China’s US$46 billion Gift to Pakistan

The one thing to take away from the visit of President Xi Jinping to Pakistan is that both are in trouble diplomatically if they have to regard each other as their closest friends in Asia.

Even by its standards of official largesse, China’s offer of US$46 billion for road, rail, energy and other investments in Pakistan is stunning. Unsurprisingly, much of the Pakistan media has responded with glee, seeing at last the kick-start money which can make Pakistan a new Asian Tiger, or at least give India some economic competition in the South Asian growth contest.

It is hard to imagine any other country in Asia being so keen to rejoice in such an embrace, particularly so soon after Sri Lanka, and previously Myanmar, found themselves trying to free themselves from too tight a clutch. The Philippines and Vietnam, two of China’s closest neighbors, are busy establishing a mutual defense pact to counter China’s actions in the South China Sea.

The Pakistani bequest is part of a huge initiative on China’s part to invest in regional infrastructure to promote cross-border trade to ensure that goods, services and capital can flow easily, primarily for China’s benefit. The total investment could reach as much as RMB1.5 trillion (US$241.8 billion).

China will gain two things in its Pakistan adventure, at least in the short term. First, gratitude. Probably China can implement enough quite quickly in the power sector to bring relief to energy-starved Pakistan. Second and far more important from China’s perspective may be its desire to refocus Indian security concerns back to New Delhi’s longstanding obsession with Pakistan. These had been waning due to Pakistan’s endemic domestic problems and the rise of China’s presence in the Bay of Bengal and the Indian Ocean.

Anything which diverts India’s attention away from China’s naval capability to land borders with Pakistan will suit China.

At the same time the noise about the China deal may make India less willing to seek accommodation with Pakistan on other issues, such as pushing forward the economic cooperation which could do far more than China’s investments to spur both economies.

Nonetheless it is easy to exaggerate the strategic significance of China improving its access to the Indian Ocean via the long, winding road from Kashgar to Pakistan’s Chinese-funded Gwadar port. Kashgar itself is remote from the Chinese heartland and susceptible to disturbances by Muslim ethnic minorities. The passage from there to the plain of Punjab is long, difficult and runs close to the border with India (and through Pakistan-administered Kashmir). Pakistan’s navy is relatively feeble and China’s presence on the Indian Ocean and high-profile role in anti-piracy efforts off Somalia are more show than anything else.

China knows only too well that Islamic forces emanating from or encouraged by Pakistan can be dangerous given its own problems in Xinjiang. It has viewed the US experience in Pakistan/Afghanistan with a mix of amusement and worry. But presumably it figures that economic leverage on a grand scale can at least keep the Pakistan military and intelligence from stirring up any and all Islamist forces which might undercut Indian interests.

Nonetheless cross-cutting interests, making policy choices very difficult, could become as numerous for China in central Asia as they are for the US in the Middle East.

Pakistan itself meanwhile has long played a diplomatic bad hand very well, just keeping on-side with the US despite its role in Afghanistan. Most recently it has offended its rich Saudi and Gulf Sunni friends by not joining their coalition against the Houthi rebels in Yemen who are supposedly backed by Iran but equally are the construct of former long-time Yemen president Ali Abdullah Saleh.

Pakistan clearly figures that offending Iran and probably failing to clean up Yemen is not a good option given Iran’s gradual emergence from western pariah status, and its ability to stir up trouble in Baluchistan.

Nonetheless, all these other issues in the end will prove more durable and influential than any amount of money, even if most of it is eventually delivered – a big “if” given administrative capacity in Pakistan. And big public sector investments only work if the rest of the economy can take advantage of them. The best thing China could give Pakistan’s economy would be a lesson in educating women. But that is not an acceptable gift for a semi-feudal Muslim society.