China Pakistan Economic Corridor CPEC– A geo-economic masterstroke or the Achilles heel of Chinese foreign policy?

Last year the first container passed through the massively expanded Gwadar Port marking what could be a new economic era for Pakistan and for China a new spur on its Belt and Road project. By opening a new route up from the Arabian Sea to Western China, Beijing can in one stroke reduce its dependence on the crowded Straits of Malacca by creating a direct route from Europe and the Middle East to its heartlands.

Pakistan stands to gain from an infrastructure and trade windfall as Chinese firms rush to develop the nation’s often decrepit road, rail and energy networks. Dozens of new projects have been planned across the country, perhaps the most significant is one close to the Iranian border. Gwadar has gone from a sleepy fishing village to a major port, now there is talk of it becoming the next Dubai. A bold claim in one respect, but Dubai went from virtually nothing to one of the world’s most visited cities in just two generations.

There has been an acute outbreak of Sino-philia among Pakistani politicians who can see the big yuan signs in front of them, the prospect of an economic boom triggered by CPEC is exciting lawmakers and the business community. Pakistan’s people and press are also generally pro-Beijing, but there is also a note of scepticism among the populace as they consider China’s intentions. Is China just interested in getting its goods across Pakistan, and will the country be left with a huge bill for a bunch of white elephants and projects destroyed through corruption? Will China use Pakistan as place to send state owned enterprises at home who lack work and lastly will this help Pakistan develop its industrial base? Is it realistic to see Chinese firms migrate to lower cost Pakistan in sectors such as garment making?

From a security of view many have pointed out that new infrastructure project will be tempting for the terror groups in Pakistan such as the Baluchi separatists or Islamic extremists who harbour a hatred of China thanks to its suppression of Islam and its predominately muslim Uyghur minority.

Gwadar port lies along the Baluchi coast facing Oman and adjacent to Iran, still part of the sub-continent, but with a distinctly Middle Eastern flavour, now it is boasts a state of the art port, new international airport and a growing population drawn by the prospect of work and the city’s future prospects.China has also gifted two naval vessels to guard the port, also raising the prospect that it sees Gwadar as a future naval base.

The Chinese originally started work on a new deepwater port in 2000 completed in 2005 and handed over to Singapore firm who were brought in to run the facility. Now the port has taken on new meaning as it is the entry point of this new spur of the Silk Road which will run from Gwadar to Kashgar in Western China. There is expected to be a massive growth in goods travelling through the port enroute to China.

One day pipelines of gas from Central Asia could run through Afghanistan and Pakistan to the coast. But the Chinese may have underestimated the risk of instability from the local Baluchi population, the region has a long history of seeking independence and its separatists have fought an often violent insurgency with the Punjabi government, driven by economic grievances such as land grabbling by Islamabad elites and the transfer of the region’s mineral wealth in exchange for a sparse return of budgetary support from the central government.

The reality of violence on the road could result in the Chinese rethink their new route, or they could double down by offering Pakistan military support, probably logistics, weaponry and supplies rather than Chinese troops on the ground. Any changes to the security situation could cost the Chinese heavily.

Next I will look at the opportunities and the credit risks inherent on the China Pakistan Economic Corridor, as well as breaking down some of the many projects which make up the CPEC. I will also examine the nexus of power, money and individuals which stand at the head of this initiative and the fast strengthening ties between Islamabad and Beijing.

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