Authors: Daniel S. Markey, Adjunct Senior Fellow for India, Pakistan, and South Asia, and James West, Research Associate, India, Pakistan and South Asia
May 12, 2016
The China-Pakistan Economic Corridor (CPEC) is part development scheme, part strategic gambit. Although Beijing and Islamabad have been close partners for decades, the CPEC is a reflection of intensified and expanded bilateral cooperation at a time of rising Chinese geopolitical ambition and persistent concerns about Pakistan’s security and development.
The CPEC is intended to promote connectivity across Pakistan with a network of highways, railways, and pipelines accompanied by energy, industrial, and other infrastructure development projects to address critical energy shortages needed to boost Pakistan’s economic growth. Eventually, the CPEC will also facilitate trade along an overland route that connects China to the Indian Ocean, linking the Chinese city of Kashgar to the Pakistani port of Gwadar.
Pakistan and China formalized plans for the CPEC in April 2015, when they signed fifty-one agreements and memoranda of understanding on Chinese investments, totaling $46 billion over the next ten to fifteen years. Some projects are already underway, including highways and energy projects where completion is expected by the end of 2016.
CPEC developments are part of a grander Chinese agenda of regional economic connectivity: the One Belt, One Road (OBOR) initiative outlined in March 2015 by China’s National Development and Reform Committee (NDRC). The highly ambitious plan calls for new state-directed investments in roads, railways, pipelines, ports, and information networks to deepen economic integration and connectivity across Asia and into Africa and Europe.
Because OBOR consists of a continental Eurasian “Silk Road Economic Belt” and a Southeast Asian “Maritime Silk Road,” Pakistan has the potential to serve as a nexus for the two routes, and Beijing describes the CPEC as a “flagship project.” Although Beijing is quick to downplay geostrategic motivations behind the CPEC, many commentators have noted that over the long run, an overland link across Pakistan to the Arabian Sea could help alleviate the “Malacca dilemma,” China’s vulnerability to the fact that roughly 85 percent(PDF) of its oil imports travel through the single chokepoint of the Strait of Malacca.
Security Through Development
Understanding the CPEC requires an appreciation for China’s security concerns, especially those stemming from its restive western region of Xinjiang. Beijing has sought to clamp down on Xinjiang’s ethnic Uighur community and has met political violence with an expanded security presence and push for economic development schemes. These efforts implicate Pakistan because Uighur militant groups, like the East Turkestan Islamic Movement(ETIM), have sought refuge in the Pakistan-Afghanistan border areas, where they have established links with al-Qaeda and the Taliban in Afghanistan and Pakistan. China perceives the ETIM as a persistent threat, committed to targeting China and attacking Chinese interests (PDF) inside Pakistan.
The CPEC represents an international extension of China’s effort to deliver security through economic development.
In this context, the CPEC represents an international extension of China’s effort to deliver security through economic development. Investments in Pakistan are intended to create jobs, reduce antistate sentiment, and generate public resources for additional improvements in law and order. By tackling the threat of jihadi organizations in neighboring Pakistan, China hopes to better secure its own territory. Consequently, while the CPEC is often portrayed as a transportation corridor, security concerns will likely impose limits on the cross-border flow of people and goods, at least in the short to medium term.
Pakistan’s ruling civilian and military leaders also appreciate the economic, political, and security opportunities that the CPEC offers. Pakistan needs direct investment to spureconomic growth, but investors have generally shied away over the past decade. If delivered, China’s investment plan represents more than double all foreign direct investment (FDI) in Pakistan since 2008.
China’s investments in energy infrastructure are especially welcome. National demand outstrips supply by an average of 4,500 megawatts. Supply shortages and distribution problems lead to frequent blackouts and cost as much as 2 percent GDP growth (PDF) a year. These troubles will worsen as Pakistan’s population of nearly two hundred million expands at a rate of almost 2 percent (PDF) annually. Without the creation of new jobs, however, the nation’s youth (over half of Pakistanis are under the age of twenty-four) will lack productive outlets for their energies. In a state riven by sectarian, ethnic, and political cleavages and populated by networks of extremism and militancy, the need for a growing economy takes on special significance.
Politically, Pakistan’s ruling civilian government recognizes that by delivering a range of “early harvest” projects, it will have a better chance of winning national elections slated for 2018. From a security perspective, Pakistan’s military leaders believe that if Chinese investments can turn around the nation’s sagging economic fortunes, they will also strengthen the state against challengers, both foreign (India) and domestic (antistate insurgents).
Plans and Realities
In Pakistan, CPEC projects are being managed primarily by the Ministry of Planning, Reform, and Development in partnership with China’s NDRC. The two sides have established a Joint Cooperation Committee with working groups focused on four main areas: the Gwadar Port, transport infrastructure, energy, and industrial cooperation.
Operations at Gwadar, a warm-water, deep-sea port in Balochistan near the Strait of Hormuz, were handed over to a Chinese state-owned enterprise in November 2015. Gwadar remains a work in progress, with total traffic of only half a million tons in 2016, but traffic isexpected to double in 2017. Planners estimate that eventually it will process three hundred to four hundred million tons annually and that the surrounding city will grow from eighty thousand to two million residents.