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Andrew Small on the China-Pakistan Economic Corridor’s Return to the Shadows

  • Catherine Putz
  • Nov, 2020
  • 212
  • China-Pakistan Relations

“CPEC has been a chastening experience for China in the context of the BRI”

In the five years since the China-Pakistan Economic Corridor (CPEC) was launched, it’s been beset by the winds of local politics and the waves of geopolitics alike. In a new report, titled “Returning to the Shadows: China, Pakistan, and the Fate of CPEC,” Andrew Small catalogues the grand promises and countless pitfalls of CPEC. In an interview with The Diplomat, Small, a senior transatlantic fellow with the German Marshall Fund’s Asia Program, explains the significance of CPEC to the China-Pakistan relationship, the contours of its highs and lows, and what the fate of the grand scheme means for China’s broader Belt and Road Initiative.

What’s the significance of the China Pakistan Economic Corridor (CPEC) to the China and Pakistan bilateral relationship?

CPEC was supposed to act as a vehicle to upgrade the China-Pakistan partnership. Some Chinese analysts used to describe the relationship as a “stool with two legs”: While security and political ties have been strong for decades, economic ties had always been extremely weak. Even this characterization somewhat overstates the breadth of the relationship - it was almost entirely confined to military and intelligence matters, and managed by a very small cast of individuals on the two sides. China was never a factor in day-to-day economic or political life in Pakistan, and its strong approval ratings in opinion polls reflected its unimpeachable reputation as the “all-weather friend” rather than any deeper affinity among the Pakistani public.

That narrowness of relations also made it difficult for China to embrace Pakistan too openly - despite being arguably Beijing’s closest partner, virtually anything the two sides did together was always viewed through a security prism, and China had to tread carefully to avoid eliciting alarmed reactions in New Delhi or further afield. CPEC was a way of changing that narrative. China could make a big public push to enhance the relationship while selling it as an economic and development matter. There was also a gamble involved: CPEC was dubbed the “flagship” of the BRI, which tied its fate closely to the reputation of the entire initiative, and even to Xi Jinping himself. This was a risk that Beijing was willing to take. China wanted its relationship with Pakistan to be a “model to follow”: Close, trusted military ties that nonetheless fell short of the commitments of a formal alliance, underpinned by a comprehensive Chinese immersion in the country’s economic life. If CPEC succeeded, other countries would look to replicate it.

For Pakistan, the logic was even more compelling. CPEC was an opportunity to draw China into a deeper level of political, security, commercial, and financial commitment to the country, in a highly visible way, at a juncture where U.S. support was being tapered back on all fronts, and international investors were very wary of the security situation. For both sides, the optics are therefore almost as important as the substance. China and Pakistan have a strong incentive to put a good face on CPEC whatever is actually happening in practice.

The Khan administration’s interest in modifying CPEC made headlines back in 2018. Since then, as you note in the report, CPEC first slowed then gradually sped up again. But in the interim, did the Pakistan Tehreek-e-Insaf (PTI) government have any success in pushing for its desired changes?

CPEC was already slowing down even before the PTI took power - by late 2017 Pakistan’s economic situation was weakening and political uncertainties were growing as Nawaz Sharif and the Pakistan Muslim League-Nawaz (PML-N)’s struggles with the army intensified. Imran Khan was known to be skeptical about CPEC - seeing it as too closely tied to the PML-N’s agenda, a poor fit for his own priorities, and almost certainly corrupt too. Prominent figures in the PTI, such as the commerce minister and leading industrialist, Abdul Razak Dawood, were also public critics of CPEC, representing sections of the Pakistani business community that saw the benefits as too tilted to Chinese firms, and had themselves missed out on the explosion of CPEC contracts.

Beijing was ready to be accommodating to the new government’s priorities. Its position had always been that the PTI just didn’t understand that they could be beneficiaries too if they spelled out clearly enough what they wanted. In practice though, the model that Imran Khan was proposing was precisely the kind of economic relationship that China had always sought to avoid with Pakistan: In his first trip to Beijing after taking office, he asked for a bailout to address the country’s weak financial position, and support for socio-economic projects, in other words, aid.

Initially, China tried...

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