviceable debt while further
exposing the fissures in its internal security. Once Pakistan repay the loans it takes from China
under the CPEC, this may worsen the situation, Hambantota initiative of Sir Lanka is quoted as
example in this regards. While the argument is quite substantial as under greater tax exemption
Inability of Pakistan in developing a comprehensive revenue generation plan, demanding right to
transit fee or toll tax and import of raw material has created serious question on this “Game
Changer” project.
Although CPEC is meant to develop the infrastructure by not only upgrading and restoring the
roads, motorways and railway tracks but also by constructing the missing road and track links
between different cities of the country. Yet, there are many domestic concerns and provincial
36
Journal of Peace and Diplomacy Vol.1 No.1 July 2018
reservations over CPEC. The most significant concern besides the establishment of Special
Economic Zone is the prioritizing and concentration on Eastern route of the project as being
given more importance and resources while the Western one is being ignored. There are many
controversies and confusions about the linked projects as it was perceived that Lahore-Karachi
motorway is also being built under the CPEC while it is not true. Yes, mass transit projects in
provincial capitals are the subsidiary of the project under consideration. Despite the intake of
construction of missing link of railway track between Quetta and Peshawar and Quetta and Dera
Ismail Khan, economists and planners still question the viability of economic zones as we have
many failed examples of establishing such zones across the country in past. So, they claim that
CPEC without framing proper mutual framework from planning to revenue generation would
just be a forward integration to boost China’s economy and her policy of Trans-border
cooperation.
Cutting it short and putting it simple, provincial governments need to play active role in making
CPEC’s Special Economic Zones workable. The key for success of CPEC is political stability in
Pakistan especially Baluchistan. Similarly, success of CPEC will comprehensively enhance and
strengthen national security of Pakistan for long terms. It will not be out of the place to mention
that political stability of neighboring countries will matter too. The challenge for state institution
especially the planning and development commission would be to efficiently create our space in
the game of CPEC by not only creating a functioning of interdependence but also by learning
Chinese and knowing the nitty-gritty aspects of the project and associated ventures.
Responsibility also lies upon state institutions not to let anyone influence the planned and agreed
upon spirit of the collaboration, they must be responsible to let the integration and connectivity
prevail, let the economic diplomats play their significant role, let not make the credence
37
Institute of Peace and Diplomatic Studies
doubtful, because we must not give up something that is inevitable. We must be undoubtedly
agreeing that CPEC will only become game changer if Pakistani government acknowledge and
vigilantly fulfil the responsibilities arising from it. So, let the small and medium enterprises seize
the opportunities through CPEC.
CPEC is not the only available solution for problems haunting Pakistan although it will play a
significant and vital role toward regional connectivity, expansion of trade and increased
prosperity. Pakistan is not smitten by economic problems rather is preoccupied with problems of
diverse complicated and complex nature. Thus, seeking all solutions in premise of economic
development is a great folly. Economic stability does provide solution to problems but few issues
need other set of workable plan too. Issues having great link to socio-cultural dynamics cannot
find their solution in disguise of prosperity. Immediately, CPEC will not bring an overnight
change but over a period of time its fruits will be ripped.
One of the important thing that requires due attention is the fact that CPEC is the investment of
China in Pakistan and not an aid. Having said it is an investment, it indicates that there is a
potential economic return, geo-political and geostrategic objectives of the Chinese government in
the region. The opportunity for Pakistan to redefine her role in the region by developing trade
and economic stability cannot be ignored either. One of predicaments of the project is the
unfortunate politicization of the program. Politicians played a passive role in its initial stage and
this led to mass resentments and remained a central point of conflict in the provincial
governments. CPEC has become the agent of political gains in Pakistan and its role in upcoming
general elections of 2018 cannot be ignored.
38
Journal of Peace and Diplomacy Vol.1 No.1 July 2018
The room for conspiracy is created owing to the lack in clarity of the whole project coupled with
non-transparent execution of the project. Unless these issues are addressed, it will continue to
create problems for the project and will remain a tool of political gains. Furthermore, the success
of the project is dependent upon its peaceful functioning. It can serve purpose to attract more
foreign investment by Chinese and other developed economies in the region. In the wake of the
CPEC, Pakistan should turn its foreign policy from geo-security to geo-economics.
39
Journal of Peace and Diplomacy Vol.1 No. 1 July 2018
Growing Strategic Relations between China and Pakistan: An Analysis Saiqa
Bukhari1
Abstract
China and Pakistan with different ideologies and backgrounds have remarkable
relations. Both countries developed their relations on the bases of mutual interest
rather than ideology. Bilateral cooperation between China and Pakistan is going
on Gwadar project, Free trade, Economic Corridor, Civil nuclear technology,
defence production etc. India has raised concerns over growing cooperation
between China and Pakistan in areas like Gwadar port development, Civil-
Nuclear cooperation, Sino-Pak Economic Corridor and military ties. India has
responded in many ways to the aforementioned cooperation between the two
states.
Key Words: Gwadar port, Free Trade Agreement, Defence Production,
Ideology
Introduction
China and Pakistan relations are as old as Pakistan itself. The relationship between People’s
Republic of China and Islamic Republic of Pakistan started at the beginning of Cold War
between USSR (Communism) and USA (Capitalism). At that time, China was an
underdeveloped and isolated state. Pakistan was the first Muslim country that recognized
China in 1950 and developed diplomatic relations in 1951.2
After recognition by Pakistan, both countries gave importance to developed and maintain
trustworthy bilateral relations. The first high-profile contact between China and Pakistan was
at Bandung (Indonesia) conference in 1955.3 Since then, the two Asian neighbors countries
have developed deep rooted friendship and increased their strategic cooperation in the field
of economy, defense, technology, science, education and energy. In the wake of 21st
century,
Sino-Pak strategic partnership is continuously expanding. China is the fourth largest export
market for Pakistan.
Most significant sign of long term strategic cooperation is the Gwadar Port of Pakistan which
is being built with Beijing technical and financial support. At present, Sino-Pak decided to
1 Saiqa Bukhari is Research Associate at Institute of Peace and Diplomatic Studies.
2 Sattar, A. (2007). Pakistan Foreign Policy 1947-2005 A Concise History. Karachi, Oxford University Press.
3 Hussain, A., Ahmad, I. (2013). “Pak-China Diplomatic and Military Relations: An Analysis”. Berkeley Journal of Social Sciences, 3, 1-7.
40
Institute of Peace and Diplomatic Studies
collaborate in the development of Economic Corridor which will connect Xinjiang to
Gwadar. Gwadar port and Economic Corridor have not only increase trade between two
states but may also economically integrate Central Asian Region and South Asian Region in
future. Pakistan was the first South Asian country who signed Free Trade Agreement with
Beijing. China is the second largest trading partner of Pakistan. China also assisted Pakistan
in Civil Nuclear sector since 1989 and both states decided to further boost their cooperation.
China and Pakistan have strong military relations from the last two decades and recent
defence agreements further strengthened this cooperation. Beijing and Islamabad has
involved in number of projects to develop strong defence system e.g. Joint venture of JF-17
aircraft, K-8 Karakorum training aircraft, AWACS system, Al-Khalid tanks. China is also the
largest arms supplier of Pakistan.
Relations between China and Pakistan are growing but have considerable implication for the
India. Sino-Pak Cooperation in the development of Gwadar port and its strategic location has
serious apprehensions for Indian security. Growing cooperation between China and Pakistan
in the establishment of Economic Corridor has also raised Indian concerns because it will
pass through disputed territory of Pakistan. Furthermore, Chinese growing maritime relations
with South Asian states have a threat for Indian hegemony in Indian Ocean Region.
India has responding in many ways as a reaction of Sino-Pak cooperation. India enhanced its
relations with USSR in Cold War. After disintegration of Soviet Union India has focusing on
strong relations with USA. Growing defence budget and modernization of its armed forces
also present India’s reaction. The most significant development in Indian Navy is nuclear
powered submarine Arihant. India support Iran financially for the development of Chabahar
port which is close to Gwadar port of Pakistan.
China-Pakistan Strategic Relations
The Sino-Pak strategic relationship has been based on mutual confidence, trust and
understanding. China and Pakistan are good friends and close neighbors. The former
President of Pakistan Pervez Musharraf in 2006 represented China-Pakistan friendship as
‘deeper than the oceans and higher than the Himalayas’.4 In the same way, the then President
of China Hu Jintao recognized that “Nothing could affect the decades old China-Pakistan
friendship despite the changes in global and regional situation”.5
Sino-Pak Economic Ties
For the last two decades trend of economic globalization have become intensified and states
are searching for economic opportunities globally. Free trade agreements are becoming a 4 Abbas, S. (2011). Regional and Global Scenario and Pak-China Relations”. Journal of political studies, 12 (1), 192-204.
5 Noor-ul-Haq. (2005). “China-Pakistan Relations a Profile of Friendship”. Islamabad Policy Research Institute.
Journal of Peace and Diplomacy Vol.1 No. 1 July 2018
trend in inter-state relations. Sino-Pak Political relations although get more attention, the
economic relations are also remarkable and noteworthy. Generally economic relations are
associated with two forms, one is aid and other is trade. Economic relations are playing very
vital role in determining the foreign policies of the states. Pakistan and China are trading
partner and growing economic ties between them is further strengthening their friendly
relations. In 2008, Chinese former President Hu Jintao said about Pakistan that “China is a
friend and strategic partner which is promoting economic progress and stability in Pakistan”.
In response of this statement former President of Pakistan Asif Ali Zardari in the same year
said that ‘It’s our belief that Pakistan can act as a force multiplier for China and we will
continue to work towards this end’.6
Before partition, trade existed between ancient India and Ancient China through Silk Road.
After the partition of subcontinent, Silk route between China and Pakistan was closed in
1949. After independence Pakistan was searching for a new trading partner to export their
cotton in return of oil, gas, iron and cement. In order to export their products Pakistan
established friendly relations with China and recognized it in 1950 as an independent state
and established formal diplomatic relations in 1951.7
During the Bandung Conference in April 1955, Chinese former Premier Zhou Enlai had a
meeting with Pakistani former Prime Minister Muhammad Ali Bogra and both countries
agreed to promote and enhance their bilateral relations.8 In 1963, a significant border
agreement and first formal Trade Agreement was signed between China and Pakistan.
Generally trade was conducted under 1963 agreement between two countries, according to
which both states gave Most Favored Nation (MFN) status to each other. The relations
between China and Pakistan were restricted to trade and economic till the end of 1964.9
In 1967, Silk route was re-opened for trade between China and Pakistan. In order to establish
a land connection between Beijing and Islamabad, the construction of a road link in 1969
across the Karakorum was started. China played vital role in the construction of Karakorum
Highway which further connected Gilgit Baltistan Region with Kashgar in Xinjiang province
of China. 10
In 1978, Karakoram Highway officially opened. In 1982, October Sino-Pak Joint
Committee of Economy, Trade and Technology were established. In 1996 the then Chinese
President Jiang Zemin visited Pakistan and both countries decided to establish
6 Peiris, V. (2010). “Zardari’s visit strengthens Pakistan-China relations”. World Socialist Web Site. Retrieved from https://www1.wsws.org/articles/2010/jul2010/pakij22.shtml
7 Noor, op.cit., p.
8 Sattar, op.cit., p.45
9 Akhtar, S. (2009). “Sino-Pakistani relations: an assessment”. Institute of Strategic Studies Islamabad (ISSI).
10 Sattar, op.cit., p.67
42
Institute of Peace and Diplomatic Studies
comprehensive partnership. In the beginning of 21st
century trade relations between China
and Pakistan entered into new phase.11
1n October 1999 General Pervez Musharraf took over the government and afterwards
cooperation in economic area become a key factor in China-Pakistan relationship. In 2000,
former President of Pakistan Pervez Musharraf visited Beijing and paid more emphasis on
economic collaboration between two countries, consequently both countries slowly and
gradually improved their cooperation in trade as well as in investment.12
China also gave
response in a positive manner through enhancing trade and economy activities. In 2001,
Chinese premier Zhu Rongji visited Pakistan and insisted to increase collaboration in
technology, infrastructure, and information via following the principle of common goal and
mutual benefits. Zhu Rongji during his visit to Pakistan signed six agreements e.g. Economic
and Technical collaboration, Lease agreement on Saindak Copper-Gold Project, Supply of
Locomotive to Pakistan railways, Tourism cooperation etc., and one Memorandum of
Understanding (MoU) between Chinese Zhong Xing Telecommunication Equipment (ZTE)
and Pakistan Telecommunication Corporation Limited.13
In 16 March 2002, Pakistani
government and Chinese government signed an agreement for the development of Gwadar
Port which was divided into two phases. It was another milestone in the collaboration of
China and Pakistan.14
China has a strategic interest in the development of Gwadar Port because it is heavily relying
on the oil which is coming from the Gulf Region. Presently, oil passes through Indian Ocean
and Malacca Strait which is a very narrow passage and also under the influence of US. In
order to safeguard their interest China supports Pakistan financially for this project. The total
cost of the Gwadar Project was estimated round about $1.16 billion and China gave $198
million to Pakistan for the construction of first phase of the Gwadar Port.15
China also gave
financial support to Pakistan for the development of Makran Coastal Highway which
connects Gwadar with Karachi. Chinese support for Gwadar Port and Makran Coastal
Highway projects has further enhanced economic ties between them. Makran coastal
Highway project will help Pakistan for the promotion of trade and commercial interest.16
General Pervez Musharraf signed “Joint Declaration on Direction of Bilateral Relations”
during his visit to China in November 2003. This declaration was a road map to define the
11 Zeb, R. (2012). “Pakistan-China Relations: Where They Go From Here”( Working Paper No. 29).Retrieved from http://www.redalyc.org/comocitar.oa?id=76724487004
12 Fazal-ur-Rahman. (2011). “Pakistan-China Trade and Investment Relations”. Institute of Strategic Studies Islamabad.
13 Ibid.
14 Shabir & Kazmi. (2007). “Economic Effects of the Recently Signed Pak-China Free Trade Agreement”. The Lahore Journal of Economics.
15 Anwar, Z. (2012). “Gwadar deep sea port’s emergence as regional trade and transportation hub: prospects and problems”. Journal of Political Studies, 1 (2).
16 Noor, op.cit., p.
Journal of Peace and Diplomacy Vol.1 No. 1 July 2018
direction of Sino-Pak bilateral ties in the future years. He further emphasized on enhancing
economic ties between the two states. In the same year “Preferential Trade Agreement”
(PTA) was signed between them in which Pakistan gave concession on 200 Chinese products
and in response China also gave concession on 839 Pakistani items. This agreement would
not only enhance economic and trade relations but also gave help in forming a well balance
trade between two. The real economic engagement between China and Pakistan were started
after this agreement. China and Pakistan took initiatives in order to strengthen and boost
economic relations. Both countries established an institute of joint study group for the
discussion on Free Trade Agreement.17
The former Prime Minister of Pakistan Shaukat Aziz signed seven agreements with Chinese
government in 2004. These agreements were rotated around the bilateral trade, setting joint
agro-based industries, further increasing Chinese investment in Pakistan. Free Market
Economy Status (FME) for China was announced by Pakistan. Preferential trade agreement
became operational in 2004.18
Early Harvest Program was the first step which was taken in
April 2005 in order to enhance economic ties.19
The 21 agreements and MoU were signed between China and Pakistan in April 2005 e.g.
Collaboration in economy, Cooperation in energy sector, Defence and many other fields. The
“Treaty of Friendship, Cooperation and Good Neighbourly Relations” was signed between
them. The “Treaty of Friendship” has great significance for both countries and it also
provides solid foundation for the long term and long lasting relations. According to
Friendship Treaty both countries bound themselves that neither party will join any alliance
which will affect the sovereignty, security and territorial integrity of both countries.20
“Early Harvest Program” came into force in January 2006 in order to encourage bilateral
trade and investment. According to which zero percent tariff on 767 products was reduced by
China and in response Pakistan also reduced tariff on 464 products. It was the first step
towards creating a free trade area between China and Pakistan. In 2006, Chinese President
Hu Jintao visited to Pakistan and signed 18 agreements in which Free Trade Agreement was
included. It covered trade in both i.e. in goods as well as in investment. According to FTA
China and Pakistan cut their tariffs on all the goods in two phases. In first phase tariff was
reduced on specific things which would be completed within next five years and in Phase II
17 Noor-ul-Haq., Khan, N. (2011). “Sixty years of Pak-China diplomatic relations (1951-2011)”. Islamabad Policy Research Institute.
18 Ibid.
19 Shabir & Kazmi. (2007). “Economic Effects of the Recently Signed Pak-China Free Trade Agreement”. The Lahore Journal of Economics.
20 Aneja, U. (2006). “Pakistan-China Relations Recent Developments”. International Peace and Conflict Studies.
44
Institute of Peace and Diplomatic Studies
tariff would be eliminated from 90% of products. After FTA “Early Harvest Program”
merged it.21
Graph 1.1 (Pakistan Bilateral Trade with China) 3500
3000
2500
2000
1500 Exports
1000 Imports
500
0 2000 2001 2002 2003 2004 2005 2006
Year
Kayani et.al, (2013). “China-Pakistan Economic Relations: Lessons for Pakistan”. Pakistan Journal
of Commerce and Social Sciences.
It is obvious from the above graph that from 2000 to 2006 the imports of Pakistan from
China have exceeded the Pakistan’s exports to China. In 2000, the exports were $244.65
million and Imports were $550.11 million. In 2006, the exports were $506.64 million and
imports were $ 2914.93 million.22
The joint efforts by both countries for enhancing trade
relations between them, trade volume between two countries was in constant growth, in 1997
trade volume between two countries was $ 1.07 billion which was further increasing to $3
billion in 2004 and in 2005 it was $4.26 billion. Although the trading relations are further
enhancing but the trade volume is still very low. The trade balance is always in the favor of
China because Pakistan imports more commodities from China than China import from
Pakistan.23
21 Kayani et.al, (2013). “China-Pakistan Economic Relations: Lessons for Pakistan”. Pakistan Journal of Commerce and Social Sciences.
22 Ibid.
23 Jabeen, M. (2012). “Development in Pak-China Strategic Alliances”. Berkeley Journal of Social Sciences, 2 (2), 5-
9.
Journal of Peace and Diplomacy Vol.1 No. 1 July 2018
Graph: 1.2 (China-Pak percentage of growth in trade volume 2001-2010 in
US $100mn)
45.00%
40.00%
39.05%
35.00% 35.00%
30.00%
29.00% 27.70%
25.00% 26.00% 25.00% 23.00% 20.00% 20.00%
Increase 15.00%
10.00%
7.00%
5.00%
0.00% -3.00%
-5.00% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
-10.00%
Source: Hamid, N., Hayat, S. (2012). “The Opportunities and Pitfalls of Pakistan’s Trade with China and other Neighbors”. The Lahore Journal of Economics, 17 (1), 274-79.
In 2008, President of Pakistan Asif Ali Zardari visited China and signed 13 agreements and
one MoU, in order to enhance bilateral economic and trade relations between them. These
agreements were related to economy, trade, energy, health, transportation and agriculture
etc.24
In 2009, Pakistan and China signed a number of agreements and MoU in various fields of
economy. In December 2010 both states signed a $300 million agreement to reconstruct the
Karakoram Highway which was submerged by land sliding.25
In 2010, the China-Pakistan
bilateral trade has increased to $8.7 billion from 1.8billion in 2002, which consider a
significant improvement.26
In 2011, Chinese vice Prime Minister Meng Jian Zhou visited Pakistan and signed six
agreements in which Currency Swap Agreement to further increase their trade and economic
cooperation was included. Additional agreement on Extension of Five Years Development
24 Khan, A. (2014). “Pak-China relations: Adding substance to slogan”. Regional Studies Journal.
25 Rakisits, C. (2012). “Pakistan-China bilateral relations 2001-2011: a deepening but cautious partnership”.
Security challenges, 8 (3), 83-101.
26 Khan, A. (September 24, 2013). “Linkage of Gwadar Port with Karakoram Highway will multiply Pakistan to China”. Pakistan Observer.
46
Institute of Peace and Diplomatic Studies
program on economic and trade collaboration was signed between both countries. China and
Pakistan celebrated 2011 as “China-Pakistan Friendship Year”.27
Moreover in June 2012, China and Pakistan signed three MoUs which covered supply of
water from Tarbela to Islamabad, establishment of Special Economic Zone in new city
Zulfikarabad (Sindh), building of round about 6000 flats and an agreement for the de-silting
of canals and barrages in Sindh.28
Further China and Pakistan signed eight agreements in
2013, in order to cooperate in various fields of economy in order to enhance trade relations
between themselves. In which the most important document was the China-Pakistan
economic corridor, according to which Gwadar Port in southern Pakistan will connect
China’s Western province Xinjiang through Railways and Highways. It will provide the
shortest and direct possible route from Gwadar Port to Chinese Xinxiang province which
plays very crucial role in enhancing economic ties between China and Pakistan.29
This track
will be shorter, safer and provide an alternative to the Sea route to China which passes
through Malacca Strait and Indian Ocean. China and Pakistan have been focusing on trade
cooperation and interaction through this corridor.30
Table 1.1 (2005-2011 Sino-Pak Trade in US $ Million)
Year Exports Imports Trade Balance
2005-06 437 1,843 -1,406
2006-07 548 2,321 -1,773
2007-08 685 3,029 -2,344
2008-09 661 2,708 -2,344
2009-10 1,211 3,284 -2.073
2010-11 1,645 4,145 -2,500
Memon, N. (2012). “Pak-China Trade Relations”. Pakistan Textile Journal.
China Imports from Pakistan increased from $685 million in 2007-08 to $1645
million in 2010-11 which is showing an average growth of 33% per annum. In sum, it can be
said that since the beginning of 21st
century the economic relations are enhancing and the
frequent visits of leaders from both sides shows that they want to boost their economic ties.
27 “Chinese vice prime minister arrives in Islamabad”. (September 26, 2011). Express Tribune.
28 “Pakistan, China sign mutual cooperation agreement”. (September 25, 2012). Express Tribune.
29 Ibid.
30 Shabbir, Op.cit., p. 179-81
Journal of Peace and Diplomacy Vol.1 No. 1 July 2018
Sino-Pak Growing Defence Relations
Growing security concerns and threats from New Delhi and development of its military and
economic supremacy were the compelling factor for Pakistan to search foreign defence
cooperation.31
After 1960’s, China and Pakistan enjoyed a solid strategic ties because US
imposed arms embargos on Pakistan with the wake of 1965 war with India and there was no
other country that helps Pakistan militarily and financially. In 1966, Beijing agreed to
provide equipment for ground forces and MIG aircraft for Air Force of Pakistan. China also
gave $ 60 million for development assistance in 1965, a further $40 million in 1969 and 200
million for the next five year. Beijing emphasized on the transfer of technology to help
Pakistan in getting self-reliance. The Heavy Mechanical Complex, the Heavy Rebuild
Factory, the Kamra Aeronautical Complex and several other projects were developed with
China’s help.32
At that time, Pakistan was completely depending on China for its defence
needs. In 1966 Chinese gave arms to Pakistan with the worth of $133 million in which
Chinese made F-6 fighter planes, T-59 tanks and anti-aircraft guns was also included.33
Beijing also helped Pakistan militarily and economically in the War of 1971. India gets
military assistance from Russia, at that time China’s support for Pakistan created balance
between them. During 1971 to 1978, China supported Pakistan in establishing two mega
projects which were related to defence e.g. building of Heavy Mechanical Factory for the
development of T-59 tanks and other was F-6 Aircraft Rebuild Factory.34
K-8 is a sophisticated and light attack aircraft planned and manufactured by the joint venture
of China and Pakistan. Beijing and Islamabad made a decision to jointly build Karakorum -8
(K-8) in 1986. In 1987, development of K-8 was started. Six K-8s were delivered to Navy of
Pakistan in 1994. Islamabad started development of MBT-2000 Al Khalid tank in 1988.
China-Pakistan signed military agreements in 1989 which included the acquisition of military
goods, joint research and cooperation and transfer of technology.35
An agreement was signed in January 1990 with Beijing to jointly develop, manufacture
system and design.36
In 1991, the spokesperson of Chinese Foreign Ministry said that
Pakistan’s Upper Space and Upper Atmosphere Research Commission and Chinese
Aerospace industry had signed a contract in order to cooperate for peaceful use of space
technology.37
With the execution of Pressler amendment in 1992, USA stopped financial and 31 Sattar,op.cit., p. 53
32 Ibid.
33 Hussian, op.cit., p.5
34 Akhtar, op.cit., p. 77-78
35 Rakisits, op.cit, p.86-7
36 Arthur, G. ( January 28, 2013). “ Main Battle Tanks in Asia”. Defence Review Asia. Retrieved on August 30, 2014.
37 Ali, G. (November 9, 2011). “China-Pakistan Space Technology Cooperation”. East Asia Forum. Retrieved from http://www.eastasiaforum.org/2011/09/09/china-pakistan-space-technology-cooperation/. Retrieved on May 5, 2018.
48
Institute of Peace and Diplomatic Studies
military assistance to Pakistan and at that time Pakistan had no other option except to rely on
Chinese support.38
The hallmark of China and Pakistan defence collaboration was joint
venture of JF-17 aircraft. In 1999, China’s Chengdu Aircraft Company and Pakistan Air
Force signed an agreement for the joint production of JF-17 aircraft.39
The plan was that JF-
17 eventually replaced the A-5C, Mirage III, Mirage 5 and F-7P combat aircraft. The
symbolic importance of joint venture of JF-17 aircraft is that it can be operated set with
Beyond Visual Range Air to Air Missile (BVRAAM) ability.
In 2001, Al-Khalid tank was introduced in Pakistan army and this induction further
strengthened the operating ability of Pakistan military now have more than 300 Al-Khalid
tanks. In order to enhance their military ties Pakistan and China conducted a joint search and
rescue exercise near Shanghai in 2003. In 2005 China and Pakistan concluded a deal in
which China Dockyard in Shanghai which build four F-22P Frigates for Pakistan’s Navy and
also transfer its technology to Pakistan. The JF-17 is a joint China-Pak venture that planned
to reduce Pakistan’s reliance on Western companies for advanced fighters.40
Strategic relations were blossomed when Pakistan signed a $ 600million defence agreement
with Beijing in May 2006. In which Chinese assistance to Islamabad in building four F-22P
frigates for the Pakistan Navy, transference of technology and up gradation of Karachi
dockyard. According to this agreement three ships were constructed in Beijing and one in
Pakistan with China’s assistance.41
In 2008, Beijing and Islamabad signed a deal with the
worth of $278 million for four China’s KJ-2000/ZDK03 airborne early warning aircraft
(AEW). Beijing offered to sell thirty six advanced frontline fighter jet named as Chengdu J- 10 Vigorous Dragon. The easy availability of Chinese made J-10 and J-17 aircraft means that
Islamabad is less dependent on American and Western aircraft to fulfil its Air force
requirement.42
Islamabad planned to buy six submarines from Beijing in order to enhance
and boost its undersea capabilities (The Hindu, March 9, 2011).43
Beijing and Islamabad also signed another agreement in the same year to get existing mutual
military cooperation to new level.44
Soon after the US raid in Abbottabad in May 2011
without giving notification to Pakistan’s government, former Prime Minister Syed Yousaf
Raza Gilani visited China. Beijing was agreed for release of 50 JF-17 aircraft in 2nd
Bach. In 38 Hali, S. (2013, April 10). “Sino-Pak naval cooperation reiterated”. The Nation. Retrieved From http://www.nation.com.pk/columns/10-Apr-2013/sino-pak-naval-cooperation-reiterated.
39 Jetly, R. (2012). “Sino-Pakistan Entente: Implications for Regional Security”. Institute of South Asian Studies. Retrieved from http://www.isn.ethz.ch/DigitalLibrary/Publications/Detail/?id=137392&lg=n
40 Akhtar, op.cit., p. 81
41 Zeb, op.cit., p.51
42 Rakisits, op.cit., p.89
43 44 Zeb, op.cit., p. 53
Journal of Peace and Diplomacy Vol.1 No. 1 July 2018
2011 Beijing officially started the construction of two fast attack missiles crafts for the Navy
of Pakistan.45
In addition, China and Pakistan signed a deal for the introduction of radar controlled guns
and low level air defence radars for the fatal air defence of its important installations.46
In
2011 militaries of two states began joint military exercise named as YOUYI-IV in order to
exchange information and experiences with each other. According to ISPR, joint military
exercise is a brigade level between the armies of two countries.47
In 2012, Mutual Military Cooperation Agreement was signed between General Ma Xiaotion
of China and Pakistani General Ishfaq Pervez Kayani. Pakistan became a valued purchaser of
China’s arms. In order to enhance defence relations both countries are engaged in different
defence deals and agreements. Now all three forces of Pakistan army, Navy and Air force are
well equipped with Chinese weapons structures. Pakistan is the largest importer of arms of
China. They are continuously supporting their friendly neighbour Pakistan in order to
modernize its military.48
In April 2014, joint military exercise between armies of two states
began named as “Peace Angel 2014” in order to further enhance bilateral relations between
militaries of two countries.49
Sino-Pak Cooperation for Energy Security
China is the major partner in energy sector with Pakistan.50
According to the Water and Power
Development Authority of Pakistan, the country is facing power shortage between 3000 to 6000
MW. In order to overcome this power shortage Pakistan and China are cooperating in many
projects. The Diamir Bhasha dam was one step that was taken by Pakistani government to
enhance their energy capability.51
According to the secretary of Ministry of Water and Powers
Himayatullah Khan that Beijing may not be able to give full financial support for the
construction of Basha dam but it can help major portion of funs which is needed for the
construction.52
Chinese agreed to give full financial support for the construction of dam and provided $ 8.5
billion assistance to Pakistan. China has also offered for providing labor for the construction
work. Sino Hydro Corporation a Chinese firm wants to invest in Pakistan through
constructing Kohala hydropower with the capacity of 1100 MW. The Cost of this project is
45 Rakisits, op.cit., p. 91
46 Hali, ibid.
47 Kabraji, R. (2012). “The China-Pakistan Alliance: Rhetoric and Limitations”. Chatham House. Retrieved from http://www.chathamhouse.org/sites/files/chathamhouse/public/Research/sia1212pp_kabraji.pdf
48 “Pakistan, China sign mutual cooperation agreement”. (September 25, 2012). Express Tribune.
49 “Pakistan, China begins joint military exercise”. (April 20, 2014). Dawn.
50 Kayani, op.cit., p.459
51 Fazal-ur-Rehman, op.cit., p.7
52 Bhutta, Z. (December 1, 2012). “Diamer Bhasha Dam: Turned away from elsewhere, government to now knock on China’s doors”. Express Tribune.
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estimated to be $ 2 billion. There are some other energy related programs which were
established with the assistance of Beijing e.g. construction of Allai Khwar hydropower
project, Dubair power station, the Jinnah hydro station, the GomalZam dam and Mangla
dam. Chinese International Water and Electricity Corporation show its intension to invest $
1.7 billion in Pakistan for hydro power generation.53
Pakistan Nuclear Capability and Chinese role
Beijing-Islamabad nuclear collaboration began in 1971. After Indian nuclear explosion in
1974, Pakistan perceived it as a security threat and decided to build nuclear weapon in order
to create balance within South Asia. In 1986 formal civil nuclear cooperation agreement was
signed between China and Pakistan.54
Chinese subsequently helped Pakistan’s government
in the construction of Chashma I and Chashma II nuclear power generation facilities with the
capacity of 300 MW. 55
Beijing supplied heavy water Khusab reactor in 1990’s to Islamabad,
which played significant role in production of plutonium. China also contributed in
Islamabad to enlarge its Uranium enrichment capability through providing 5000 ring magnets
which is used in centrifuges.56
Nuclear cooperation between China and Pakistan gradually increased during 1986 to 1996.57
China assisted in building Pakistan’s nuclear weapon capability and civilian energy program.
China signed a civil-nuclear agreement with Pakistan in 1986 and has subsequently supplied
it with two nuclear power plants. Chashma I became operational in 2001 and Chashma II
inaugurated in 2011.58
Both countries also informed IAEA that they would go for further
expansion of their civil nuclear energy cooperation. In 2009 China and Pakistan signed an
agreement for the construction of Chashma III and Chashma IV. Chashma II was inaugurated
in 2011. In 2013 Sino-Pak decided to build Chashma V power plant.59
In order to deal with
the future challenges, Pakistan decided to start work on two nuclear power plants (Kanupp II
and Kanupp III) in Karachi with the capacity of 1100 MW with the help of Beijing.60
Chashma III and Chashma IV would become operational in 2016 and 2017 respectively.61
53 Fazal-ur-Rahman, op.cit., p.9
54 Ramana, S. (2011). “China-Pakistan Nuclear Alliance”. Institute of Peace and Conflict Studies.
55 Jabeen, op.cit., p.7
56 Akhtar, S. (2009). “Sino-Pakistani relations: an assessment”. Institute of Strategic Studies Islamabad (ISSI).
57 Ramana, op.cit.
58 Jabeen, op.cit., p.9
59 Hamid, N., Hayat, S. (2012). “The Opportunities and Pitfalls of Pakistan’s Trade with China and other Neighbors”. The Lahore Journal of Economics, 17 (1), 274-79.
60 Syed, B. (January 2, 2014). “8,900 MW nuclear power generations planned”. Dawn. Retrieved on August 20, 2014.
61 Hamid, op.cit., p.276
Journal of Peace and Diplomacy Vol.1 No. 1 July 2018
Sino-Pak Diplomatic Ties
In 1951, when China entered into Korean War in order to save their security and sovereignty,
Pakistan was the country who withdrew from resolution of General Assembly, in which they
called China as an aggressor state. This stance of Pakistan for China further strengthened
their relations. In order to enhance their friendly relations, China-Pak signed border
agreement on March 1963.62
In 1965 Pakistan-India war, Beijing extended full assistance to
Islamabad, both implicitly and explicitly. Beijing condemned New Delhi ‘Criminal
aggression’ against Pakistan.63
After the separation of East Pakistan from West Pakistan in 1971, People’s Republic of
China assisted West Pakistan financially and diplomatically. China have used a veto power in
Security Council so that Beijing did not allowed Bangladesh (East Pakistan) to became a
member of United Nations until Pakistan accepted it as a sovereign state in 1973.64
China
always respects the territorial sovereignty, integrity and independence of Pakistan. It always
gave its full support on Kashmir issue in which Pakistan has its rivalry with India. Both sates
are collaborating with each other to create and maintain peace and stability in South Asian
Region. China is always remained supportive state for Pakistan in the time of crises and
played vital role in its development. That’s the reason China-Pak relations are known as
“Higher than Himalayas and deeper than Oceans”.
Sino-Pak Scientific and Technical Cooperation
Technical and scientific collaboration began in 1963 between China and Pakistan. Beijing
and Islamabad has shared wide range of scientific cooperation which covers all sectors such
as energy, health, agriculture, communication, environment, information technology etc.
China-Pakistan has very deep and close collaboration in the sector of science and technology
also. One of the Chinese diplomat in Pakistan embassy said that scientific and technical
partnership between Beijing and Islamabad is being followed under the structure of 1976
agreement on scientific and technical assistance under which mutual advantage has increased
satisfactorily. Through seventeen protocols 300 items of assistance included study visits,
mutual research projects and training programs were started.65
China and Pakistan signed different agreements and protocols in the field of science and
technology. In 1988, Beijing and Islamabad signed protocol for technical and scientific
cooperation in mapping and surveying. Chinese National Natural Science Foundation and
Pakistan’s Science Foundation signed an agreement in 1992 for the cooperation in scientific
62 Hussain, op.cit., p.7
63 Sattar, A. (2007). Pakistan Foreign Policy 1947-2005 A Concise History. Karachi, Oxford University Press.
64 Zeb, op.cit., p.57
65 “Science and Technology Section”. (2013), “Scientific and Technical Cooperation between China and Pakistan”.
Embassy of Peoples Republic of China in Islamic Republic of Pakistan. Retrieved from http://pk.chineseembassy.org/eng/scientechcooperation/t191006.htm.
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field. In 1993 MoU was signed between Pakistan and China in order to enhance their
collaboration in science and technology. Another MoU was signed for the establishment of
fund for the mutual research and development in December 2001. In November 2011, the
most recent protocol was signed between China and Pakistan at Beijing for cooperation in the
area of science and technology.66
Sino-Pak Social and Cultural Cooperation
The two Friendly countries China and Pakistan have close connection in the field of culture.
After the establishment of diplomatic ties, both states have sent cultural groups and held
cultural exhibitions. Cultural cooperation agreement was signed between Beijing and
Islamabad in 1965.67
“Pak-China Friendship Centre” in Islamabad is seen as a sign of both
states commitment to further expand cultural relations.68
In 2003, Education cooperation
program was began between China and Pakistan. Under which Higher Education
Commission of Pakistan selected capable students which would be fully financed by Pakistan
government for MBBS in China.69
In 2008, Beijing and Islamabad signed a MoU for the
establishment of permanent campus of China-Pakistan university of Engineering, Science
and Technology but the university not yet inaugurated. In 2010, during Chinese former
Premier Wen Jiabao visited to Pakistan ‘China-Pak Friendship Centre’ was inaugurated.70
In short, strategic co-operation between China and Pakistan has increasing rapidly. The ever
growing partnership in economy, defence, civil nuclear sector, diplomacy, science and
technology has provided a solid foundation for the future cooperation.
Conclusion
Relations between China and Pakistan have grown admirably since 1950 when Pakistan
recognized China as a sovereign state. Both states supported each other on defence
cooperation, joint venture of weapon system, economic and trade cooperation etc. Economic
relations between Beijing and Islamabad are expanding rapidly and Free Trade Agreement
was signed between them. China and Pakistan have undertaken several economic projects in
Pakistan such as development of Gwadar Port, Coastal Highway links Karachi with Gwadar,
China-Pakistan Economic Corridor, Chashma nuclear power plants. Gwadar port is
constructed with Chinese technical and financial support.
66 Akhtar, J. (December, 2013). “Pakistan China a model of friendly relations between two opposing ideology states”. Associated Press of Pakistan.
67 “China-Pakistan Relations”. (November 14, 2006). China Daily. Retrieved from http://www.chinadaily.com. Retrieved on April 24, 2014.
68 Saddique, Q. (2014). “Deeper than the Indian Ocean? An Analysis of Pakistan-China Relations”. Centre for International and Strategic Analysis. Retrieved from http://strategiskanalyse.no/Publikasjoner%202014/2014-02-27_SISA16_Sino-Pak_QS.pdf
69 Khan, op.cit., p.13
70 Khan, op.cit., p.17
Journal of Peace and Diplomacy Vol.1 No. 1 July 2018
In China-Pakistan Economic Corridor, Gwadar port (Pakistan) will be connected
through Highways and Railway with Xinjiang (China). Both states are focusing on
expanding bilateral economic and trade cooperation. Defence and security is another
important area of cooperation between China and Pakistan.
A landmark agreement between China and Pakistan is the joint venture of JF-17
thunder aircraft. Both states are looking towards future areas of mutual cooperation and
previous mutual agreements are JF-17 aircraft, Al-Khalid tanks, K-8 Karakoram etc.
Another significant area of relationship between China and Pakistan is using nuclear
technology for the peaceful purposes. The development of Chashma I and Chashma II power
plants are the significant example of such cooperation and both states also decided to further
expand cooperation in this sector. Both states wanted to increase bilateral relation in all
spheres.
The ever growing Sino-Pak cooperation has raised challenges for India because it
gives India a possible two front war threat in the case of clash with either state. New Delhi
shows concerns over Chinese involvement and assistance in Gwadar port. As India is of the
view that, port will facilitate both states to look world energy resources and Indian oil
tankers. China-Pakistan cooperation for the development of Economic Corridor has security
implications for India because it may passes through disputed land of Pakistan. Sino-Pak
cooperation for the development of civil nuclear reactor at Pakistan also alarm bells in New
Delhi because according to Indian policy makers that Pakistan is not committed to separate
civil nuclear reactor from military facilities.
New Delhi showing apprehensions over China growing maritime relations with South
Asian states because it may challenge for Indian superiority in Indian Ocean Region.
Growing Sino-Pak defence cooperation has become a source of concerns for India because
both shares mutual rivalry with it. India considers itself as a sandwich between China-
Pakistan nexus.
India has responded as a reaction of Sino-Pak cooperation through increasing
strategic relations with USSR and USA. Despite being a leading member of Non-Alignment
Movement, New Delhi signed “Friendship Treaty” with USSR in order to counter Beijing in
the time of clash with Pakistan. Indo-Soviet treaty is one of the leading examples of Indian
response.
Since the start of 21st
century, India is focusing on strong relations with United State
of America. Both states also signed Civil Nuclear Cooperation which is a significant
agreement in Indo-US relations. India changed its previous military doctrine with Cold Start
in order to react against Pakistan more aggressively and rapidly.
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Development of Gwadar port has some implications for India which it wants to
neutralize by helping Iran for the construction of Chabahar port. India also financially
assisted Iran for the development of land connection from Chabahar port to Afghanistan.
Defence budget of New Delhi rapidly growing from the start of 21st
century. India
modernizes its armed forces with sophisticated weaponry in order to make its defence
stronger. Therefore, to sum up the ever increasing strategic cooperation between China and
Pakistan has a considerable impact on the security policies of India.