- As China rises globally, Pakistan continues to deepen its economic ties, securing strategic benefits from this partnership
The time proved that China and Pakistan has remained permanent cohorts in various economic, political, and strategic areas. A constant prevailing common — interests of both nations is a permanent feature of this bounding. This leads to self-driven foreign policies of both countries, where they prioritise each other’s interests. Among all East Asian near and far countries, Pakistan has established the solidest acquaintances with China. In the recent past, China has proven itself as the sturdiest and sustainable country, not only in Asia, but across the world. Pakistan has always prioritised in its foreign policy, the geo-strategic relations with China. The reason behind is that China has maintained a balance of power, peace and stability within the region. Even after the emergence of CPEC and BRI, China has established unique abreast connections with Pakistan.
Pakistan’s foreign policy with China encompassed some concrete pillars including sound economic relations, mutual confidence, and foreign investment. The most significance is foreign investment in the areas of need of Pakistan during last decade, since the launch of CPEC. Recent data witnesses that investment inflows have rose to $65 billion, in the areas of mutual cooperation including infrastructure, energy, communication, IT, port/shipping etc. This investment helped Pakistan to cover its energy crisis, which daunted the country’s all economic sectors. Pakistan needs foreign investment to bolster its economy. China has been a major source of investment, and prioritising the economic relationship could attract even more. Both nations are extending utmost priority and concern to each other. Pakistan has a significant amount of debt, and China is a major creditor. A strong economic relationship could lead to more favorable loan terms and debt restructuring.
Chinese investment inflows to Pakistan are increasing manifold, in contemporary different sectors, bio-technology, education, information technology etc. In South Asia, Pakistan is the first nations who signed a free trade agreement (FTA) with China in 2006. During the initial five years of agreement, Pakistan’s exports to China increased manifold which urged both nations to extend FTA further for five years. They have emerged as strong partners now in the fields of energy, technology, value-chain, trade and economic spheres. This is a reflection of Pakistan to prioritise bilateral relations in its foreign policy as well. Several joint ventures in several fields including heavy engineering, Karakoram highway, Gwadar port, Thar coal development, Saindak metal project are part of a long list. Apart from these projects, investment inflows are also still emerging here to support the dwindling economy.
Recently, China is world’s 2nd largest economy followed by USA. It is the largest exporter and importer of goods in the world, total exports surpasses $3.38 trillion and import more than $2.56 trillion in 2023. Pakistan signed first FTA in 2006 for a period of five year from 2006 to 2012. Although the trade remained unfavorable for Pakistan – a deficit, but now China started supporting Pakistan to increase export. Next, second FTA was signed in 2019 to boost bilateral trade, covering more areas and making it essential for both.
Pakistan export $2.7 billion and import $11.7 billion from China with a trade deficit of $9 billion in the year 2023, the deficit is not uncommon in the recent past. China import large amount from the world, where Pakistan’s share is trifling. The phenomena show the priority of our side to prioritize export to China. In spite of bilateral FTA, no encouraging picture emerged in our favor yet. China’s emergence as an economic and trade giant in the world, has liberalise the trade avenues for the world and particularly for Pakistan, however, it depends on Pakistan how it actualizes and is advantageous for us.
Historically, both countries have been resilient strategic partners as well. As a permanent member of the Security Council, China has always been vocalist in favor of Pakistan on political and strategic issues. That’s why the relationships are considered ‘higher than Himalaya, and deeper than the Arabian Sea’. These diplomatic relations have emerged as favourable economic ties to furnish BRI. The BRI as a centerpiece offers significant potential for infrastructure development, job creation, and increased trade in this region, hence global as well.
At the moment, Pakistan requires to negotiate effectively to attain the most out of BRI and CPEC projects, and future investment inflows. This includes ensuring transparency, fair labour practices, political stability, and focus on benefiting local companies. Providing security to CPEC Chinese staff is another challenge to Pakistan. Country needs to address these concerns to ensure the smooth running of project. The USA, EU and other countries remain indispensible strategic and economic partners for Pakistan. Prioritising China too heavily could strain relations with the USA and EU. Pakistan needs to navigate the emerging recent relations carefully. Overall, prioritising the economic agenda in Pakistan’s foreign policy with China holds significant promise for Pakistan’s development. However, careful management is needed to ensure Pakistan gets the most out of the relationship and avoids potential pitfalls.
The author is a Assistant Prof. NUML, Islamabad. (This writeup is based on HEC-funded research project under National Research Programme for Universities – NRPU)