Source: BharatShakti

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Context: The second phase of the China-Pakistan Economic Corridor (CPEC) is expected to be formally announced during the visit of Pakistan’s Prime Minister Shehbaz Sharif to China.

Details

China-Pakistan Economic Corridor (CPEC)

• The China-Pakistan Economic Corridor (CPEC) is a major bilateral project aimed at improving infrastructure within Pakistan to enhance trade with China and further integrate South Asia.
• It is part of China's larger Belt and Road Initiative (BRI), announced in 2013, to improve connectivity, trade, communication, and cooperation across Eurasia.
• The CPEC project was officially launched on April 20, 2015, with the signing of 51 agreements and memorandums of understanding between Chinese President Xi Jinping and Pakistani Prime Minister Nawaz Sharif.
• These agreements were valued at $46 billion.
• Objectives of CPEC include transforming Pakistan's economy by modernizing its road, rail, air, and energy transportation systems.
• The project aims to connect Pakistan's deep-sea ports of Gwadar and Karachi to China's Xinjiang Uygur Autonomous Region and beyond through overland routes.
• Xinjiang borders Mongolia, Russia, Kazakhstan, Kyrgyzstan, Tajikistan, Afghanistan, Pakistan, and India, and is historically significant as part of the ancient Silk Road.
• The initiative seeks to reduce the time and cost of transporting goods and energy, such as natural gas, to China by avoiding the Strait of Malacca and the South China Sea.
• CPEC includes the establishment of several special economic zones (SEZs) in Pakistan, modeled on China's SEZs, to attract investment and spur rapid economic growth.
• Joint space and satellite initiatives between Pakistan and China, driven by CPEC, were announced in 2016.

Recent Development

• Pakistan’s Prime Minister Shehbaz Sharif is on a five-day visit to China, Pakistan’s biggest and most important ally.
• The second phase of the China-Pakistan Economic Corridor (CPEC) is expected to be formally announced during this visit.
• The $62-billion CPEC, launched in 2015, is part of President Xi Jinping’s Belt and Road Initiative (BRI), which aims to expand China’s geopolitical influence through investments in infrastructure projects across around 100 countries.
• CPEC would facilitate the construction of power plants, road and rail networks, and the deep-sea port of Gwadar in Pakistan.
• For China, CPEC is of strategic significance, providing direct access to the Indian Ocean through highways in Pakistan-Occupied Kashmir and down the length of Pakistan.

CPEC Story So Far

• First Phase Focus: Infrastructure, energy, and port development projects.
• Progress:
• Power Projects: Of the 21 proposed, 14 completed, 2 under construction, and 5 yet to start.
• Transport-Related Projects: Of the 24 proposed, 6 completed, no work started on 13.
• Special Economic Zones (SEZs): Of the 9 proposed, only 4 have seen progress, none completed.
• Direct Investment: Brought $25.4 billion to Pakistan until 2022.

Behind Stalled Progress

• Concerns: Corruption, red tape, political tumult, and poor security in Balochistan where Gwadar is located.
• Violence: Tens of Chinese nationals killed in terrorist attacks since 2018; at least 5 Chinese killed by Baloch militants this year.
• Economic Injustice in Balochistan: CPEC infrastructure has not generated quality jobs or economic dividends for the local population.
• Developers failed to build promised social infrastructure.
• Government did not fulfil promises to promote economic and social development in Balochistan.
• Security Situation: Remains a major concern for China, impacting future investments.

Hopes and Questions for the Future

• Priority: Bringing CPEC back on track is crucial for Pakistan’s crisis-hit economy.
• Second Phase Focus: Deeper cooperation in energy, agriculture, infrastructure, and the Main Line-1 rail project.
• Track Record: Limited success in translating infrastructure improvements into economic productivity and growth.
• Estimated 2 million employment opportunities; less than 250,000 jobs created so far.
• Chinese companies not partnering with local firms, impacting job creation for Pakistani youth.
• Debt Concerns: China holds roughly $30 billion of Pakistan’s $126 billion external debt.
• More than 80% of Pakistan’s bilateral debt service went to Beijing between July 2021 and March 2022.
• Fear that the debt burden effectively makes Pakistan a Chinese client state.

The 'Mirage' of CPEC

• Government’s Talk: Anticipated revival of CPEC; China issued only a vague statement.
• IMF Bailout Package: Agreed to release a $1.1 billion tranche; negotiating a fresh package of $6-8 billion.
• Sticking point: Pakistan’s debt obligations to China.
• IMF’s condition: No positive net outflow from Pakistan to China during the program period; requires rescheduling of Chinese debt maturities.
• Heart of Sharif’s Visit: Addressing debt obligations to China, not necessarily CPEC revival.

For more: https://www.iasgyan.in/daily-current-affairs/italy-to-walk-out-of-chinas-belt-and-road-initiative

Sources:

IndianExpress

PRACTICE QUESTION Q. The China-Pakistan Economic Corridor (CPEC) is viewed as a cardinal subset of China’s larger ‘One Belt One Road’ initiative. Give a brief description of CPEC and enumerate the reasons why India has distanced itself from the same. 150 words