Imran Khan ’s much anticipated China visit took place from 2 to 5 November 2018 in the backdrop of Pakistan's desperate requirement of a financial bailout due to mounting balance of payment crisis, the rising concerns about the unsustainability of the costly projects under the China-Pakistan Economic Corridor (CPEC), and spectacular climb-down by the Pakistan Government before the fundamentalist protest against the judgement of the Supreme Court freeing Aasia Bibi charged in a blasphemy case.

The usual protocol was granted to the Prime Minister and 15 routine Memoranda of Understanding (MOU) were signed. A verbose joint statement was issued.¹ However, there was not a headline-grabbing outcome to the visit.

No Bailout

The Pakistani expectations of getting a substantial financial bailout package from China did not materialise. “We are willing to provide assistance to Pakistan within our capability,” the Chinese Premier told Imran Khan. Yet there was no specific commitment. Silence on the issue was deafening. The Chinese have promised help to its ‘all-weather’ friend Pakistan, but said that detailed discussion would take place later.

The Joint Statement talked about all kinds of issues but a bailout. The section on Trade, Investment and, Financial Cooperation talked about boosting Pakistan’s industrial capacity through relocation of labour-intensive industry and joint ventures. The two sides also agreed to take concrete measures to address the trade imbalance. The second phase of China Pakistan Free Trade Agreement would be concluded soon. They will also start negotiations on a ‘Services’ agreement. These are long-term measures which are not going to help Pakistan in the immediate short run.

The Chinese have indicated that Pakistan should look for other sources of assistance. This is a hint that Pakistan should approach the IMF. The $ 6 bn bailout from Saudi Arabia will at best provide limited and temporary respite to beleaguered Pakistan economy. Most economists feel that Pakistan would have to approach the International Monetary Fund (IMF) for a rescue package soon. The Government has been avoiding that so far and hoping that its all-weather friend China would come up with generous help. Since that is now unlikely, the Government will have to most likely approach the IMF which in turn will look closely at the CPEC projects.

CPEC

The Chinese also signaled that they would not agree to any scaling down of CPEC project which is critical for China’s geopolitical game in the region. On the contrary, China told Imran Khan that CPEC’s ambit and scope should be increased. China dismissed all negative talk about the CPEC. According to the Chinese newspaper Global Times, Chinese Premier Keqiang told Imran Khan “CPEC projects have been meticulously examined, conform to commercial principles and are economically feasible.” Imran Khan was compelled to reassure the hosts that Pakistan would continue with the CPEC projects.

China was clearly unhappy at Imran Khan’s public position that his Government would review and scale down the CPEC. China has already suffered a loss of face in Myanmar and Malaysia where some Chinese projects have been cancelled. It cannot afford to suffer another setback in Pakistan. Pakistan's room for manoeuvre vis-a-vis China using CPEC as a card is limited given the precarious state of its economy. Pakistan’s current account deficit is unsustainable. On the other hand, there has been disquiet in Pakistan about the CPEC. The loan terms are onerous, the Chinese have dumped huge amounts of machinery in Pakstan. Chiese skilled workers are taking Pakistani jobs.

The Joint Statement devoted a whole section of the CPEC. It was clear that under the Chinese pressure, Imran Khan was compelled to change his critical tone on the CPEC. According to the Joint Statement, “The two sides reaffirmed their complete consensus on the future trajectory of the CPEC.” The only concession given to Imran Khan was that the CPEC would also focus on social development, job creation, and, livelihood issues and that there would be a meeting of the CPEC Joint Cooperation Committee to explore “new areas of cooperation.” A working group on socio-economic development to “assist with livelihood projects in Pakistan” has been set up. This is a far cry from Imran Khan’s earlier position that his Government would review the CPEC projects because of their unsustainability. The Chinese preference in CPEC bouquet of projects was quite clear. The Joint Statement described “Gwadar as…the central pillar of CPEC,” and both sides “agreed to speed up progress on the Port and its auxiliary projects.”

China’s Call

Chinese anxieties about the safety and security of its personnel who have come under physical attacks were also reflected in the Joint Statement, which said, “Both sides dismissed the growing negative propaganda against CPEC and expressed determination to safeguard the CPEC projects from all threats. The Chinese side expressed its appreciation for the measures taken for the security of Chinese personnel and projects in Pakistan.”

While Imran Khan was away to China, his Government has entered into an agreement with the fundamentalist protesters to end their protests against the Pakistan Supreme Court judgment on Aasia Bibi. The agreement has been seen as humiliating appeasement of the religious fundamentalists. Pakistani Government’s object surrender to the fundamentalist groups would have been noticed in China. Their worries about the safety and security of their personnel working in Pakistan would increase. However, the geo-political importance of CPEC is immense for China, and it has pressurised Pakistan to stay the course, and not let down China. Pakistan has no option but to comply.
China’s deafening silence on an issue of critical importance for its ‘all weather’ ally would be heard by all.

Reference:

1. For the text of the Pakistan-China Joint statement see http://www.xinhuanet.com/english/2018-11/04/c_137581441.htm accessed on 5.11.2018.