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Eye on Asia by Hannan Hussain
Why US criticism of the China-Pakistan Economic Corridor will fall on deaf ears
Hannan Hussain
Published: 3:00pm, 15 Dec, 2019
Pakistani Prime Minister Imran Khan meets Chinese President Xi Jinping at the Diaoyutai State Guesthouse in Beijing on October 9. Photo: Xinhua
Washington’s critique of theChina-Pakistan Economic Corridor
(CPEC) is becoming a bit predictable. Alice Wells, the top United States diplomat for South Asia,reiterated the Trump leadership’s long-term position on the project last month: aid is an illusion, Pakistan is headed for a debt trap, and Beijing will consolidate all profits.
Interestingly, what began as a warning quickly transpired into a proposition: US multinational engagement in Pakistan should increase. But as long as Washington overlooks the key consistencies in the Sino-Pakistan bilateral engagement, its view on the economic corridor is unlikely to make gains with Islamabad.
First, Pakistan’s repayments to China are stretched over 20 years
, a timeline aligned with the corridor’s prospective operations. According to official documents with the Ministry of Planning, total payments amount to US$39 billion – where US$28 billion account for infrastructure and energy projects, and US$11 billion account for dividends (a sum extracted out of profits).
These specifics contest Well’s assertion that the “bulk of payments start to come due in the next four to six years”, and that “the corridor is going to take a growing toll on the Pakistan economy”.
Moreover, what frequently escapes American discourse is how Pakistan and China manage their deferrals. For instance, many of the deferred project investments under CPEC are marked by concessionary loans – designed to suit Pakistan’s revenue generation limitations.
The same is the case with bilateral loans and grants. Beijing has pushed across
billions this year to bolster Islamabad’s dwindling cash reserves and socio-economic challenges. This judicious tailoring of investments to Pakistan’s economic limitations – a long-standing hallmark of Sino-Pakistan cooperation – is largely absent in Pakistan’s experience with the US.
Interestingly, many within the Trump administration are of the view that Pakistan is pushing itself into a “client-state” spot with Beijing, with Beijing the chief financier and thus entitled to asymmetrical leverage. What this fails to consider is that the corridor’s development is itself an attempt to upgrade Pakistan’s revenue generation capacity.
How the US is turning Pakistan into a Chinese colony
Still the remarks should not strike Islamabad as a total surprise. The Trump administration has argued its case on CPEC far more erroneously in the past. Last year, US Secretary of State Mike Pompeo allegedthat Pakistan’s pursuit of an International Monetary Fund (IMF) bailout was an attempt to pay back Chinese loans. “There’s no rationale for IMF tax dollars, and associated with that American dollars that are part of the IMF funding, for those to go to bail out Chinese bondholders or China itself,” said Pompeo.
The allegations, dismissed by the IMF as false, were a direct reference to Chinese investments under the corridor project. Earlier, former US state secretary Rex Tillerson went on record to question the financial structure of projects under CPEC. Another odd probe into an inherently bilateral settlement.
President Donald Trump has been very open about America’s reservations with China. At the United Nations, he accused Beijing of undermining free trade through
currency manipulation, forced technology transfers and massive market barriers. All these fit into Trump’s self-initiated trade war with Beijing, designed to boost his protectionist domestic image.
The understanding now is that Islamabad too should embrace some of these protectionist policies towards Beijing. “CPEC relies primarily on Chinese workers and supplies, even amid rising unemployment in Pakistan,” Wells warned last month. The remark enjoys strong parallels with President Trump’s State of the Union address in February, alleging Chinese
“theft” of American jobs.
Washington’s view that CPEC is destined to backfire appears unconvincing on many counts. Little suggests that Chinese investment has been dismissive of Pakistan’s economic challenges, or that Pakistan prefers a cynical approach to regional connectivity and integration in its neighbourhood.
Hannan Hussain is a security analyst at the London School of Economics’s South Asia Centre, and an author
Why US criticism of the China-Pakistan Economic Corridor will fall on deaf ears
- US warnings of debt trap, job losses and economic toll will go unheeded as Pakistan soaks up China’s concessionary loans in a project that aims to fundamentally improve its economic prospects
Hannan Hussain
Published: 3:00pm, 15 Dec, 2019
Pakistani Prime Minister Imran Khan meets Chinese President Xi Jinping at the Diaoyutai State Guesthouse in Beijing on October 9. Photo: Xinhua
Washington’s critique of theChina-Pakistan Economic Corridor
(CPEC) is becoming a bit predictable. Alice Wells, the top United States diplomat for South Asia,reiterated the Trump leadership’s long-term position on the project last month: aid is an illusion, Pakistan is headed for a debt trap, and Beijing will consolidate all profits.
Interestingly, what began as a warning quickly transpired into a proposition: US multinational engagement in Pakistan should increase. But as long as Washington overlooks the key consistencies in the Sino-Pakistan bilateral engagement, its view on the economic corridor is unlikely to make gains with Islamabad.
First, Pakistan’s repayments to China are stretched over 20 years
, a timeline aligned with the corridor’s prospective operations. According to official documents with the Ministry of Planning, total payments amount to US$39 billion – where US$28 billion account for infrastructure and energy projects, and US$11 billion account for dividends (a sum extracted out of profits).
These specifics contest Well’s assertion that the “bulk of payments start to come due in the next four to six years”, and that “the corridor is going to take a growing toll on the Pakistan economy”.
Moreover, what frequently escapes American discourse is how Pakistan and China manage their deferrals. For instance, many of the deferred project investments under CPEC are marked by concessionary loans – designed to suit Pakistan’s revenue generation limitations.
The same is the case with bilateral loans and grants. Beijing has pushed across
billions this year to bolster Islamabad’s dwindling cash reserves and socio-economic challenges. This judicious tailoring of investments to Pakistan’s economic limitations – a long-standing hallmark of Sino-Pakistan cooperation – is largely absent in Pakistan’s experience with the US.
Interestingly, many within the Trump administration are of the view that Pakistan is pushing itself into a “client-state” spot with Beijing, with Beijing the chief financier and thus entitled to asymmetrical leverage. What this fails to consider is that the corridor’s development is itself an attempt to upgrade Pakistan’s revenue generation capacity.
How the US is turning Pakistan into a Chinese colony
Still the remarks should not strike Islamabad as a total surprise. The Trump administration has argued its case on CPEC far more erroneously in the past. Last year, US Secretary of State Mike Pompeo allegedthat Pakistan’s pursuit of an International Monetary Fund (IMF) bailout was an attempt to pay back Chinese loans. “There’s no rationale for IMF tax dollars, and associated with that American dollars that are part of the IMF funding, for those to go to bail out Chinese bondholders or China itself,” said Pompeo.
The allegations, dismissed by the IMF as false, were a direct reference to Chinese investments under the corridor project. Earlier, former US state secretary Rex Tillerson went on record to question the financial structure of projects under CPEC. Another odd probe into an inherently bilateral settlement.
President Donald Trump has been very open about America’s reservations with China. At the United Nations, he accused Beijing of undermining free trade through
currency manipulation, forced technology transfers and massive market barriers. All these fit into Trump’s self-initiated trade war with Beijing, designed to boost his protectionist domestic image.
The understanding now is that Islamabad too should embrace some of these protectionist policies towards Beijing. “CPEC relies primarily on Chinese workers and supplies, even amid rising unemployment in Pakistan,” Wells warned last month. The remark enjoys strong parallels with President Trump’s State of the Union address in February, alleging Chinese
“theft” of American jobs.
Washington’s view that CPEC is destined to backfire appears unconvincing on many counts. Little suggests that Chinese investment has been dismissive of Pakistan’s economic challenges, or that Pakistan prefers a cynical approach to regional connectivity and integration in its neighbourhood.
Hannan Hussain is a security analyst at the London School of Economics’s South Asia Centre, and an author
