Asia Unhedged thinks the opening strategy on a chessboard is sometimes key.
Chinese President Xi Jinping inked deals for $46 billion in energy and infrastructure projects in Pakistan Monday as part of a much-awaited state visit. A $1.65 billion Chinese-backed dam project in northern Pakistan also serves as the maiden investment by Beijing’s $40 billion Silk Road investment fund that will finance a vast economic corridor that stretches from China to Central Asia and Europe.
Pakistan’s geographic position makes it critical in China’s plans to access the Indian Ocean and push overland towards Europe. From the Pakistani side, China is already the country’s biggest trading partner.
Bloomberg reports the two nations are “planning $45 billion in projects along a 3,000-kilometer (1,850 miles) corridor stretching from Xinjiang in western China to Gwadar on the Arabian Sea. The investments – $28 billion of which were announced this week – would boost Pakistan’s economic growth and provide another route for China to import oil from the Middle East.”
Xi’s visit carries a host of other geopolitical implications. China’s billions in development cash nearly equals the aid the U.S. has poured into Pakistan over the last decade to back its Afghanistan operations. Beijing is building on close ties with Pakistan during the Cold War when it nurtured Islamabad as an ally against then Soviet-leaning India. In a move closely watched by New Delhi, China is discussing the sale of eight Chinese-built submarines that would double Pakistan’s undersea military capability. Pakistan also signed an “All-Weather” military partnership with China Monday that makes informal defense ties between the two countries official.
Massive Chinese aid to Pakistan likewise carries a security trade-off. China’s antsy about Muslim separatists in Xinjiang teaming with Pakistan’s militants. Xi praised the Pakistani military’s efforts to crackdown on Muslim militants near the Afghan border and wants it to contain any Islamist spillover in China’s restive Central Asian provinces. He’s likely to get more Pakistani cooperation on this point.
Pakistan will also serve as a training ground for Chinese banks and companies in Beijing’s first concerted Silk Road project. China Development Bank and the Industrial Bank of China will lend funds to Chinese companies involved in the local infrastructure projects.
Chinese companies building the energy and infrastructure projects include the Three Gorges Corp., China Power International Development, Huaneng Group, ICBC Corp. and Zonergy Corp.
Categories: Asia Unhedged