The China-Pakistan Relationship: A Critical Analysis

Photo credit: THOMAS PETER/AFP/Getty Images

Pakistani Prime Minister Imran Khan recently said,

Pakistan’s future is with China. We should be clear about this… Our country’s progress and development is linked with China… We’re lucky that it’s currently the world’s fastest growing economy, I don’t see any country challenging it in the future.

This line of thinking represents not just Imran Khan and his party, but rather the entire political and military leadership of Pakistan. However, it should not be believed uncritically. These leaders often prioritize their short term political gains over the long-term well-being of the country, so it’s possible that being so closely linked with China will end up being bad for Pakistan.

In this post, I’ll take a closer look at the China-Pakistan relationship. I’ll start by laying out Pakistan’s priorities, and I’ll show how China hasn’t helped much except a little. I’ll then discuss CPEC, and demonstrate that it’s a one-sided project that doesn’t significantly benefit the Pakistani people. After that, I will discuss the US-Pakistan relationship and point out why it’s important for this relationship to expand in the future. I’ll end by pointing out historical parallels with the Pakistan-China relationship and the warnings they might provide.

Pakistan’s Goals and Priorities

Right now, these are the things Pakistan needs:

  1. Security on the Western border
  2. Peace in Afghanistan
  3. International pressure on India over Kashmir
  4. Economic development
  5. Arms parity with India

China has been mostly irrelevant on securing the Western border and achieving peace in Afghanistan. It hasn’t caused too many problems, but it certainly hasn’t helped either. It may try to take on a larger role here in the future, we’ll have to watch out for it.

All the major countries on Earth have failed to pressure India on Kashmir, and China is no exception. Despite the fact that India’s actions violate many UN Security Council resolutions, the actual (permanent) members of the UNSC don’t seem to mind. China hasn’t really taken up this cause either. Overall no one cares. Furthermore, China has recently failed to veto UN sanctions India has brought forward to punish Pakistan-based supporters of the Kashmiri struggle, despite having vetoed them in the past. These sanctions cause economic problems for Pakistan by placing its financial system under scrutiny.

In terms of economic development, China has indeed spent money on Pakistan, but people doing business with China need to be careful. China is known for engaging in “debt-trap diplomacy” where it lures in smaller nations with the promise of money, then makes them dependent on it and uses them for its financial and political gain. In addition, China’s investments have mostly been on infrastructure whereas what Pakistan really needs is industry, healthcare and education. Also, Pakistan’s economic problems were never a result of a lack of outside economic investment in the first place, they were a result of corruption and mismanagement. So outside investment cannot solve Pakistan’s economic woes. I’ll discuss CPEC in more detail below.

As far as arms go, China helped Pakistan with the JF-17 but this doesn’t do much for Pakistan because what Pakistan needs is arms parity, not just arms. India is acquiring the S-400 from Russia, working jointly with Russia on hypersonic missiles, and even has a space program. India is marching into the 2020s with its weapons technologies while Pakistan is stuck in the 1970s. The gap between the two grows every year. This was acknowledged by Pakistan’s military spokesman who recently spoke about the growing conventional imbalance in the region:

Their defense spending and their budget compared to ours is affecting the conventional balance of the region. And when this happens, things go into another domain and the international community should also look at this.

The military imbalance between the two countries informs political stances as well, with India becoming more and more aggressive and Pakistan increasingly on the defensive. Indian leaders now routinely fantasize about militarily conquering the Pakistan-held parts of Jammu & Kashmir. The only thing Pakistan has defending it are nukes and missiles, both of which were developed in-house. The JF-17 is alright but it does not provide the technological leap needed to maintain parity with India.

Some have argued that the close relationship with China creates security for Pakistan, by deterring attacks by India or any other adversary. This is true when viewed through a narrow India-vs-Pakistan lens, but ignores broader realities. Having China close can protect Pakistan from India, but also makes it more likely for Pakistan to be drawn into China’s own conflicts, intentionally or not.

Specifically, there’s a scenario where if the US and China went to war, India might attack the Pakistani-held areas of Jammu & Kashmir and sell it to the US as a way of cutting off China’s supply lines from the West. China would presumably be under an overwhelming US assault in the East and not be able to help Pakistan respond. Thus, the China-Pakistan relationship is a double-edged sword for Pakistan, creating both added security and added vulnerability.

CPEC – Infrastructure

The Pakistani government has made a lot of information about CPEC available on its website. The initial phase of CPEC focuses on transportation and energy infrastructure. It consists of Chinese companies working on infrastructure projects within Pakistan, financed by low-interest loans taken by Pakistan from China. These include the Gwadar Port, along with some highways and rail lines.

One benefit of infrastructure projects, beyond the actual infrastructure, is that they provide employment opportunities for the local population in construction, as well as in sourcing and supplying the materials. In this case, despite the Pakistani labor surplus, the contracts for these projects were awarded to Chinese companies, often without bidding! Where bidding was allowed, it was usually “controlled bidding” done between Chinese companies only (example here), who were awarded generous above-market contracts alongside tax breaks.

Thus, the Pakistani people will get to use the infrastructure while the other benefits of these projects will go entirely to China, in a neo-colonial style relationship. Lest we forget, the British also did many infrastructure projects in South Asia. The railways they built are still in use!

While the loans for these projects are indeed low-interest, they’re still loans at the end of the day. It’s money that Pakistan will have to pay China eventually. A better arrangement would have been for Pakistan to borrow money to finance infrastructure projects, which are led by foreign companies if necessary, but employ many locals, and the bidding would have been open and competitive. Or, if China was insisting on exclusive access, then the projects should have used equity financing. If one of the projects fails, the risk should be shared by both sides rather than being entirely borne by Pakistan!

CPEC – Economic Zones

In addition to infrastructure projects, CPEC stipulates the creation of “Special Economic Zones” within Pakistan, which are essentially hubs where Chinese companies will move and employ Pakistanis in factories. For China, this will help them take advantage of the low labor costs in Pakistan. For Pakistan, this will provide employment for its workers.

The problem is: who’s in charge of these zones? China is doing this because it sees an advantage, the low salaries of Pakistani workers. If Pakistan wants to advance and develop, eventually it would need to see its wages rise beyond the level of third-world sweatshops. Indeed, China itself has seen wages rise and that’s why it’s coming to Pakistan in the first place for cheap labor!

But China’s firm control over the project ensures that it will be run according to Chinese interests, and where they clash with Pakistani interests, China’s will win out. It’s important to view things from China’s perspective. If Pakistan were to industrialize and become a middle income economy, as a nation of over 200 million, it would be in direct competition with China itself. China needs Pakistan to remain a low-income economy it can relocate its sweatshops to, and use for Arabian Sea access and importing raw materials. It’s not in China’s interests for Pakistan to advance beyond that.

There will be no way for the Pakistani government to force the Chinese companies in these Special Economic Zones to pay their workers a higher wage if Pakistan’s economy advances, and this will stunt Pakistan’s development in the long term. Thus, while the Special Economic Zones do provide employment opportunities in the short term, they do so at the cost of effectively undermining Pakistan’s sovereignty over its own economy.

There is little historical precedent for a country having developed its economy while handing over this level of control to a foreign power. The US famously provided economic investment for post-war Europe via the Marshall Plan, and this had political goals too (stopping communism), but US companies and government officials did not directly administer economic zones within Europe at this level. They merely offered funds and technical advice.

The closest comparison for CPEC’s economic zones I can think of are the “capitulations” that the Ottoman Empire granted to the great powers in its final decades. These helped the Ottoman government survive short-term debt crises, but they critically undermined the empire’s sovereignty and likely contributed to its eventual collapse. Of course, they were different from CPEC in certain aspects, as they surrendered legal privileges in a way CPEC doesn’t do explicitly. But the overall structure and imbalance of the deals is similar.

What’s The Alternative?

If the relationship with China hasn’t been all that great, then what’s the alternative? For starters, you shouldn’t need an “alternative” in a bad relationship to realize you’re being taken advantage of. The alternative to a bad relationship is to recalibrate the bad relationship, and if that doesn’t work then to leave, even if you don’t have another partner lined up.

The fixes for Pakistan’s domestic woes have to come from the inside. China isn’t going to fix the corruption and mismanagement. Neither China nor any other foreign power is going to make people start paying their fair share of taxes. China isn’t going to get rid of pollution and clean up the roads, beaches and canals. Ultimately it’s gonna have to be Pakistanis who do that.

Looking at the timeline, it seems like Pakistan immediately jumped into CPEC as soon as it got a handle on its security problems, which resulted in it not being in a great negotiating position. A better approach would have been to fix internal security, then try to significantly reduce corruption, and then open the country for business in a competitive way. No one country should get exclusive access or monopoly, rather deals should be made based on whichever country or corporation offers the best package. However, Pakistani politicians were looking for quick wins they could sell to the electorate.

Of course, things aren’t that simple. It’s easy to say “fix corruption” but much harder to do that in real life. The politicians who pushed Pakistan into CPEC are themselves very corrupt. And outside investment was a non-negotiable requirement. But it’s hard to shake the fact that if Pakistan fixed its security threats and corruption, the business would have come, and Pakistan would have been able to conduct its deals on its own terms and from a stronger negotiating position.

The Importance of the US-Pakistan Relationship

The best way for Pakistan to deal with how much they’ve given away to China is to balance their relationship with China against the US. If they’re able to do this, they will ensure that China will have to give more concessions to Pakistan as part of a competition with the US. China (or anyone else) should have to earn Pakistan’s business, it shouldn’t be taken for granted.

Some have pointed out that the US-Pakistan relationship has been strained over the past 20 years. That’s true, but it was strained for one big reason: Afghanistan. Since the peace deal was signed earlier this year, US and Pakistani interests are aligned. Things change; in politics there are no permanent enemies and no permanent friends. It would be a mistake for Pakistan to move way from the US now because it’s still mad about what happened in the past, especially when the US has expressed interest in a deeper trade relationship with Pakistan as a way to compete with China. This can only work in Pakistan’s favor.

If words don’t convince you, perhaps numbers will. Pakistan imports $12.4 billion from China and exports just $2 billion, a massive trade deficit of over $10 billion. And a lot of the imports are cheap plastic goods that hurt local artisans. Pakistan imports $2.6 billion from the US, and exports $4 billion, a trade surplus of $1.4 billion. One of the only countries that Pakistan has a surplus of this size with!

Furthermore, there are many Pakistanis living in the US or its allies (like Canada, the UK and Saudi Arabia), who work and send back remittances. Whereas Pakistanis don’t go to China much unless they’re there to spend money, e.g. tourism or education, so it’s a net outflow of money. Pakistani Americans alone send over $4 billion in remittances per year, and that’s not including how much they spend when they visit their relatives back home.

Of course, the US has its own interests and may not always have Pakistan’s best interests in mind. But that’s the whole point, everyone has their own interests. It’ll serve Pakistan best to not become a client of one country, rather to remain neutral and deal with everyone. Based on Imran Khan’s statements (“Pakistan’s future is with China”) it doesn’t seem like this is the approach Pakistani leaders are taking, unfortunately.

Historical Parallels: A Warning

A lot of international affairs analysis in the past few years has been looking at the rise of China and comparing it to the rapid rise of other great powers in the past, and whether or not this portends a US-China war. One of the most common comparisons is to Germany in the late 19th and early 20th centuries, which quickly overtook France and began challenging Britain for dominance. This turned Europe into a powder keg, and ultimately a small ethnic conflict in the Balkans unraveled and led to the bloodiest war the world had ever seen up to that point.

The Ottoman government saw Germany’s rise and forged an alliance with it. But when Germany went down in WW1, the Ottoman Empire went down with it. Pakistan today might be making a similar mistake with China. And while the Ottomans probably had a choice to enter WW1, and made the wrong choice, once Pakistan is so deeply in bed with China it might not even have the luxury of a choice. The tail doesn’t wag the dog.

Of course, it’s also possible that China would win, or that the US and China will never go to war, or that Pakistan is able to stay neutral. But these are risks that need to be considered and planned against. The more Pakistan becomes a client of China, the more it gets sucked into China’s conflicts, without the ability to manage their spillover effects.

May Allah grant us all that which is best.

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