China Targets India and Pakistan to Grow Trade and Investments

The Chinese Prime Minister Mr. Wen Jiabao is on state visits to both India and Pakistan to grow his country's invesment and trade. He has signed deals worth $16 billion in trade with India, and $35 billion in trade and investment with Pakistan this month.

China is now India's largest trade partner, with bilateral trade expected to reach $60 billion during this fiscal year ending March 31, 2011. On Thursday, the two countries set a target for bilateral trade to reach $100 billion by 2015. The bulk of Chinese exports are financed by Chinese banks on attractive terms. And China has invested significantly in many parts of the world including South Asia, more in Pakistan than it has in India.



China is Pakistan’s third largest trading partner with $7 billion in trade in 2009, after the United States and the European Union, while Pakistan is China’s largest investment destination and second biggest trade partner in South Asia.

Currently, China enjoys two-to-one trade advantage with both South Asian nations, with China exporting twice as much as its imports. This large and growing imbalance stems from the fact that India and Pakistan import high-value manufactured products like power generation and telecom equipment from China, while India's biggest export to China is iron ore, and Pakistan's main export to China is cotton yarn.

The Chinese delegation to India and Pakistan was larger than the number in delegations led in recent weeks to India by US President Barack Obama (215), French President Nicolas Sarkozy (more than 60) and British Prime Minister David Cameron (about 40), according to a BBC report. For his Pakistan visit, Mr. Wen was accompanied by dozens of corporate chief executives and 250 business leaders—many of whom were also present during the Chinese leader's visit to India earlier this week, during which he announced economic deals aimed at stabilizing a fragile relationship with New Delhi, according to Wall Street Journal.

India and China signed some 50 deals in power, telecommunications, steel, wind energy, food and marine products worth $16bn at the end of a business conference attended by Mr Wen in the capital, Delhi, on Wednesday evening.

This overtakes the $10bn of agreements signed between Indian and American businesspeople during the recent visit of US President Barack Obama.

In Islamabad, Pakistan, the Chinese Premiere has signed 45 agreements worth $35 billion in just the first two days of his three day visit, approaching the total value ($40 billion) of all of India's agreements signed with China, US, France and Britain during their leaders' recent visits to New Delhi.

Pakistan and China Saturday signed 22 new trade agreements, worth $15-billion, aimed at deepening strategic and economic toes between the two countries, officials told media covering the visit.

These come on the top of another 13 agreements worth around $20 billion signed Friday after bilateral meetings.

The fresh deals were inked at a business summit addressed by Chinese Premier Wen Jiabao and his Pakistani host Prime Minister Yousuf Raza Gilani and attended by business representatives from the two nations.

Gilani said that the corporate and business sectors of both countries must now seize business opportunities offered by Pakistan and take the lead.

Wen urged the investors from his country to invest in Pakistan and help build the economic ties with the traditional Chinese friend.

"We have strong political relations and now we are building economic ties, which can witnessed from the fact that trade has risen from $1 billion in 2000 to $7 billion by 2009," he said.

The state-run Pakistan Television (PTV) said the agreements are expected to bring $25 billion in investments and double the bilateral trade to $15 billion by 2015.

Through their huge investments in Africa and significant commitments in Afghanistan and Pakistan, the Chinese have shown the extraordinary capacity to see great opportunity where others see large risks.

The Chinese know how to do good and do well. They are clearly demonstrating by Mr. Wen's Pakistan visit what they like to call their "all-weather friendship" with Pakistan. The marked shift in focus of this relationship from mostly defense-related deals to broad commerical ties is particularly welcome, given the rise of China as the world's second largest economy after the United States, and a major lender, investor and trading partner of the United States and the European Union.

The positive impact of China-Pakistan business relationship will only be achieved by full implementation of these agreements. Let's hope Pakistanis hold their end of the bargain to realize the full potential of economic ties with the world's fastest growing and the second largest economy.

Related Links:

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China Sees Opportunities Where Others See Risk

Chinese Do Good and Do Well in Developing World

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Food, Fuel Inflation Hits India; Primary Price Index Up 15%, Credit Expansion Up 23%

Comments

Riaz Haq said…
Here are a few excerpts from Christian Science Monitor on Wen Jiabao's visit to Pakistan:

Chinese Prime Minister Wen Jiabao wrapped up a three-day visit to Pakistan on Sunday with a warmly received speech to Parliament that pledged closer strategic ties and lauded Pakistan’s fight against militancy, underscoring Beijing’s commitment to a geostrategic ally a Chinese diplomat recently dubbed “our Israel.”...

The Chinese delegation had already inked trade agreements between the private and public sectors of both countries worth some $30 billion. The trade deals are expected to bring up to $15 billion of desperately needed foreign investment over the next five years to this nation of 180 million struggling to cope with militancy and poverty. Last year, direct foreign investment to Pakistan stood at a 5-year-low of $2 billion. ..

“The timing of the trip is very important. Pakistan is facing difficulties in the region with the Obama review [on Afghanistan] excoriating Pakistan, and Western leaders trooping off to India without visiting Pakistan,” says Mushahid Hussain, an opposition senator and chairman of the Pakistan China Institute think tank. “This trip instills confidence in the Pakistani leadership and the Pakistani nation. Even through these hard times, the world’s second-largest economy is standing with us.”..

Decades of unresolved border disputes after a brief 1962 border war have soured relations between India and China.

Solid Pakistan-China ties
Contrast that with Pakistan, where China has maintained solid ties for six decades. In 1951, Pakistan was among the first countries to recognize the People’s Republic of China founded two years earlier by the Communist party, which still governs China.

Today, China benefits from access to Pakistan’s natural resources, which prompted several bilateral agreements from Wen's trip, including a $400 million loan for post-flood reconstruction, $10 million donation to the flood victims, the widening of the Karokoram highway to facilitate trade, and a pledge to assist Pakistan’s energy sector.
Riaz Haq said…
Indian Bank targets up to 28% credit growth

Inquiring minds are reading Indian Bank targets up to 28% credit growth

According to a top official working with the Indian Bank, the bank has the plans to target the credit growth to around 28 per cent during the current fiscal year as the demand for the credit this year seems to have risen quite a bit.

"We expect a credit growth of 27-28 per cent this year," the Chennai-based bank's Chairman and Managing Director, T M Bhasin, said.

"RBI has always been judicious and its decision to decrease the statutory liquidity ratio by 1 per cent will definitely infuse more liquidity in the system," he said.
The sustained growth assumptions of India and China at about 10% each are simply not going to happen. Both countries are overheating and there is a not so little constraint called peak oil that will get in the way. Should India maintain its rate of growth, do not expect to see any containment in price inflation. The same holds true for China.

For more on China, please see China Hikes Rates, Ponders Capital Controls to Halt Currency Inflows; Eight Reasons China Faces Hard Landing

India and China are going to overheat and crash, or their economic growth is going to slow dramatically, quite possibly both.


http://globaleconomicanalysis.blogspot.com/2010/12/food-fuel-inflation-hits-india-primary.html
Riaz Haq said…
Here are excerpts from a Wall Street Journal Op Ed by Rupa Subramanya Dehejia on potential for India-Pakitan trade:

How does India fit into this picture? And can two nuclear-armed rivals with a fraught relationship meaningfully engage in trade and commerce with each other?

Trade is one of the engines of growth and development but in the case of Pakistan, this potentially important link with India is virtually missing. At present trade is roughly $2 billion a year.

Pakistan accounts for less than 1% of India’s trade and India less than 5% of Pakistan’s trade. Contrast this to the bilateral trade relationship following independence, when 70% of Pakistan’s trade was with India while more than 60% of India’s exports went to Pakistan.

According to Mohsin Khan of the Peterson Institute, economists estimate a “normal” trading relationship would be five to 10 times larger than the current amount.

There is also an estimated $2 billion to $3 billion a year in trade that takes place unofficially through third countries, especially the United Arab Emirates.

If this could be normalized as bilateral trade, it would occur at a much lower cost and therefore greater economic gain.

I’d argue that we must at least try to improve our economic relationship even if the political relationship is still frosty. The great exemplar here is the European Union, which was built on the premise that binding neighbors together economically was a prerequisite for ensuring peace and prosperity for all. We in India have yet to fully absorb this lesson. A prosperous Pakistan will not only be good for Pakistanis themselves but also good for us in India.

It’s time for the liberal commentators on both sides of the border to stop wringing their hands about the demise of a secular liberal democracy, because Pakistan hasn’t been that for some time, if it ever was.

While the support that the Indian intelligentsia has offered their counterparts in Pakistan following the assassination is heart-warming, it’s not consequential in the big picture. Liberals in Pakistan may fight on but it’s time for us in India to accept that Pakistan is an Islamic state with Islamic values and laws.

The crux here is that trade and commerce know no religious boundaries. We must work towards building a stronger bilateral relationship on that basis.
Riaz Haq said…
Here's piece by Michael O'Hanlon of Brookings recommending closer US ties with Pakistan, including free trade deal and nuclear cooperation similar to US-India nuclear deal:

Under these circumstances, part of the right policy is to keep doing more of what the Obama administration has been doing with Pakistan -- building trust, as with last month's strategic dialogue in Washington; increasing aid incrementally, as with the new five-year $2 billion aid package announced during that dialogue; and coordinating militarily across the border region. But Obama also needs to think bigger.

First, he needs to make clear America's commitment to South Asia, to wean Pakistan away from its current hedging strategy. Obama has frequently used general language to try to reassure listeners in the region that there will be no precipitous U.S. withdrawal next summer. But few fully believe him. Hearing stories like Bob Woodward's accounts of how the vice president and White House advisors have generally opposed a robust counterinsurgency strategy in favor of a counterterrorism-oriented operation with far fewer U.S. troops, they worry that next summer's withdrawal will be fast. Obama needs to explain that he will not revert to such a minimalist "Plan B" approach under any imaginable circumstances. More appropriate would be a "Plan A-minus" that involves a gradual NATO troop drawdown as Afghan forces grow in number and capability, without necessarily first stabilizing the entire south and east, should the current strategy not turn around the violence by next summer or so. This would represent a modification to the current plan rather than a radical departure. The president can find a way to signal that this is in fact his own thinking, sooner rather than later -- ideally before the year is out.

Second, Obama should offer Islamabad a much more expansive U.S.-Pakistani relationship if it helps win this war. Two major incentives would have particular appeal to Pakistan. One is a civilian nuclear energy deal like that being provided to India; Pakistan's progress on export controls in the wake of the A.Q. Khan debacle has been good enough so far to allow a provisional approval of such a deal if other things fall into place as well. Second is a free trade accord. Struggling economically, Pakistan needs such a shot in the arm, and a trade deal could arguably do even more than aid at this point.

But the key point is this: Pakistan should be told that these deals will only be possible if the United States and its allies prevail in Afghanistan. Small gestures of greater helpfulness are not adequate; bottom-line results are what count and what are needed. If Afghanistan turns around in a year or two, the deals can be set in motion and implemented over a longer period that will allow the United States to continually monitor subsequent Pakistani cooperation in the war.

It may seem harsh to Pakistan that America would put things in such stark terms -- but in fact, it is not realistic that any U.S. president or Congress would carry out such deals if the United States loses the war in Afghanistan partly due to Pakistani perfidy. As such, these terms are really just common sense, and they are based on political realism about America's domestic politics as well as its strategic interests.

America's current strategy for the war in Afghanistan is much improved. But it is not yet sound enough to point clearly toward victory. The most crucial problem is the role of Pakistan in the war, and so far, the Obama administration is not thinking creatively enough about how to fix it.
Riaz Haq said…
Here's the latest report from Business Recorder on China-Pakistan trade and investment:

ISLAMABAD: The Federal Minister for Finance and Economic Affairs, Dr. Abdul Hafeez Shaikh said that no in-action by line ministry (implementation department) would be allowed in the implementation of the decisions agreed between Pakistan and China during the last visit of Chinese Premier to Pakistan.

This he said while chairing a meeting with Chinese delegation led by Chinese Ambassador to Pakistan Mr. Liu Jian to review the progress in the implementation of the mechanism for the number of projects in which China has pledged to extend technical and financial assistance to Pakistan.

In the post flood Reconstruction Programme, the Chinese Government has pledged to support Pakistan in the reconstruction of a number of projects which included the Grant for Highways and Agriculture, Transport, Energy and Communication, Establishment of China-Pakistan Agricultural Technology Zones, Upgradation of Karakarum Highway and Reallignment of Ataabad Lake, Disaster for Preparedness and Response System and Environment and Ecosystem.

The meeting also deliberated upon the progress in the operationalization and implementation of the agriculture related component under the Economic and Technical Cooperation and reviewed the progress in the finance and banking sector, and the members of the meeting were apprised that the ICBC Industrial and Commercial Bank of China is coming to Pakistan to open its branches in Karachi and Islamabad.

Meanwhile, the meeting also discussed the opening of Pakistan's National Bank of Pakistan Branch in China under the prevalent procedure in the Chinese Banking laws. Under the bilateral trade, China is to send more trade missions to Pakistan, and Pakistani traders to be given access and free space in trade exhibition in the cities of Kashghar, Urmuqi, Kensing and Chengdu.

The Finance Minister asked the concerned officials to give a comprehensive report on the development in this regard.

The other subjects which have been discussed in detail are Pakistan's market access by considering grant of unilateral tariff concession to 228 Pakistani products, launch of second phase of the Pak-China Free Trade Agreement, in the first quarter of 2011, the Establishment of Pakistan China Entrepreneurs Forum, and exploring possibility of establishing trans-border economic zones.

It may be recalled that during last visit of the Chinese Premier to Pakistan, new air routes between Pakistan and China were also agreed to be opened. The meeting also deliberated upon on airport also.

The youth exchange programme was also brought under dicucussion whereby one hundred Chinese and Pakistani youth delegations to visit respective countries to enhance cultural cooperation between the two friendly countries.

Both the sides expressed their satisfaction over the pace of progress in the affore mentioned projects and hoped that if there is any laxity from any quarter shall be overcome with collaboration and coordination with the line ministries and corresponding agencies.
Riaz Haq said…
China has offered to invest about $15 billion in Pakistan’s energy sector projects, according to Dawn News:

A Chinese delegation led by Cao Guanging, chairman of the state-owned China Three Gorges Project Corporation (CTGPC), discussed the Kohala, Bunji, Bhasha, Dashu and other hydropower projects in the upper and lower Indus valley during a meeting with Finance Minister Dr Abdul Hafeez Shaikh on Wednesday.

Dr Hafeez welcomed the offer and said he would try to develop consensus on issues relating to the projects. He said he would consult with the ministries of water and power and law and justice to sort out legal and other issues.

He informed the delegation about the country’s bidding rules and laws and assured it that the bidding process would be held in a transparent manner.

He said the Chinese offer had been discussed at a recent meeting of the Economic Coordination Committee of the cabinet. He said the projects identified by the CTGPC would be taken up with it but only after the completion of procedural matters.

The Chinese offer to provide financial and technical assistance for hydel and wind power projects, upgrade the transmission system and provide an integrated solution to the problems of power shortage and disruptions was elaborated by the CTGPC delegation at the Aiwan-i-Sadr on Wednesday.

Presidential spokesman Farhatullah Babar said in a statement that President Asif Ali Zardari had advised the government to consider tasking the CTGPC with building a run-of-the-river hydro project at Sukkur Barrage and asked Water and Power Minister Syed Naveed Qamar to discuss the project with the sections concerned and prepare a proposal in two months.

The president said that agreements with China ensured full security of Chinese investments in Pakistan. He said the true potential of business partnership between entrepreneurs of the two countries had yet to be fully realised.

Mr Babar said the CTGPC was already involved in a number power projects in the country and offered to build more to address the problems of power shortage. He said the corporation was currently undertaking Karot, Taunsa, Kohala and Bunji hydro-electric power projects. A letter of intent for the 720MW Karot project has been issued after the approval of its feasibility study. The project is currently at the tariff petition stage.

A memorandum of understanding for the 120MW Taunsa hydro-eclectic project has been signed and a development agreement will be signed this month. Mr Babar said the 1,100MW Kohala project was ready for tariff negotiations. A letter of intent for the project has already been issued after the approval of its updated feasibility study.

The 7,100MW Bunji project is ready for site survey. The MoU for the project was signed in August 2009.

Mr Babar said that wind power projects, including Sindh’s first and second wind farms and Punjab’s wind and solar projects, were also in an advanced stage.
Riaz Haq said…
China is opening bank branches in Pakistan as part of trade and investment promotion, according The Nation:

ISLAMABAD (APP) - President Asif Ali Zardari on Friday inaugurated two branches of Industrial and Commercial Bank of China (ICBC) here at a ceremony at Aiwan-e-Sadr.
President ICBC Yang Kaisheng and senior management of the team were present at the ceremony.
Speaking on the occasion, President Zardari said the initiative taken by the Industrial and Commercial Bank of China by opening its branches in Islamabad and Karachi, would begin a new era of cooperation in the banking sector of the two countries.
The opening of ICBC branches will take the economic relations between the two countries to new heights, he added. The President said that the opening of ICBC branches coincided with the anniversary of 60 years of diplomatic relations of Pakistan and China.
The President said by opening bank in Pakistan, Chinese have shown confidence in the financial sector of Pakistan.
He said when the world was passing through a difficult economic phase and the investors were not readily coming forward to make investments, the initiative taken by ICBC was most commendable. The President hoped that ICBC's investment in Pakistan would prove to be profitable and the bank would play a prominent role in channelizing bilateral investments.
The President said the government and State Bank would extend every possible assistance to facilitate ICBC operations in Pakistan. Appreciating tremendous economic progress of China, the President said since becoming President he had visited China six times in order to learn from the Chinese experience of development. "There is so much to learn from the Chinese experience," he remarked.
The President said Pakistan has offered to set up special Chinese investment zones in Pakistan where special tax concessions will be offered. With captive power, tax concessions, low cost labor and access to a huge market the Chinese investors will find Pakistan most profitable place for investment, the President added.
Riaz Haq said…
Emerging market specialist investor Mark Mobius sees investment opportunity in Pakistan as China-Pakistan alliance grows, according to Business Recorder:

Pakistan is set to benefit from its strategic importance to China, which is seeking to cement relationships with countries surrounding India, Franklin Templeton's Mark Mobius said. "They are trying to secure their lines of transport and communication," he said.

"That means Pakistan is quite critical." Mobius said he wants to start investing in Libya in the next 12 months as the oil producer emerges from civil war and looks to outside investment. The country of six million people benefits from oil resources, potential for tourism and a large land area, the veteran emerging markets investor told journalists on Monday, adding that it had a very well-run stock market.
Riaz Haq said…
China has become Pakistan's largest trading partner, replacing the US which slipped to third place, according to Dawn News:

China has emerged as Pakistan’s largest trading partner replacing the US and is being closely followed by the UAE. The US has slipped to third position on the list of the top ten trading partners.

Germany and the UK occupy eighth and 10th slots respectively and Japan is no more on the ten top list. The latest rankings based on the FY11 statistics indicate that Pakistan is doing much more trade within Asia and its reliance on American and European markets is on the decline.
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Emergence of the new rich in China and expansion in middle-income consumers in the Middle Eastearn countries opened up new opportunities for Pakistan to boost trade with all these nations. Moreover, the trade gravity played its part in redirecting our external trade towards South and East Asia including Malaysia and Indonesia.

Small wonder then, that in the last fiscal year seven out of the top ten largest trading partners of Pakistan were all Asians—China, the UAE, Saudi Arabia, Kuwait, Malaysia, Afghanistan and India. And all of them except Saudi Arabia and India showed an improvement in their respective rankings, in a small span of three years.

“Interestingly whereas recession in the US and troubled political relationship between Islamabad and Washington affected growth of bilateral trade, the surge in the US troops in Kabul aimed at winding up the military operation there increased our exports to Afghanistan,” according to a senior official of Trade Development Authority of Pakistan (TDAP). That explains, at least in part, why Afghanistan’s seventh slot among our largest trading partners in FY11.

Our exports to Kabul totaled $2.3 billion in FY11. This growth trend is continuing and in the first five months of this fiscal year, exports to Afghanistan have touched a billion dollars mark------------
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Business leaders say Pakistan’s top bilateral trade partners are changing not just because of economic miracle of China and overall better average economic growth in Asia than in America and in Europe. “Increase in imports from China, for example, is also related to the Chinese investment projects in Pakistan part of which are scaling down American influence,” said a former president of the Federation of Pakistan Chambers of Commerce and Industry.
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India and China are two of the six countries on the list of the top ten trading partners with whom Pakistan runs trade deficits.
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The other four are the UAE, Saudi Arabia, Kuwait and Malaysia. Whereas Pakistan imports large amounts of costly fuel oil from the first three countries, it runs trade deficit with Malaysia primarily due to huge import bills of palm oil.
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With four countries out of the ten largest trading partners, Pakistan boasts of a trade surplus. These are the US, Afghanistan, Germany and the UK. “Whereas it is easier to retain Afghanistan as a major export market and it is encouraging that Bangladesh has emerged as a billion-dollar market for our products, the US, Germany, the UK and other European countries are equally important for sustained growth in overall exports,” remarked chairman of Pakistan Bedwear Exporters Association Mr. Shabbir Ahmad. He and many other exporters believe that normalisation of political relationship with the US and continuing of efforts to win trade concessions in European Union are required for keeping exports on a high growth trajectory.


http://www.dawn.com/2012/01/16/top-ten-trading-partners.html
Riaz Haq said…
Here's Der Spiegel story on Chinese investment in Karakoram Highway connecting Pakistan with China:

China is shelling out massive amounts of money and manpower to improve Pakistan's Karakoram Highway, the highest motorway in the world. The supposed gift to its neighbor is a perfect example of China's economic strategy of taking on short-term expenses for the sake of long-term benefits.

The road roller struggles up the mountain, tar steaming in the heat. Several Chinese and Pakistani workers stand there, leaning on their shovels and observing how their boss, Mr. Li, operates the yellow machine. A few meters on, he stops and jumps out on the unpaved side of the road, directly before a chasm about 1,000-meters (3,300-feet) deep. Seemingly unfazed by the elevation, he nods to his workers and calls out: "That's how it's done. Any questions?"

Whether its high-rises, ports or streets, China is building -- worldwide and on a grand scale. The expansion of the famed Karakoram Highway from China to Pakistan, a part of the Silk Road trade routes, is just one of China's massive construction projects and an example of Beijing's strategy for the future -- investing a lot and giving generously in exchange for long-term benefits.

The almost 1,300-kilometer (800-mile) long path, which runs from Kashgar in western China's Uighur Autonomous Region almost to the Pakistani capital Islamabad, is set to be transformed from a dusty, bumpy road into a modern mountain highway. The section on the Chinese side is already finished. "For Beijing, it's about being able to export more goods to Pakistan, through the ports of Karachi and around the world," says China expert Fazal ur-Rehman of the Institute of Strategic Studies in Islamabad. Plans also include a future pipeline that runs along the Karakoram Highway, allowing China to bring in Iranian gas.

But government circles in India, China's rival in Asia, are concerned that after the expansion China will also be able to transport tanks and other heavy military equipment to the Indian Ocean. After all, China already showed its aggressive potential when it marched into Tibet in 1950, and a few years later when it occupied other parts of the region....
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The Chinese have summarily decided to drill a tunnel to bypass the newly created Attabad Lake, now a tourist attraction. "It will now take another few years," says Li.

Undeterred by the challenge, the Chinese hauled in heavy equipment. And where bricks were needed to protect the road with walls against landslides or falling rocks, brickworks were swiftly built on site. "Where protective walls were of no use, we built a tunnel," says Li.

Kilometer by kilometer, a monument to Chinese foreign economic policy is being erected. Beijing doesn't worry about the short-term rates of return for its building projects abroad, but on the long-term trade options that they open up instead. The country is also interested in gaining allies with its generous help. In many countries besides Pakistan, Chinese engineers are working on key infrastructure projects. And often the Chinese are also investing in exactly the places from which the West has long since retreated -- such as many African countries rich in natural resources.


http://www.spiegel.de/international/world/china-expands-karakoram-highway-to-pakistan-a-844282.html
Riaz Haq said…
Here's an NPR report on Chinese investments raising suspicions among Sindhi nationalists in Pakistan:

...Boost in Chinese investment has sparked resentment in southern Pakistan, where activists accuse China of trying to be a new colonial power. A bomb blast recently hit near the Chinese Consulate in Karachi — an ominous sign of the rising tensions.

When Bashir Qureshi, a politician in his late 40s, died unexpectedly last month, the medical examiner said it was a heart attack. But Qureshi's friends and family don't believe that. Instead they claim there's been a conspiracy, and that Qureshi was murdered. Poisoned, in fact — by China.
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China and Pakistan have been allies for decades, and China recently pledged to greatly increase its investment in Pakistan, from $7 billion to $30 billion a year.

Maleeha Lodhi, a former Pakistani ambassador to the U.S. and Britain, says that money couldn't come at a better time. "Let's face it: Foreign direct investment into Pakistan has plunged to a historic low," she says. "In this environment, when you have China — the second-largest economy in the world — stepping up to the plate and saying, 'We're prepared to help you,' at a time when others are shy of coming into Pakistan, I think that more than offsets the fears that some may have."

The late Qureshi complained that China's big construction projects rely on Chinese workers and Pakistani migrants.

In recent years, China has faced similar criticisms when it has made large investments in other developing nations, including a number of African states...


http://www.npr.org/2012/08/21/159531740/chinas-increased-investment-upsets-some-pakistanis
Riaz Haq said…
Here's a Xinhua report on Chinese Prime Minister Li's visit to Pakistan:

In order to deepen the China-Pakistan strategic cooperative partnership, Li proposed, the two neighbors should firstly strengthen strategic communication and coordination, maintain high-level contact, and thus steer the bilateral relationship forward.

Secondly, the two countries should reinforce strategic and long-term planning, and open up new cooperation areas such as connectivity and maritime sectors, the Chinese premier said.

They should start formulating a long-term plan for the China-Pakistan economic corridor project and gradually push forward its construction, added the premier.

Thirdly, Li suggested, China and Pakistan further raise the level of bilateral trade and realize a dynamic balance while expanding the scale of two-way trade.

China, he said, encourages Chinese enterprises to participate in Pakistan's infrastructure construction.

Fourthly, the two sides should boost people-to-people and cultural exchanges and media cooperation, said the Chinese premier, adding that they also need to expand exchanges between their young generations so as to carry forward their traditional friendship.

Fifthly, he urged the two countries to promote cooperation in regional and global affairs and safeguard the common interests of developing countries.

China respects the development path Pakistan has chosen based on its own realities, and will continue to support Pakistan in defending its independence, sovereignty and territorial integrity, Li said.

China, he added, is willing to provide unconditional help within its capacity for Pakistan's economic development and seek common advancement in state governance through exchanges and mutual learning.


http://news.xinhuanet.com/english/china/2013-05/23/c_124750134.htm
Riaz Haq said…
Here's an FT report on how Pakistan's top central banker used Chinese line of credit to stabilize economy:

In May, with Pakistan’s rupee looking particularly weak, its balance of payments parlous and election jitters increasing, Yaseen Anwar, the head of State Bank of Pakistan, quietly took advantage of a little-known clause in the bank’s central currency swap agreement with the People’s Bank of China and borrowed almost $600m. By drawing down on part of a $1.5bn line of credit, the government was able to report that far from showing a big deficit, Pakistan’s balance of payments were positive at the end of the month.
By the end of June the rupee was under less pressure and by early September the new government of Nawaz Sharif had signed an agreement with the International Monetary Fund that further stabilised the ailing currency.

“China helped us weather the storm,” Mr Anwar says.
Drawing down the Chinese line of credit, of course, was cosmetic: it did not change the underlying economic and financial realities. But since most market participants, including virtually every foreign banker in Karachi, had no idea that the improvement was essentially technical, it contributed to more positive sentiment.
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China is quietly but steadily increasing its footprint both in Asia and in emerging markets across the globe. It is especially effective in places such as Pakistan, which are desperately short of capital and in dire need of foreign assistance to tackle the shortcomings of their infrastructure, from telecoms equipment to turbines. The line of credit from the PBoC is largely symbolic, a small part of the billions of dollars from banks such as China Development Bank and China Export Import Bank. China’s vendor financing model has become a principal engine for the development of Pakistan at a time when few foreigners will even get on a flight to visit it.
For example, one of the biggest obstacles to growth in this country of almost 200m people – soon to be the world’s fourth most populous nation – is energy. Pakistan has recently decided to develop its vast reserves of low- quality coal in the Thar desert of Sindh province to fuel its power plants. That is not exactly the fashionable choice in many parts of the world, but Pakistani executives say they rely on coal for less than 1 per cent of their power today, in contrast to say India or China, where the figure is more like 80 per cent.
China is promising to develop some of the Thar tracts and provide financing and equipment to help private Pakistani companies such as Engro develop other tracts.
The Chinese are also taking over management of Pakistan’s newest port, Gwadar, in the west, and will help construct a road that leads from to its border and then on to the oil-rich “stans” of central Asia. That will give China access to yet another warm-water port in Asia and cut by half the time taken by Chinese exports to reach many parts of the world from its western regions. Like so much of what China does, that combines the strategic interests of Beijing with the ability to help its best geopolitical friends develop.
For the Pakistanis, isolated from the west, that sort of self-interest is not a problem: it means that they have leverage with Beijing. Today less than 10 per cent of Pakistani exports go to China and virtually all are priced in dollars. But its biggest lender, Habib Bank, has a China desk in its Islamabad branch and a rep office in Beijing. When executives went to China for a symposium, they were courted by senior banking officials. For Pakistanis who feel that many parts of the world have turned their backs on their country, such courtship is almost painfully welcome.


http://www.ft.com/intl/cms/s/0/63e4900a-4872-11e3-8237-00144feabdc0.html

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