Pakistan

Pakistan

Pakistan established diplomatic relations with China in 1951, the first Islamic country to do so. In the following decades, the relationship was largely driven by the shared rivalry with India. Today the China–Pakistan Economic Corridor is considered a flagship and pilot project of the Belt and Road Initiative.

Pakistan

Written by Hong Zhang.

Historical Background

Pakistan established diplomatic relations with the People’s Republic of China (PRC) in 1951, the first Islamic country to do so. The earliest decade of the bilateral relationship was lukewarm, as in 1954 Pakistan became a treaty ally with the United States and joined the Southeast Asia Treaty Organisation (SEATO), making it a member of the anti-communist camp. China responded to Pakistan’s move with pragmatism, seeing that Pakistan’s positioning was more about building up its own military capacity vis-à-vis India than ideological hostility to communism. Later, because of this unique position of having close contacts with both China and the United States, Pakistan was able to facilitate the secret visit of then US Secretary of State Henry Kissinger to Beijing in 1971, which paved the way for the momentous US–China rapprochement of 1972.

India was the primary reason why Pakistan started to move closer to China in the 1960s. Seeing that both the United States and the Soviet Union were leaning toward India, Pakistan looked upon China as a counterweight. Starting from 1961, the Pakistani authorities voted at the United Nations to support the PRC’s bid for admission. In 1962, they concluded the boundary negotiations with China, and the following year they signed the final agreement. Ignoring US pressure, in 1964 Pakistan started a commercial flight between Karachi and Shanghai via Canton (Guangzhou), the first air link connecting China to a non-socialist country.

China, on the other hand, was splitting from the Soviet Union, and its relationship with India deteriorated to the point that a brief war broke out on the Himalayan border in 1962. In this context, having closer relations with Pakistan also worked in China’s interest. When Pakistan and India went to war for a second time in 1965, the PRC provided weapons to the former and helped apply international pressure on India. Since then, China has become Pakistan’s primary source of military assistance, and the two countries have also provided mutual assistance for each other’s nuclear programmes. While China does not have a formal security alliance with Pakistan, their military cooperation comes close to that.

In 1971, as Pakistan experienced the most serious political crisis in its history—a civil war that led to its dismemberment—China again offered political support. While expressing disappointment for the violent crackdown that the Pakistani authorities initiated in the seceding eastern region of the country, Beijing vetoed Bangladesh’s admission to the United Nations. The relations between Pakistan and the PRC continued to grow in the 1970s, with some of the highest-profile project assistance being provided in this decade, including the Karakoram Highway and the Heavy Mechanical Complex (HMC) and Heavy Forge and Foundry (HFF) in Taxila.

The bilateral relationship developed steadily, if more quietly, in the 1980s and 1990s. Since the 1980s, mutual visits by national leaders have taken place at least once a year. Since the late 1990s, the Chinese Communist Party has also maintained a programme of party-level contacts with various political parties in Pakistan, including the religious ones. As China’s relations with India gradually thawed, the Chinese authorities sought to maintain a balance between the two archrivals. By the 1990s, China’s position on Kashmir shifted from backing Pakistan to a more neutral support for bilateral efforts of Pakistan and India for a peaceful settlement. When India and Pakistan tested their nuclear weapons in 1998, triggering a series of crises in South Asia, China tried to exert a moderating influence on Islamabad’s position on the diplomatic front while strengthening its military cooperation with Pakistan.

After the 9/11 attacks in 2001, Pakistan became embroiled in the US Global War on Terror. China showed support for the enhanced military cooperation between Pakistan and the United States, a move that was partly motivated by Beijing’s own goal to tackle alleged terrorist elements in its Xinjiang Uyghur Autonomous Region, which borders Pakistan. While the China–Pakistan relations are largely smooth, one exception has been China’s belief that some Uyghur militants received training in al-Qaeda camps in Pakistan. To allay these concerns, the Pakistani authorities actively cooperated with China in the crackdown of the so-called ‘three forces’ of terrorism, separatism, and religious extremism in Xinjiang. Similarly, when China’s policies toward the Uyghurs and other Muslim minorities in Xinjiang began to receive international condemnation in the late 2010s, Pakistan took China’s side.

Khunjerab Pass is the highest paved border crossing in the world and the highest point on the Karakoram Highway. Credit: @KeithTan (CC).

In the new millennium, Pakistan and China stepped up their economic cooperation. A landmark project was the Gwadar port, which China helped build in 2002–5 and which later became a centrepiece of the China–Pakistan Economic Corridor (CPEC). In 2005, the two countries signed the ‘Treaty of Friendship, Cooperation, and Good Neighbourly Relations’, which provided the legal basis for the bilateral relationship. While Chinese and Pakistani leaders have described their relationship as ‘all-weather’ at least since 2006, this epithet was formalised in 2015 with the announcement of an ‘All-weather Strategic Cooperative Partnership’, a unique designation among all of China’s bilateral relationships. In official statements, China repeatedly proclaims that its relationship with Pakistan ‘is always a matter of highest priority’, while Pakistan reiterates that this relationship is the ‘cornerstone’ of its foreign policy.Both countries have also sought to deepen their ties through cultural diplomacy and people-to-people exchanges, which were traditionally weak. Five Confucius Institutes and two Confucius Classrooms have been set up in Pakistan between 2005 and 2019 to promote the study of the Chinese language and culture. The Chinese government also provides scholarships for Pakistani students to study in Chinese universities. By 2019, over 7,000 Pakistani students had been funded under such programmes.

BRI Status

The China–Pakistan Economic Corridor (CPEC) is considered a flagship and pilot project of the Belt and Road Initiative (BRI). Pakistan and China signed an MoU on CPEC in July 2013, before the unveiling of the BRI. When China’s State Council released the BRI Action Plan in March 2015, CPEC was included as one of the six economic corridors envisioned. Although work had already started following the signature of the MoU in 2013, CPEC was formally launched during Xi Jinping’s state visit to Pakistan in April 2015. On that occasion, a total financial cost of 46 billion USD based on an estimate of projects then under discussion was circulated, which was later raised to 62 billion USD. While media reports continue to cite this figure when referring to CPEC, it is not accurate because projects to be included in CPEC keep changing as well as the costs of individual projects. Pakistan and China signed a further MoU on BRI cooperation during the first Belt and Road Forum for International Cooperation in 2017.

A Joint Cooperation Committee (JCC) was set up in 2013 to steer the development of CPEC, which in turn delegated work to nine Joint Working Groups focussing respectively on planning, energy, transport infrastructure, Gwadar, industrial parks/special economic zones, security, international cooperation and coordination, social and economic development, and agriculture. By November 2019, the JCC had held nine meetings. As of February 2021, 17 projects worth 13 billion USD have been completed while another 21 projects with an estimated cost of 12 billion USD are in the process of implementation. The official CPEC website lists at least 67 projects

During the Pakistan Muslim League (Nawaz) (PML-N) government (2013–18), CPEC-related investment was primarily focussed on the energy sector to address Pakistan’s pressing energy shortage. The combined power generation capacity of the 17 priority energy projects (scheduled for completion by 2020) amounts to 11,108 MW. As the Pakistan Movement for Justice (PTI) party came into power in 2018, the new government has sought to shift the emphasis toward micro-level socio-economic development rather than top-down infrastructure. While efforts have been made to promote industrial cooperation in the form of special economic zones and agricultural development, progress appears to be slow compared to the big push into energy investment that marked the previous period. In an attempt to centralise decision-making and accelerate the implementation of CPEC, in 2019 the PTI government established a new CPEC Authority and appointed a retired lieutenant general as its chairman. This is widely read as the military putting its weight behind CPEC to overcome the fragmentation in the civilian government.

Current Economic Relations

Trade: Pakistan and China signed their first trade agreement in January 1963. Border trade started in 1967. To promote economic exchanges, both countries formed Joint Committees on economic, trade, science and technology cooperation in October 1982. The first bilateral Free Trade Agreement (FTA) on goods was signed in 2006, with an additional agreement on services trade signed in 2009. The FTA was upgraded in 2019, with provisions that would gradually increase the proportion of tariff-free products between China and Pakistan from 35% to 75%. World Bank’s data shows that, as of 2018, China was Pakistan’s second largest export market, a distant second after the United States, but its top source of import. The bilateral trade was highly imbalanced, with China’s export to Pakistan eight times as much as what Pakistan exported to China. Chinese export to Pakistan grew 15-fold between 2003 and 2018, mostly driven by the export of capital goods and machinery and electronic projects, reflecting the fact that Pakistan is one of China’s largest overseas construction and engineering contracting markets. In comparison, Pakistani exports to China grew seven-fold during the same period, with top export categories being intermediate goods and textile and clothing.

Investment: According to the Pakistani Board of Investment, China has been Pakistan’s largest source of foreign direct investment (FDI) since the 2013–14 fiscal year. Between 2013 and 2018, China on average accounted for 39.3% of Pakistan’s annual incoming FDI, while FDI from other major sources such as the United Kingdom and the United States fluctuated. The surge in FDI from China seems to be driven by CPEC, as China was not among Pakistan’s leading sources of FDI before 2013.

Source: Chinese Ministry of Commerce.

Aid: China started to provide economic assistance to Pakistan in 1956. Some of the economic assistance projects, such as the Heavy Mechanical Complex (HMC) and Heavy Forge and Foundry (HFF) in Taxila that China helped build in the 1970s, are considered to have significantly contributed to Pakistan’s industrial take-off. According to the Pakistani Ministry of Economic Affairs, China currently is Pakistan’s largest source of bilateral economic assistance (Pakistan counts grants and various types of loans to the government as such). Between 2013 and 2019, the period since CPEC was proposed, China disbursed 62.45 million USD of grants and 8.33 billion USD of loans to Pakistan, representing respectively a 24% and 174% increase from the previous six-year period. Except for a small amount of humanitarian aid, almost all Chinese economic assistance is ‘project aid’, i.e. in the form of specific infrastructure or industrial projects typically contracted to Chinese companies. In addition to the physical projects, China also provides training for Pakistani government officials and scholarships for Pakistani students.

Key Controversies

Macroeconomic impacts: CPEC has been hailed as a ‘game changer’ for Pakistan, especially by the PML-N government who wished to take credit for reviving the Pakistani economy. The hype may have been counterproductive, as it led to the anticipation that Pakistan will become overly dependent on China financially, and that Chinese investment will jeopardise the country’s indigenous industries. Partly due to CPEC projects which had to import large amounts of materials and equipment from abroad (in particular from China), in 2019 Pakistan ran into a balance of payment emergency and had to request a bailout from the International Monetary Fund (IMF) for the 13th time in 30 years. This raised the question of whether the Pakistani government can properly manage the fiscal impact of the CPEC, especially given its low planning and coordinating capacity.

Transparency: The lack of transparency in the CPEC’s decision-making process has caused concerns. During the project’s initial planning, the PML-N government conveyed inconsistent messages about their agreement with China regarding the route—whether it would go through the poorer western provinces of Khyber Pakhtunkhwa (KP) and Balochistan or mainly stay within the richer eastern provinces of Punjab and Sindh. This uncertainty fed into the long-standing tension between Punjab, the province economically most developed and inhabited by the ethnic majority that traditionally dominates Pakistan’s political scene, and the other provinces. In particular, the PML-N government initially gave ambiguous answers to whether the Orange Line metro project in Lahore, the capital city of Punjab, would be part of CPEC. It led to the suspicion among the other provinces and political parties that PML-N, which also ruled Punjab province (the chief minister of Punjab was a brother of then prime minister Nawaz Sharif), was scooping the CPEC benefits to their own political advantage. While both the PML-N and PTI governments promised to prioritise the development of the western route, the commitment was not matched up by actual investment.

Another controversy caused by the opaque policymaking process relates to the drafting of the CPEC Long Term Plan, which was jointly formulated by the PML-N government and the Chinese government. After the Plan failed to meet its scheduled deadlines to be released, the Dawn newspaper obtained a 231-page draft of the plan and reported about it in June 2017. The government denied the legitimacy of the report, and when it finally published the Long Term Plan in December that year, it appeared to be an abridged version of less than 40 pages. This again led to concerns about the government’s lack of transparency. This perception did not improve much after PTI took power, as the Senate Special Committee on CPEC complained in a 2019 report about the failure of the government to properly communicate progress on this project. Nevertheless, it is worth noting that Pakistan is a rare case among the BRI partner countries in that it has an official website dedicated to CPEC-related information.

Ethnic tensions and security: Gwadar port, the centrepiece of CPEC, is located in the resource-rich yet sparsely populated Balochistan province. With a history of deadly clashes with the federal government, there is general scepticism in the province about the federal government’s policies, as the Baloch people feel that they have been historically exploited for their natural resources while their development needs have been neglected. The routing controversy mentioned above further exacerbates local distrust that the CPEC would bring any direct benefit to the province. Even though Gwardar port is located in Balochistan, it is expected that the maritime economy promised by the port will be largely insulated from the rest of the province. There is also concern that the local population will not have the skill set required for the kind of modern industry that is to be developed in Gwadar, and that the new jobs that will be created will be taken by workers from the other provinces and even from China, reducing the indigenous population to a minority in their own homeland.

Insurgency groups in Balochistan have taken advantage of such sentiment and targeted Chinese personnel. One of the earliest attacks was in 2004, when three Chinese engineers working in the Gwadar port project were killed in a car bombing. Incidents have been recurrent over the years, with the latest being the attacks on the Chinese consulate in Karachi in November 2018 and on the Pearl Continental Hotel in Gwadar in May 2019. In 2017, it was reported that the Pakistani military had deployed a 13,700-strong special security division to protect the Chinese personnel in CPEC projects.

Gwadar, Pakistan. Credit: @umairadeeb (CC)

Key Sources

English-language Media:

The media scene in Pakistan is quite dynamic. Major English-language newspapers include The Dawn, The Nation, The News International, The Express Tribune, and Business Recorder. All these newspapers offer good coverage of CPEC-related stories. There is also a CPEC Portal, a platform dedicated to news related specifically to the CPEC, which is jointly run by the pro-China Pakistan-China Institute chaired by Senator Mushahid Hussain, and China Radio International, a Chinese state-run media organisation. This publication can be seen as representing the voices of the CPEC advocates.

Books, Reports, and Scholarly Articles:

  • Ahmed, Zahid Shahab. 2019. ‘Impact of the China–Pakistan Economic Corridor on Nation-building in Pakistan.’ Journal of Contemporary China 28, no. 117: 400–14.
  • Bengali, Kaiser. 2015. ‘China-Pakistan Economic Corridor: The Route Controversy.’ Chief Minister’s Policy Reform Unit Government of Balochistan. Link.
  • Boni, Filippo. 2016. ‘Civil-military Relations in Pakistan: A Case Study of Sino-Pakistani Relations and the Port of Gwadar.’ Commonwealth & Comparative Politics 54, no. 4: 498–517.
  • Boni, Filippo, and Katharine Adeney. 2020. ‘The Impact of the China-Pakistan Economic Corridor on Pakistan’s Federal System: The Politics of the CPEC.’ Asian Survey 60, no. 3: 441-465.
  • Gao, Bai 高柏 and Zhen Zhihong 甄志红 (eds). 2017. 中巴经济走廊的政治经济学分析 [Political Economic Analysis on the China Pakistan Economic Corridor]. Beijing: Shehui Kexue Chubanshe.
  • Garlick, Jeremy. 2018. ‘Deconstructing the China–Pakistan Economic Corridor: Pipe Dreams versus Geopolitical Realities.’ Journal of Contemporary China 27, no. 112: 519–33.
  • Haider, Ziad. 2005. ‘Sino-Pakistan Relations and Xinjiang’s Uighurs: Politics, Trade, and Islam along the Karakoram Highway.’ Asian Survey 45, no. 4: 522–45.
  • Han, Xiaoqing 韩晓清. 2015. 新中国睦邻外交的典范:中巴关系研究 (19511965) [An Excellent Model of Chinese Good Neighbour Diplomacy: The Study on China-Pakistan Relations (1951–1965)]. Beijing: Renmin Chubanshe.
  • Hussain, Zahid. 2017. ‘The China-Pakistan Economic Corridor and the New Regional Geopolitics.’ Asie Visions, no. 94: 1–28. Link.
  • International Crisis Group. 2018. ‘China-Pakistan Economic Corridor: Opportunities and Risks.’ International Crisis Group website. Link.
  • Khan, Riaz Mohammad. 2011. ‘Pakistan-China Relations: An Overview.’ Pakistan Horizon 64, No. 4: 11–28.
  • Rafiq, Arif. 2019. ‘The China-Pakistan Economic Corridor: The Lure of Easy Financing and The Perils Of Poor Planning.’ Asian Affairs 50, no. 2: 236–48.
  • Rehman, Sherry. 2019. ‘CPEC 2.0: The Promise and The Peril.’ Jinnah Institute website. Link.
  • Small, Andrew. 2015. The China-Pakistan Axis: Asia’s New Geopolitics. Oxford: Oxford University Press.
  • Small, Andrew. 2020. ‘Returning to the Shadows: China, Pakistan, and the Fate of CPEC.’ The German Marshall Fund of the United States and Center for Asian Law, Georgetown University Law School, no. 16. Link.
  • Syed, Mushahid Hussain (ed.). 2015. 独特的中巴伙伴关系 [The Unique China-Pakistan Partnership]. Beijing: Zhongyang Bianyi Chubanshe.
  • Wolf, Siegfried O. 2020. The China-Pakistan Economic Corridor of the Belt and Road Initiative. Cham: Springer International Publishing.

Updates & Corrections

15 April 2021: An earlier version of the text erroneously stated that in 1964 Pakistan started a commercial flight between Karachi and Beijing, instead of Karachi and Shanghai (via Guangzhou). We also fixed a typo on Khyber Pakhtunkhwa.


Cover Photo: Pakistan-China border. Credit (CC): @Teseum.

Updated on 15 April 2021.


Hong ZHANG (张翃) is a PhD candidate in public policy at the Schar School of Policy and Government, George Mason University. Her research interests include Chinese political economy, China’s international development engagement and foreign aid, and the global expansion of China’s ‘national champion’ state-owned enterprises. She is a member of the editorial team of the Made in China Journal. Previously, she worked as a reporter with China’s Caixin Media where she covered Chinese economy and international affairs.