Challenges Loom for China-Pakistan Alliance Amid Economic Crisis And Security Risks

"Although all partnerships encounter difficulties, the China-Pakistan relationship has mechanisms in place to prevent it from deviating too far from the intended course."

Challenges Loom for China-Pakistan Alliance Amid Economic Crisis And Security Risks

The Karachi Nuclear Power Plant in Pakistan saw the introduction of a new reactor, designed by China, as revealed by the Pakistani Prime Minister, Shehbaz Sharif. The $2.7 billion unit was constructed with funding from China as part of an effort to upgrade the facility and enhance Pakistan's energy security.

In spite of their long-standing partnership, Pakistan has only managed to finish a handful of new infrastructure projects supported by China in recent years. The unveiling of the new reactor at the Karachi Nuclear Power Plant is a notable exception.

Construction on the new reactor began in 2016, shortly after the China-Pakistan Economic Corridor (CPEC) was formally launched as a part of China's Belt and Road Initiative. While both sides have publicly expressed their commitment to revitalize CPEC, in reality, Pakistan has been slow to finish infrastructure projects and China has been sluggish in financing new ones.

One of the reasons for the deceleration of CPEC projects is Pakistan's ongoing economic crisis, which has made it increasingly unable to afford infrastructure loans, along with China's own economic slowdown. During his visit to Beijing in November last year, Sharif requested a rollover of $6.3 billion in debt, but China has not yet confirmed if it will grant the request, even though it announced a two-year debt moratorium for Sri Lanka. Although Pakistan's finance minister has stated that China will rollover over $4 billion in Pakistani debt, Beijing has not verified this.

The reduction in infrastructure projects is only one indication of a potential setback in China-Pakistan relations. On the diplomatic front, some observers noted last year that China did not oppose India's decision to exclude Pakistan from a high-level meeting on the sidelines of a virtual BRICS summit that included other emerging economies. China, which hosted the event, might have previously intervened to assist Pakistan. According to some analysts, Beijing regards the present government in Pakistan as too precarious to be a dependable partner.

Chinese officials have expressed growing concerns about security risks in Pakistan due to the country's escalating terrorism problem. Several recent attacks have targeted Chinese investments and nationals, including a dental clinic in Karachi, a Confucius Institute in Karachi, and a luxury hotel in Baluchistan that was hosting a senior Chinese delegation in 2021. After Sharif met with Chinese President Xi Jinping in Beijing last November, the Chinese foreign ministry released a statement expressing Xi's concern about the safety of Chinese nationals in Pakistan.

However, it would be incorrect to assume that the China-Pakistan relationship is in significant trouble. While Chinese loans are not solely dedicated to infrastructure projects, they continue to flow into Pakistan. Between 2018 and last summer, Pakistan received almost $22 billion in short-term loans from China, with most allocated for balance of payments relief. This indicates that Beijing is willing to try to alleviate Islamabad's economic stress. In June of last year, China approved a new $2.3 billion loan at a discounted interest rate.

Nonetheless, China's own economic difficulties mean that sustaining this level of support is not a certainty, particularly as Pakistan's crisis deepens. Inflation reached its highest level since 1975 last month, and Pakistan's foreign reserves are only sufficient to cover less than three weeks' worth of imports. On Thursday, Islamabad declared that the latest round of talks with the International Monetary Fund had not resulted in an agreement to release additional funds.

China may prefer a more stable government in Islamabad, but it has a good relationship with the Sharif family. Nawaz Sharif, the current prime minister's brother, was also prime minister when CPEC was formally launched. The previous government led by Imran Khan didn't have a positive relationship with China, as it called for a review of past CPEC agreements under the guise of anti-corruption efforts. Nonetheless, Pakistan's military has the final say on policy decisions concerning key partners such as China.

Given current geopolitical circumstances, it seems inevitable that China and Pakistan will continue their alliance. The growing security ties between the United States and India unite Beijing and Islamabad in their concern over their common rival, New Delhi. With increasing U.S.-China competition, cooperation between Pakistan and the United States is limited, thus extending Islamabad's dependence on Beijing for economic and military support. Pakistan's own efforts to establish a stronger partnership with Russia are taking place amid a deepening China-Russia alliance.

Although all partnerships encounter difficulties, the China-Pakistan relationship has mechanisms in place to prevent it from deviating too far from the intended course.

About The Author

Girish Linganna is a Defence & Aerospace analyst, and is the Director of ADD Engineering Components (India) Private Limited which is a Subsidiary of ADD Engineering GmbH, Germany with manufacturing units in Russia.

(Views expressed are the author's own & do not reflect the editorial stance of Mission Victory India)

For more defence related content, follow us on Twitter: @MVictoryIndia and Facebook: @MissionVictoryIndia


🎉 You've successfully subscribed to Mission Victory India!