CPEC at Ten: A Road to Nowhere

2023 marks the 10th anniversary of the China-Pakistan Economic Corridor (CPEC), the flagship project of China’s Belt and Road Initiative (BRI). The project was initially thought so significant that it was included as part of China’s 13th five-year development plan (NDRC, 2016). However, the decade-long journey to develop Pakistan’s port on the Arabian Sea at Gwadar, Balochistan province, and connect it with Kashgar city in China’s western Xinjiang Uyghur Autonomous Region (XUAR), has not gone smoothly. Through a proposed network of highways, railways, and energy pipelines, CPEC has already marshalled $25 billion of Chinese investment to improve the country’s infrastructure. But chronic issues have plagued the project, leaving many aspects in doubt as it enters its next phase (VOA, July 23; Express Tribune, October 18).

On July 31, Chinese Vice Premier He Lifeng (何立峰) visited Pakistan to attend a ceremony in Islamabad celebrating the CPEC reaching its ten-year milestone (PRC Foreign Ministry, July 29). While there, the two countries signed six agreements for the promotion of bilateral cooperation in agriculture and information technology sectors (Dawn, July 31). However, the minutes of the 11th meeting of the Joint Cooperation Committee (JCC) of the CPEC, which were signed that day—nine months after the meeting had taken place—belie a less unified belief in the win-win opportunities on offer (The Express Tribune, September 26). China did not agree to further expand cooperation on projects related to energy, climate change, electricity transmission lines and tourism (Nikkei Asia, October 2).

This caution from Beijing might seem indicative of wider perceptions of a faltering BRI in recent months, but this week’s BRI Cooperation Summit in Beijing suggested otherwise. In the runup to the two-day meeting, the State Council Information Office published a white paper proclaiming that “China is ready to increase its resource input in global cooperation” (SCIO, October 10). But beyond the fanfare of this week, the state of CPEC provides valuable insight into the disjuncture between the lofty goals and the often-troubling reality of the BRI.

CPEC And Sino-Pakistan Relations

Chinese president Xi Jinping declared in Islamabad this summer that CPEC is “a vivid testament to the all-weather friendship between China and Pakistan” (Ministry of Foreign Affairs, Peoples Republic of China, July 31). The use of terms such as “iron brothers (铁哥们)” or “good brothers (好兄弟)” to describe the relationship are standard (People’s Daily, April 20, 2015), and Pakistan has sought a close partnership with China, especially in the military and economic domains, since 1990. However, while Pakistan is conceivably of geostrategic import to the PRC, it is Pakistan who has historically benefited most from the relationship to date, though not without cost: According to the Taiwanese think tank Doublethink Lab, Pakistan is the most China-dependent country in the world (Doublethink Lab, 2022). China is the biggest foreign investor in Pakistan, and the two support each other in multilateral fora, with Pakistan remaining silent on the treatment of Muslims across the border in Xinjiang.

China’s close military ties with Pakistan rival those it has with Russia. The two have substantial information- and intelligence-sharing agreements, and the heads of their two militaries have met frequently (Aljazeera, April 27). China has also conducted naval cooperation with Pakistan, and has provided a high volume of military equipment to the country’s military: For instance, Pakistan was the first foreign buyer of China’s J-10C fighter jet (Global Times February 21, 2022). A recent report describes the relationship as “approaching a threshold alliance” (United States Institute of Peace, March). Pakistan’s powerful military establishment is therefore predictably a strong supporter of the CPEC. Many politicians have not been on the same page, however. CPEC was agreed upon under the government of former Prime Minister and Punjab Chief Minister Shehbaz Sharif, with whom Beijing had a good relationship. However, the government of Imran Khan, who acceded to office in 2018, delayed several CPEC projects and accused its predecessors of taking kickbacks from Chinese state-owned enterprises (SOEs) working on CPEC projects in Punjab (South China Morning Post, April 20).

Regardless of delays, CPEC has achieved a number of notable successes to date. The BRI white paper highlights many of the CPEC projects underway, including transport networks, power plants, electrical infrastructure, and a number of special economic zones (SEZs) (SCIO, October 10). Prior to these investments, Pakistan suffered from chronic power outages for up to 15 hours per day, so there is a palpable sense that Chinese financing for the construction of power plants has mitigated Pakistan’s power crisis (AidData, March 22, 2022). Chinese construction of Pakistan’s power infrastructure is set to continue: The construction of the country’s largest civil nuclear power plant is underway (VOA, July 14). However, CPEC’s first phase ultimately overpromised and underdelivered. Real gains are offset by problems ranging from difficulties with financing, security issues due to a backlash from local Pakistanis, and a pervading sense that China is beginning to see its position in Pakistan as more hassle than it is worth. The status of Gwadar port is perhaps the most illustrative example of China’s misguided ambitions.

Gwadar: Strategic Importance, Unrealistic Ends

The development of Gwadar port is a key strategic component of CPEC for China. The original “corridor” concept entailed a direct root for Chinese oil and other imports to be transported from this port on the Arabian sea across Pakistan and into western China. As such, China Overseas Port Holding Company (COPHC) acquired the operations of the port on a 40-year lease in 2017 (Indian Express, April 20, 2017), making China simultaneously the operator and developer of the port. Not only would Gwadar in theory provide a shorter—and possibly cheaper—route for goods to reach China, it would also provide China safe access to the Arabian Sea in case of any crisis relating to the Nicobar islands, Strait of Malacca, or South China Sea (China Institute of International Studies, November 10, 2017). However, while the strategic merits of such a project make sense from both a Chinese and a Pakistani standpoint, the facts on the ground have made this a reality that is unlikely to occur.

The problems that the project faces encompass concerns over physical geography, financial difficulties, and security issues. Balochistan is a comparatively poor part of the country, and one which has been the most resistant to Chinese activity. Dozens of Chinese engineers and workers engaged in CPEC-related projects have been targeted, injured, or killed by Islamic extremists and Baloch separatists in Pakistan, the most prolific being the Balochistan Liberation Army (BLA). In a video last year, a BLA commander warned, “China, you came here without our consent, supported our enemies, helped the Pakistani military in wiping out our villages, but now it is our turn. The Baloch Liberation Army guarantees that the China-Pakistan Economic Corridor will fail miserably on Baloch land” (See: Jamestown Foundation, July 14). BLA attacks on Chinese nationals include the targeting of the Chinese consulate in Karachi in 2018 (Dawn, November 2, 2018); an attack on Chinese tourists at the Pearl Continental Hotel in Gwadar in 2019 (Al Jazeera, May 12, 2019), and a suicide attack by a BLA female soldier on a Confucius Institute in Karachi University (Dawn, April 26, 2022). Their most recent attack targeted a military convoy carrying Chinese engineers in Gwadar (Dawn, August 13). The BLA are not alone in this fight: In July 2021, nine Chinese nationals were among thirteen people killed at a construction site for the Dasu hydropower project in northern Pakistan ,following an attack by two further militias, the East Turkestan Islamic Movement (ETIM) and Tehreek-e-Taliban Pakistan (TTP) (Dawn, July 15, 2021).

Besides resistance groups, many locals also do not trust China’s methods. CPEC activities in Gwadar have not managed to change the fate of its people, and the influx of Chinese workers or officers from elsewhere in Pakistan to work on the projects have made many locals feel alienated from the development (See: Jamestown Foundation, July 14). In one recent journalistic account, the Pakistan-based Zofeen Ebrahim says that unlike Chinese nationals in Pakistan in previous periods, locals do not have the opportunities to interact with the CPEC-related influx of bankers, company owners, engineers, and construction and mine workers. She also expresses frustration that she has to go through a lengthy process to get permission to talk to a Chinese workers at CPEC projects (Panda Paw Dragon Claw, September 8). This restriction on interaction, coupled with the difficulties locals have finding stable employment, has been a source of unrest in the region.

There are also structural economic problems with CPEC that exacerbate these issues. As the researcher David Landry has shown, CPEC appears to have pulled public expenditure toward Pakistani provinces that are already more developed, rendering the interregional inequalities more acute. [1] Moreover, Landry finds that economic spillover effects in the period 2012-2019 were minimal: increases in economic activity in CPEC regions beyond those associated with the increase in government spending were “largely negligible.” Pakistan’s already weak economy has been weakened further still by the debt burden from CPEC projects. As of July, Chinese loans from government and commercial banks constituted nearly 30 percent of the country’s external debt (VOA, July 14). While it has helped that Islamabad managed to negotiate a $3 billion bailout with the IMF in June, and Chinese lenders have extended the repayment schedules for debts totalling $5 billion, Pakistan nevertheless remains highly leveraged, which poses significant risks if Pakistan’s economy were to rapidly deteriorate. Islamabad’s repayment obligations have already skyrocketed following the Pakistani Rupee’s devaluation against the US dollar by almost 40 percent from August 2018 to early 2022 (AidData, March 22, 2022). This economic instability has been a factor in project delays on the Chinese side, which then exacerbate the situation on the ground in Pakistan.

One of the biggest issues with CPEC was the initial lack of planning. Alarmingly, reports suggest that there was very little expertise on Pakistan in Beijing when CPEC was first announced (GMF, September, 2020). A better appraisal from the Chinese side could have prevented the dramatic overpromising that has occurred in years since, and the disappointment and overt hostility it has led to in some cases. A more reasoned assessment on how increasing economic ties would impact both Pakistan’s domestic politics and the foundational Sino-Pakistani military relationship also seems not to have been given sufficient thought.

Conclusion

The prospect of any Chinese military presence in Pakistan is overblown, both because Islamabad is unlikely to allow Chinese private security companies or personnel to be active on Pakistani soil, and because Gwadar is not likely to be co-opted by the PLAN as a naval base, as some observers has surmised (AidData, August 15). This fear and other concerns about CPEC have not come to pass, nor do they seem likely. Nevertheless, some of the hopes for BRI’s flagship project have not been realized.

Despite the pomp and circumstance on display in Beijing this week surround the BRI (People’s Daily, October 18), the agenda for CPEC in the coming years will likely be revised significantly. There will be a shift—already in motion—from “mega projects” to “peanut projects”(GMF, September, 2020).

At the end of the day, China views Pakistan’s military establishment as its main partner for dealing with CPEC: The military serves as the security guarantor for its projects, and Beijing has leaned on them to pressure or silence critics in the political establishment. Even Imran Khan, who came into government in 2018 on a platform that was critical of CPEC, was forced to accelerate CPEC projects in the second half of his time in office. The upcoming elections, likely to be held early next year, will have little meaningful impact on CPEC projects. How CPEC develops in the coming years will have much more to do with China’s strategic interests and the practical challenges on the ground.

Notes

[1] David Landry (2023) A torrent or a trickle? The local economic impacts of the China-Pakistan Economic Corridor, Oxford Development Studies, 51:2, 145-162, DOI: 10.1080/13600818.2022.2124241