June 27, 2024
5 mins read

CPEC – A bane for China?

Of the 122 projects initially announced under CPEC, only 36 have been completed. Although CPEC was envisioned as a transformative force for Pakistan’s economy, it has not succeeded in alleviating Islamabad’s economic troubles….reports Asian Lite News

The China-Pakistan Economic Corridor (CPEC), announced in 2015 subsequent to Pakistan’s engagement with China’s Belt and Road Initiative (BRI) in 2013, represents a considerable collaborative venture. Originally valued at $46 billion, the project focuses on sectors such as energy, transportation, and industry, aiming to connect China’s Kashgar in northeastern Xinjiang with Gwadar port in Pakistan’s Balochistan province across approximately 3,000 kilometers.

Subsequently, CPEC, often referred to as a ‘flagship project’, escalated into a $62 billion initiative projected for completion by 2030.

At the time of its announcement, Pakistan was grappling with a precarious economic condition characterised by a shortage of Foreign Direct Investment, significant electricity deficits, macroeconomic instability, and a severe internal security crisis due to terrorist activities.

Consequently, CPEC was perceived as a transformative element for Islamabad’s economic framework.

For China, the successful completion of CPEC promises enhanced access to the Indian Ocean and beyond.

Some experts believe that the project was also anticipated to mitigate separatist tensions in Xinjiang through increased infrastructural development and connectivity with Pakistan. Nonetheless, nearly nine years post-launch, the progress of projects under CPEC has fallen significantly short of its objectives, raising severe concerns regarding its actual benefit to China.

To date, Chinese investment in the China-Pakistan Economic Corridor has reached approximately $25 billion.

Of the 122 projects initially announced under CPEC, only 36 have been completed. Although CPEC was envisioned as a transformative force for Pakistan’s economy, it has not succeeded in alleviating Islamabad’s economic troubles.

Furthermore, the projects have been marred by allegations of corruption within Pakistan, including reports that Chinese investors were assured significant annual returns on their investments.

Additionally, the suspension of several CPEC projects in 2018 during Imran Khan’s administration contributed to Beijing’s frustration.

Concurrently, Pakistan’s total debt to China has escalated to $30 billion, exacerbating its economic challenges, which remain unaddressed despite the initiation of numerous CPEC projects.

The primary endeavor of the CPEC, the development of Gwadar port, has been embroiled in controversy due to Pakistan’s apparent neglect of the interests of local Gwadar residents and Baloch nationalist groups.

This oversight has precipitated increasing resentment within the province, exemplified by the emergence of the Gwadar Haq Do Tehreek (Gwadar Rights Movement).

Despite being declared ‘fully operational’ in 2021, Gwadar port has attracted minimal traffic and has underperformed compared to smaller ports, failing to secure any regularly scheduled deep-sea lines, thereby generating no significant cargo revenue for Pakistan or China.

China-Pakistan Economic Corridor (CPEC) (Xinhua/IANS)

In addition to its lackluster performance, political and economic instability in Balochistan; one of Pakistan’s most impoverished regions, has severely impeded the port’s potential as CPEC’s “game changer”.

This situation has intensified major unrest among natives and separatist groups in Balochistan, who demand a greater share in CPEC’s benefits. Chinese officials have repeatedly voiced concerns to Pakistan, emphasizing that the success of CPEC hinges on improving the conditions in Gwadar and alleviating poverty in Balochistan.

The frequent attacks on Chinese nationals involved in CPEC projects by insurgents have further decelerated progress, leading to significant investment losses and heightened security concerns for China.

Whether dealing with isolated terrorist incidents or orchestrated attacks targeting Chinese interests, Beijing is confronting diminishing returns from CPEC amid escalating security risks to its nationals in Pakistan.

This growing concern has compelled China to press Pakistan to prioritise addressing Beijing’s security apprehensions, highlighting a primary challenge in advancing CPEC initiatives.

The ambitious vision of the China-Pakistan Economic Corridor in a country grappling with economic and political challenges, such as Pakistan, has proven costly for Beijing.

In response to security concerns for its investments near the Wakhan Corridor compromised by Pakistan’s inability to secure the safety of Chinese nationals, China had resolved to expand CPEC into Afghanistan in May of the previous year, thereby incorporating the Taliban-led government into this flagship initiative.

This decision to seek alternatives, particularly with the Taliban regime, arises from Pakistan’s consistent failure to safeguard Chinese personnel and its ongoing issue with cross-border terrorism.

Nonetheless, this strategic shift appears to counteract Beijing’s initial intentions, as China now faces security issues in Taliban-controlled Afghanistan, notably concerning attacks by Pakistani militant groups like Tehreek-i-Taliban Pakistan (TTP) and other factions such as Islamic State-Khorasan (ISIS-K), which is a staunch adversary of the Taliban, threatening Chinese interests in the region.

Pakistan’s Prime Minister Shehbaz Sharif undertook a five-day visit to Beijing in early June 2024 with the objective of soliciting foreign investment to alleviate Pakistan’s financial distress, was perceived as an attempt to rejuvenate the CPEC.

During this visit, both nations agreed to progress CPEC to its second phase, despite the incomplete status of the majority of Phase I projects.

However, it is widely believed that Sharif’s commitments to enhance security for these projects did not sufficiently reassure China, considering previous experiences.

Notably, despite the declaration of upgrading CPEC, Sharif was unable to secure any new investments or debt restructuring arrangements from Beijing as anticipated.

Just days prior to the visit, Islamabad’s plea for an additional $17 billion to support nine infrastructure and energy projects, along with a $15 billion debt restructuring proposal, received a tepid response from Beijing.

This reflects China’s definite scepticism regarding Pakistan’s management of economic and security issues.

Furthermore, reports suggest that Pakistan plans to reallocate CPEC funds towards military activities along the Indian border, indicating a blatant disregard for both China’s security concerns and its own economic predicaments.

Evidently, the ambitious CPEC has become a strategic liability for China, presenting a complex challenge that it struggles to resolve.

Not surprising, an article in ‘The Diplomat’ claims that China had been upset with Pakistan and has subsequently downgraded Pakistan’s status from ‘Highest Priority’ to just ‘Priority’.

Regardless of the veracity of the claims made in ‘The Diplomat’ article, Pakistan has seen its relations with China and Afghanistan turn cold recently owing to its turbulent internal security dynamics.

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