China-Pakistan Economic Corridor(CPEC)

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4-Feb-2023: Pakistan inaugurates a nuclear reactor

Pakistan inaugurated a USD 2.7 billion nuclear reactor under China-Pakistan Economic Corridor (CPEC), providing some relief as the nation grapples with an energy crisis.

CPEC Nuclear Reactor

  • Cost USD 2.7 billion
  • Generates 1,100 megawatts capacity
  • Provides relief for Pakistan's energy crisis
  • Will generate some of the nation's cheapest electricity

Pakistan's Energy Crisis

  • Nationwide power outages in Pakistan
  • Struggle with blackouts for years
  • Surging energy costs
  • Low foreign-exchange reserves
  • Pressure on government budget
  • Talks with IMF for bailout in exchange for increased energy tariffs

China-Pakistan Economic Corridor (CPEC)

  • A 3,000 km long infrastructure project connecting China's northwest Xinjiang Uygur Autonomous Region and Gwadar Port in Pakistan.
  • Promotes connectivity across Pakistan with highways, railways, and pipelines accompanied by energy, industrial, and other infrastructure development projects.
  • Paves the way for China to access the Middle East and Africa from Gwadar Port.
  • Enables China to access the Indian Ocean.
  • China supports development projects in Pakistan to overcome energy crises and stabilise economy as a part of the Belt and Road Initiative (BRI).

Challenges of CPEC for Pakistan and China

Pakistan:

  • Regional Imbalances: Concerns about development and investment in certain areas and provinces
  • Debt Trap
    • Large scale of projects financed by loans from China and the ability to repay these loans.
    • China is now Pakistan's largest creditor with Pakistan owing 27.4% of its total external debt to China in 2021, according to the IMF.
  • Environmental Impacts
    • Negative impacts on environment from large-scale infrastructure projects
    • Deforestation, loss of biodiversity, air and water pollution
  • Social Implications
    • Displacement of local communities
    • Loss of traditional livelihoods
    • Impact of increased migration and population pressures
  • Sovereignty Concerns
    • Concerns about China's increasing influence in Pakistan
    • Potential for compromise of country's sovereignty and independence

China:

Security Concerns

  • Security of Chinese workers.
  • Stability of the region.

Political Opposition

  • Opposition from certain political parties and groups.
  • Concerns about lack of transparency and long-term implications on Pakistan's sovereignty.

CPEC's Implications for India:

India's Sovereignty:

  • CPEC passes through the Pakistan-occupied Kashmir territory of Gilgit-Baltistan, which India claims.
  • Success of CPEC will consolidate the region's perception as Pakistani territory, diminishing India's claim.

Chinese Control Over Trade Via Sea:

  • Once fully functional, CPEC will offer a more economical trade route to North and Latin American enterprises.
  • China will have the power to dictate terms of international movement of goods between Atlantic and Pacific oceans.

Chinese String of Pearls:

  • Gwadar port's control will establish complete dominance of the Indian ocean by China.
  • China already has a presence in other ports in the region.

Stronger BRI and Chinese Dominance in Trade Leadership: CPEC is one step towards China's BRI project to dominate the region politically.

Pin It
Whatsapp

4-Feb-2023: Pakistan inaugurates a nuclear reactor

Pakistan inaugurated a USD 2.7 billion nuclear reactor under China-Pakistan Economic Corridor (CPEC), providing some relief as the nation grapples with an energy crisis.

CPEC Nuclear Reactor

  • Cost USD 2.7 billion
  • Generates 1,100 megawatts capacity
  • Provides relief for Pakistan's energy crisis
  • Will generate some of the nation's cheapest electricity

Pakistan's Energy Crisis

  • Nationwide power outages in Pakistan
  • Struggle with blackouts for years
  • Surging energy costs
  • Low foreign-exchange reserves
  • Pressure on government budget
  • Talks with IMF for bailout in exchange for increased energy tariffs

China-Pakistan Economic Corridor (CPEC)

  • A 3,000 km long infrastructure project connecting China's northwest Xinjiang Uygur Autonomous Region and Gwadar Port in Pakistan.
  • Promotes connectivity across Pakistan with highways, railways, and pipelines accompanied by energy, industrial, and other infrastructure development projects.
  • Paves the way for China to access the Middle East and Africa from Gwadar Port.
  • Enables China to access the Indian Ocean.
  • China supports development projects in Pakistan to overcome energy crises and stabilise economy as a part of the Belt and Road Initiative (BRI).

Challenges of CPEC for Pakistan and China

Pakistan:

  • Regional Imbalances: Concerns about development and investment in certain areas and provinces
  • Debt Trap
    • Large scale of projects financed by loans from China and the ability to repay these loans.
    • China is now Pakistan's largest creditor with Pakistan owing 27.4% of its total external debt to China in 2021, according to the IMF.
  • Environmental Impacts
    • Negative impacts on environment from large-scale infrastructure projects
    • Deforestation, loss of biodiversity, air and water pollution
  • Social Implications
    • Displacement of local communities
    • Loss of traditional livelihoods
    • Impact of increased migration and population pressures
  • Sovereignty Concerns
    • Concerns about China's increasing influence in Pakistan
    • Potential for compromise of country's sovereignty and independence

China:

Security Concerns

  • Security of Chinese workers.
  • Stability of the region.

Political Opposition

  • Opposition from certain political parties and groups.
  • Concerns about lack of transparency and long-term implications on Pakistan's sovereignty.

CPEC's Implications for India:

India's Sovereignty:

  • CPEC passes through the Pakistan-occupied Kashmir territory of Gilgit-Baltistan, which India claims.
  • Success of CPEC will consolidate the region's perception as Pakistani territory, diminishing India's claim.

Chinese Control Over Trade Via Sea:

  • Once fully functional, CPEC will offer a more economical trade route to North and Latin American enterprises.
  • China will have the power to dictate terms of international movement of goods between Atlantic and Pacific oceans.

Chinese String of Pearls:

  • Gwadar port's control will establish complete dominance of the Indian ocean by China.
  • China already has a presence in other ports in the region.

Stronger BRI and Chinese Dominance in Trade Leadership: CPEC is one step towards China's BRI project to dominate the region politically.

2018

20-Sep-2018: Saudi Arabia to join CPEC as 3rd strategic partner

Saudi Arabia will be joining China Pakistan Economic Corridor as third ‘Strategic Partner’. Addressing a press conference following Prime Minister Imran Khan's return from Saudi Arabia, Fawad Chaudry said, “Saudi Arabia will invest in CPEC and will be third Strategic Partner in it.”

He said Pakistan has invited Saudi Arabia to join CPEC as the 3rd strategic partner. “Saudi Arabia is the third country which has been invited to join CPEC.” He said Saudi participation in this mega project will ensure huge investment in Pakistan through this platform.

Saudi Finance and Energy Ministers will visit Pakistan in the first week of October. A delegation from the UAE will also visit Pakistan next month to find ways to expand economic relations between the two countries.

What is CPEC?

China-Pakistan Economic Corridor (CPEC), conceived in 2014 is an offshoot of China’s ambitious One Belt One Road (OBOR) initiative. The CPEC aims to develop a collection of infrastructure projects throughout Pakistan and improve its economy through;

  1. rapid construction of modern transportation infrastructure(roads, railway lines and pipelines to carry oil and gas),
  2. establishment of special economic zones(similar to SEZ's in China), and
  3. a vast number of power projects.

The present form of project was initially proposed by General Pervez Musharraf. Later, Chinese Premier Li Keqiang and the Pakistani President Asif Ali Zardari agreed to develop the long term plan for a China-Pakistan economic corridor. In 2014, Pakistan Prime Minister Nawaz Sharif met with Premier Li Keqiang in China to discuss further plans, resulting in the full scope of the project to be devised under Sharif's tenure. In November 2014, Chinese government announced its intention to finance Chinese companies as part of its $45.6 billion energy and infrastructure projects in Pakistan as part of CPEC. On 20 April 2015, Pakistan and China signed an agreement to commence work on the $46 billion agreement, which is roughly 20% of Pakistan's annual GDP.

Finance: CPEC project is currently valued at $62 billion. 90% of loan amount is funded by Exim Bank of China, China Development Bank, and the Industrial and Commercial Bank of China. Only 10% of the plan expenditure to be borne by Pakistan.

Major Projects: Gwadar Port, Karakoram Highway, Railway projects(Lahore Metro, Karachi–Peshawar Railway Line, Kotri–Attock Railway Line, Rohri–Chaman Railway Line), Energy sector projects(As part of the "Early Harvest" scheme of the CPEC, an estimated 10,400 MW of electricity are slated for generation by March 2018 as part of CPEC's "Early Harvest" projects.), Renewable energy(world's largest solar power plant – the 6,500 acre Quaid-e-Azam Solar Park near the city of Bahawalpur), coal, Liquified natural gas( Iran–Pakistan gas pipeline), "Early Harvest" energy projects etc….

They also collaborate in Agriculture, Science and technology and banking as well.

Economic outcomes:

  1. Once completed, CPEC will cut short the trade route for China’s oil imports by 6000 miles.
  2. The plan will also open up new strategic avenues for China to trade with African, West Asian and South Asian countries.
  3. $28 billion worth of fast-tracked "Early Harvest" projects will be developed in Pakistan by the end of 2018.
  4. CPEC will increase the Pakistan's GDP by 2-2.5 percentage points.
  5. The development of Kashgar as a trade terminus will reduce the isolation of the restive Xinjiang province, deepen its engagement with the rest of China, and raise its potential for tourism and investment.
  6. Central Asian republics will join the CPEC infrastructure networks to gain access to the Indian Ocean, while contributing to the OBOR initiative.
  7. An economically stable Pakistan is good for India, as it will improve trade ties with India.

Setbacks:

  1. The unpredictable security situation in Balochistan(location of Gwadar) and Khyber Pakhtunkhwa(KP) remains a huge concern. Pakistan has already deployed 15,000 special security forces to protect Chinese nationals and companies along the corridor.
  2. Uighur militants in Xinjiang may create tensions as well.

Geopolitical implications:

  1. Geopolitical tensions in Kashmir may escalate, as the CPEC corridor passes straight through disputed Gilgit-Baltistan in PoK region, challenging Indian sovereignty.
  2. CPEC may give China and Pakistan a greater strategic leverage with both India and the United States in the Indian Ocean region.
  3. China will gain a strong maritime presence in Arabian sea through its Gwadar port establishments, which will pave the way for its immediate military and political influence in India's neighbourhood and in West Asia.
  4. CPEC will replace Pakistan's dependence on a north-south trade corridor with an east-west corridor, from Kashgar (Xinjiang province) to Gwadar.
  5. Pakistan may align more towards China, neglecting India's company.

Glossary:

Corridor - A strip of territory or airspace by which a country has access to a particular place, e.g. a port, or providing access through another's land for a particular purpose.