Why China-Pakistan Economic Corridor Expansion Into Afghanistan Concerns India? Explained
Kabul: In a move that is fraught with geopolitical consequences, China and Pakistan have decided to expand their economic corridor (CPEC) to Afghanistan to boost trilateral cooperation.
The announcement on expansion of CPEC was made following a meeting among Chinese Foreign Minister Wang Yi, his Pakistani counterpart Ishaq Dar and Afghanistan’s Acting Foreign Minister Amir Khan Muttaqi in Beijing.
India, however, has consistently opposed the move since it involves the constructions through Pakistan-occupied Kashmir (PoK).
This is the first trilateral meeting between China, Pakistan and Afghanistan since Operation Sindoor post the Pahalgam attack. The three nations have reaffirmed their commitment towards “regional peace, stability and development”.
What Is CPEC?
The China-Pakistan Economic Corridor is the flagship project of the Belt and Road Initiative (BRI), which was introduced in May 2013 during Chinese Premier Li Keqiang’s visit to Pakistan. The CPEC started in April 2015 when Chinese President Xi Jinping and Pakistani Prime Minister Nawaz Sharif signed 51 agreements and memorandums of understanding.
The project initially required an investment of US$ 46 billion, which rapidly increased to US$ 62 billion in pledges or around 20% of Pakistan’s GDP.
The economic corridor was commended for its design, plugging Pakistan’s infrastructure gaps, establishing industrial zones, and creating trade routes to China through the Gwadar Port, strategically located on the Arabian Sea.
Why Is Pakistan Dependent On CPEC?
For Pakistan, CPEC provide critical infrastructure, but also creates a dependency that Beijing can leverage to keep Islamabad firmly in its orbit.
People of Pakistan initially got hope and relief from the country’s persistent power and energy issues with the introduction of the CPEC project. Widespread blackouts due to crippling power shortages had paralysed economic activities and engulfed bustling market areas in darkness.
Initially, China focused on constructing new coal-fired power plants within the framework of the CPEC. But late in 2021, it changed its story to reflect the objectives of the UN Climate Change Conference (COP26), committing to avoid developing coal-fired power plants overseas. This shift had dire consequences for Pakistan’s coal-dependent power sector, as it halted or shelved ongoing CPEC projects aimed at expanding the country’s power generation capacity by 20 gigawatts.
While Pakistan’s unsustainable external debt and economic difficulties predated the CPEC agreement, the initiative exacerbated the country’s widening current account deficits and bled foreign exchange reserves. Despite the International Monetary Fund’s (IMF) recommendations, Pakistan imported large volumes of materials for the projects before seeking a bailout worth US$ 6.3 billion from the intergovernmental body.
Since the foundation of CPEC relies on Chinese equity holdings in Pakistan’s infrastructure projects, Islamabad is liable for 80% of the investments related to the corridor. This has led to concerns that the flagship initiative of BRI is flawed and a costly. China has repeatedly refused to defer or restructure pending debt repayments, fearing that it would set a precedent for other debtors and result in a collapse of bad loans. Thus, it is up to China’s interest to assist Pakistan in maintaining its image as a reliable ally to the developing world, as per think tank Observer Research Foundation (ORF).
