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No CPEC 2.0? China gives Pakistan cold shoulder on new major investments

Ahead of Pakistani PM Shehbaz Sharif's China trip, officials in Islamabad had claimed that an upgraded version of CPEC would be formally launched in Beijing

Pakistan Army soldiers in North Waziristan during Operation Zarb-e-Azb in 2015. Image credit: Inter Services Public Relations Directorate (Pakistan)

Pakistan Army soldiers in North Waziristan during Operation Zarb-e-Azb in 2015. Image credit: Inter Services Public Relations Directorate (Pakistan)

Bhaswar Kumar New Delhi
Pakistani Prime Minister Shehbaz Sharif left China nearly empty handed after finishing a five-day official visit this weekend, with Beijing all but pouring cold water on Islamabad's hopes that it was gearing up for another round of major investments in Pakistan, especially through a revival of CPEC.

Sharif was slated to join the formal launch of the second phase of the China-Pakistan Economic Corridor (CPEC-II), during his visit to China starting June 4, Pakistani media had reported last month. Sharif's bid to secure more big-ticket Chinese infrastructure and energy deals comes at a time when Pakistan continues to be in the grips of an economic crisis. This was Sharif's first trip to China since taking office in March.

However, despite meetings between Sharif and his entourage of cabinet ministers and Chinese President Xi Jinping and other top Chinese officials in Beijing, Nikkei Asia reported on Tuesday that the Pakistani side was only able to secure some modest gains.

Claims by Pakistani officials that an upgraded version of the CPEC agreement would be formally launched in Beijing did not materialise, added the report.

Beijing's response was reportedly lukewarm, with the 32-point joint statement issued this weekend revealing that Islamabad was able to secure few concrete gains. In fact, there was only a vague mention of an upgraded China-Pakistan economic cooperation deal in the statement.

"The two sides recognised that CPEC has been a pioneering project of the Belt and Road Initiative," said the joint statement, adding, "After the successful first decade of CPEC, the two sides are committed to carrying out the eight major steps for supporting high-quality Belt and Road cooperation, forging an 'upgraded version' of CPEC by jointly building a growth corridor, a livelihood-enhancing corridor, an innovation corridor, a green corridor and an open corridor."

Formally launched in 2015, the $62-billion CPEC project included the construction of the Gwadar seaport, power plants and road networks across Pakistan. CPEC is a component of China's Belt and Road Initiative (BRI), with the 3,000-kilometre Chinese infrastructure network aiming to connect Pakistan's ports in Gwadar and Karachi to China's Xinjiang Uygur Autonomous Region by land.

Pakistan did manage to secure some modest gains, shows the joint statement. China has agreed to advance the $6.7-billion Main-Line-1 (ML-1) railway project in stages. The project is meant to improve the railway infrastructure between the southern Pakistani port city of Karachi and Peshawar in the country's north in three phases. However, Beijing has only agreed to the project's first phase.

Both sides also arrived at a deal to upgrade a portion of the Karakoram Highway, which connects Pakistan with China through mountainous terrain. Heavy snowfall closes down the highway during winter.

In May, Pakistan had requested an additional $17 billion of Chinese energy and infrastructure projects.

However, according to experts quoted by Nikkei Asia, Beijing's lukewarm response could become the new normal as it cools on investing in Pakistan and in the much-hyped CPEC project.

Speaking to the Japanese publication, Jeremy Garlick, associate professor of international relations at Prague University of Economics and Business, said, "We will not see big investments, nor will we see China (completely) withdrawing from cooperation with Pakistan."

According to Garlick, Beijing has become wary of putting in more money into Pakistan since it knows that it is "a financial black hole" due to "long-term poor economic circumstances".

For example, Pakistan recently called to restructure over $15 billion in power-plant debt owed to Chinese energy producers which operate power plants in the country.

Cash-strapped Pakistan is also negotiating a $6-billion to $8-billion bailout with the International Monetary Fund.

However, Garlick added that "China needs to maintain the facade that CPEC is working".

Mohammad Shoaib, assistant professor at Quaid-i-Azam University Islamabad, told the Japanese publication that further progress on Chinese investments in Pakistan would likely be slow. He added that the situation would remain that way. According to Shoaib, CPEC would continue to be a major enterprise "in terms of rhetoric only".

One of the major challenges for CPEC has been the security situation in Pakistan. On the weekend, Islamabad committed to ensuring the safety of Chinese workers and projects in Pakistan after a string of deadly militant attacks.

Pakistan's reassurance came after it was reported that Beijing was not impressed with Islamabad's efforts to protect Chinese nationals working in Pakistan, despite Pakistani law-enforcement agencies completing the investigation into the Dasu terrorist attack.

The attack, carried out by the Tehreek-i-Taliban Pakistan (TTP) in March, killed five Chinese nationals.

In fact, China has called on Pakistan to carry out a large-scale anti-terrorism operation, similar to the two-year long 'Operation Zarb-e-Azb' launched by Pakistani armed forces in 2014, a piece published by Pakistani publication Dawn revealed earlier this month.

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First Published: Jun 11 2024 | 7:37 PM IST

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