Is CPEC a Chinese Trap to devastate it’s all weather Friend Pakistan’s Economy?

Few days back we wrote an article on the dubious tactics of China to devastate economies. Several African Nations have experienced it, Sri Lanka is experiencing it and next could be Pakistan.

Yes you heard it right, it could be Pakistan….the so called all weather Friend of China. We will explain it how.

CPEC (China Pakistan Economic corridor is one of the biggest buzzword if this decade. It is an example of a huge proposed Infrastructure to be made across Pakistan and Pakistani occupied Kashmir till Gwadar Port. The cost is quite huge, somewhere between 45-50 Billion Dollars.

So there is an obvious question that who will get the benefit out of this huge project? Will the China-Pakistan-Economic Corridor (CPEC) benefit either countries, or only China? Several Experts have raised their concerns and highlighted the aspects which indicate Pakistan may not benefit at all.

A caution was registered recently by the International Monetary Fund (IMF). The organization observed in a report that CPEC projects are expected to generate balance of payment outflows to the tune of US$3.5-4.5 billion for Pakistan by 2024. However, the report also warned that enhancing exports poses a real policy challenge for Pakistan and that failure in the endeavor will considerably diminish CPEC’s benefits.

It is quite evident that CPEC will cause a massive inflow of Chinese currency “Yuan” for both payment and settlement purposes, which will further damage Pakistan’s already massive trade deficit with China. Most of Pakistan’s external trade is currently done using the US dollar, and CPEC will do nothing for its US dollar reserves.

Massive Truck convoys coming from China via Karakoram Highway have already begun to flood Pakistan’s domestic market with cheaper, made-in-China goods. The cost of production in Pakistan remains very high – partly due to the high costs inflicted by the country’s massive energy crisis. This also hampers the viability of Pakistan’s own exports. The corridor will, additionally, assist China to flood external markets which might otherwise have been receptive to Pakistani goods.

Made-in-China goods are already very cheap, the shorter route afforded Chinese exports via Gwadar will further reduce import costs in markets that have so far been export destinations for Pakistan. This is certainly hurt the Pakistani local organizations up to a larger extent.

Pakistani Government is making Investments to resolve the energy crisis in Pakistan through building more power plants; however, the roots of the problem go much deeper than a simple production shortfall. The actual problem is that Pakistan doesn’t have a robust Distribution sector and in its absence any added generation capacity will have little effect. Pakistani government is aware of this situation but they have made No investment so far to improve distribution system.

Another potential loophole for Pakistan is the way Chinese companies are likely to emerge as new “middle-men” in Pakistan’s economy, particularly in the agricultural sector.

If we see the broader aspect, then we understand that this proposed co-operation in agriculture, infrastructure along with Chinese development of road, rail and energy projects in Pakistan, CPEC appears more and more to be a master plan for deep Chinese penetration into Pakistan’s economy, with long term economic and political consequences. In other words we can say that CPEC is a Chinese Trap to devastate Pakistani Economy.

Manish Sharma