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Cracks In China-Pakistan Relations: Bilateral And External Factors – Analysis

By Sarral Sharma China-Pakistan bilateral ties are currently going through a rough phase. Beijing is increasingly frustrated with Islamabad’s inability to repay debts, ensure the security of Chinese workers, and advance the second phase of the China-Pakistan Economic Corridor (CPEC). Another factor potentially straining relations between the “all-weather strategic cooperative partners” is the ongoing attempts by Pakistan to repair its relations with the United States (US) under Prime Minister Shehbaz Sharif's Pakistan Democratic Movement (PDM) government. As the strategic competition between China and the US intensifies in the Indo-Pacific region, Pakistan may face troubles in balancing ties with both countries. For China, maintaining an all-round economic and strategic ties with Pakistan is non-negotiable, and vice-versa, particularly as India and the US continue to advance their defence and security relations. At a recentinteractionwith Pakistani journalists, Prime Minister Sharif emphasised that Islamabad wanted to mend its bilateral ties with Washington, “but not at the cost of its relationship with China, as no other country could do what Beijing was doing for his cash-strapped country.” He further stated, “Whatever China is helping Pakistan accomplish, the United States cannot do.” These remarks came just days after Sharif had officially written to the Chinese government, requesting debtreprofilingfor Pakistan in a desperate bid to secure a fresh US$ 7 billionloanfrom the International Monetary Fund (IMF). Pakistan hasreportedlysought a rollover of more than US$ 12 billion in annual debt for a period of three to five years from China, Saudi Arabia, and the United Arab Emirates (UAE) to secure a 37-month IMF bailout package. In addition, Islamabad hasrequestedBeijing to convert imported coal-based projects to local coal and restructure over US$ 15 billion in energy sector liabilities. On 28 July, duringa press conference, Pakistan’s Finance Minister, Muhammad Aurangzeb that the issue of energy sector repayments was raised by Prime Minister Sharif with President Xi Jinping during his recentvisitto Beijing. On 2 August, Sharif followed up on this discussion with formallettersto the Chinese government. Accompanied by a large contingent of senior ministers and Pakistan Army Chief General Syed Asim Munir, Sharif’s trip to China in June was projected as a game-changer for the bilateral relationship. Both sides formally announced the much-anticipated second phase of CPEC. However, the Chinese side expressed frustration over the CPEC slowdown and Islamabad’s failure to provide adequate security for Chinese nationals in Pakistan. Notably, on 26 March, five Chinese engineers were killed in asuicide attack in Khyber Pakhtunkhwa province, marking the second attack on Chinese personnel in the same area since 2021. Expressing his concerns to Prime Minister Sharif, President Xiemphasisedthe importance of Pakistan continuing to “create a safe, stable, and predictable business environment and ensuring the safety of Chinese personnel, projects, and organisations.” In recent years, Chinese citizens in Pakistan have been targeted by various extremist groups, leading to heightened concerns in Beijing. As a result, China appears reluctant to make new financial investments in Pakistan unless the issue of security is addressed. During hisvisitto Pakistan in June, Liu Jianchao, Minister of the International Department of the Communist Party of China’s Central Committee, identified “security” as the primary challenge threatening the future of CPEC. He also emphasised the importance of political stability in Pakistan to ensure the continuation and success of the multibillion-dollar project. As Islamabad is urgently seeking debt reprofiling from Beijing, concerns are growing both within Pakistan and abroad that the country is becoming increasingly entangled in China’s ‘debt-trap’ policy. According to the World Bank’s latest International DebtReport2023, Pakistan owes over 72 percent of its external bilateral debt to China. The IMF has repeatedly asked Islamabad to disclose details of loans from China and has warned Pakistan not to use bailout packages to repay Chinese debts. As a result, the IMF is showingno leniencyin approving a new bailout package for Pakistan until the country ensures the reprofiling of more than US$ 27 billion in debt and liabilities with ‘friendly’ countries. Similarly, Washington has expressedconcernsregarding Chinese investments in Pakistan that “may be used for coercive leverage.” At a US Congressional hearing in July, Donald Lu, Assistant Secretary of State for South and Central Asia,toldlawmakers that “China is the past in terms of investments in Pakistan; we [US] are the future.” Furthermore, the US administrationrequesteda budget of US$ 101 million for Pakistan to “strengthen democracy, combat terrorism, and stabilise the country’s economy.” Ties between Islamabad and Washington soured after former Prime Minister Imran Khan openlyaccusedthe US government of orchestrating his removal in April 2022. Over the past year, their ties have improved, and several high-level visits have taken place between the two nations. In December 2023, General Munir, accompanied by Director General Inter-Services Intelligence, Lieutenant General Nadeem Anjum,travelledto the US for a week-long visit. In addition to discussions on defence and security issues with the US. government officials, General Munir also engaged with American investors and the Pakistani overseas community, encouraging them to invest in Pakistan. While US-Pakistan relations have predominantly remained security-focused, Washington may seek to diversify its engagement with Islamabad on non-security and commercial issues to prevent Pakistan’s “furtheroverrelianceon China.” Notably, the US played a crucial ‘behind-the-scenes’ role in helping Pakistan secure IMF loans. Washington is aware that Islamabad needs its support to secure loans from Western financial institutions for avoiding default. Additionally, the Biden administration’s largely subdued response toelection irregularitiesin Pakistan and disinterest in other human rights concerns have helped Islamabad evade the international pressure on these issues. But does the ongoing rapprochement between the US and Pakistan raise concerns in China? To demonstrate their unwavering loyalty to Beijing, both civilian and military leaders in Pakistan regularly issue ‘pro-China’ statements. During his visit to Washington in December 2023, General Munirtoldhis American counterparts that Pakistan ‘refrains from bloc politics and believes in maintaining balanced relationships with all friendly countries.’ As the strategic rivalry between China and the US intensifies in the Indo-Pacific region, Pakistan may struggle to maintain a neutral position. For Beijing, external loans or financial assistance to Islamabad from the US or any other country are also crucial for safeguarding Chinese projects and investments in Pakistan. Perhaps, China wants to share the burden of Pakistan’s ongoing economic crisis with other countries. In October 2023, China and Pakistanagreedto invite ‘third parties’ to invest in CPEC and extend the project into Afghanistan. Interestingly, CPEC is being promoted as an ‘open corridor’ to attract external investors, though this approach has yet to yield success. China may employ all possible measures to protect CPEC, which is the ‘flagship’ project of the Belt and Road Initiative (BRI). While China has various ways to recover its financial losses from Pakistan, the failure of CPEC, if it happens, would be a major setback for the future of BRI and President Xi’s economic vision. However, this does not imply that China-Pakistan defence and strategic ties will also suffer. According to the latest SIPRIdata, 82 percent of Pakistan’s arms imports came from China between 2019 and 2023. Although Sino-Pakistani defencerelationsare primarily focused on India due to their shared rivalry, they could also serve as a force multiplier in the future for China in the Indian Ocean Region (IOR) against the US. In China’s strategic calculations, Pakistan plays a crucial role in countering the influence of India and the US in IOR. For that reason, Beijing can tolerate more financial losses and simultaneously make efforts to revive CPEC. However, it may no longer accept Pakistan’s lackadaisical attitude in ensuring the safety and security of Chinese nationals. Moreover, anti-China sentiments are rapidly growing in some parts of Pakistan, especially in Balochistan province, where locals areprotestingto reclaim their land, water and natural resources from “outsiders”—China and Pakistan’s military establishment. Under pressure from Beijing, the Pakistani government approved a new military operation,Azm-i-Istehkam(Resolve for Stability), on 22 June, just days after Prime Minister Sharif and General Munir’s visit to China. This military campaign will largely focus on conducting anti-terror operations in Balochistan and Khyber Pakhtunkhwa. While it is too early to predict the outcome(s) of the operation, Pakistan’s failure to protect Chinese citizens and installations in the future could seriously strain their bilateral relations. On the other hand, Washington will continue to advance its ties with Islamabad, aiming to reduce Pakistan’s dependence on China. Meanwhile, Pakistan may see an opportunity to extract financial and military benefits from the ongoing rivalry between China and the US. However, unlike during the Cold War, when Islamabad behaved as a ‘bridge’ between Beijing and Washington, it may now become collateral in the strategic competition between China and the US in the Indo-Pacific region. About the author: Sarral Sharma is a Doctoral Candidate at Jawaharlal Nehru University, New Delhi. Source: This article was published by the Observer Research Foundation