Since establishment of diplomatic ties between the two countries in May 1951, Pakistan and China have developed an all-season friendship, which is based on equality, brotherhood and overall cooperation. In the past 60 years, the two countries have displayed multi-dimensional cooperation in varied fields.
Despite unstable international situations, China-Pakistan friendship remained strong and vibrant. This is only because both the countries enjoy high respect and trust. Recent years have witnessed a frequent exchange of visits between the leadership of the two countries, which further promoted and bonded cooperation in almost every area of the relationship.
Considered the world’s emerging and booming economy, China has shown phenomenal growth in every sector of its economy and is moving in the right direction.
Trade dynamics
Economic relations between Pakistan and China can be traced back to the earliest times. There is lot of trade potential among both the countries and Free Trade Agreements appear quite beneficial for both of them, at least on the face of it: Pakistan has been given
tariff concessions for its major exports such as raw cotton, cotton made-ups, leather and sports goods, and seafood to name a few prominent items.
China, on the other hand, gets to have market access for products such as industrial and electrical machinery and equipment among others.
Pak-China trade figures, after the signing of the FTA, depict an expanding two-pronged fork, showing trade growth tilted in China’s favour as the difference between imports from China and exports to China rises.
Facts behind figures
While China marches on in opportunity utilisation by increasing its exports to Pakistan, the latter’s exports to the growing giant have witnessed only a marginal increase, but from 2009-10 there was a 65 per cent increase.
A closer look reveals the qualitative imbalance of traded goods between the countries. Growth in Pakistan’s exports under the FTA has mainly been in secondary goods or raw materials used for further production such as yarn, etc. Exports of value-added products, on the contrary, have barely grown.
China has, unlike Pakistan, benefited from greater exports in all categories, particularly in electrical goods and machinery. The nature of exports from China raises concerns from a domestic manufacturing point of view, since greater dependence on Chinese machinery will hinder growth of our indigenous manufacturing capability.
But Pakistan is home to loads of untapped opportunities which need to be exploited before work on other concerns is initiated.
Research, Development and Advisory Cell of the Ministry of Textile Industry claims that tremendous potential opportunity exists in the value-added garment sector, such as, trousers, pullovers, cotton blouses for women, socks, towels, bed linen, etc.
A lot of idle benefits have to be utilized from the FTA before entreating for more concessions. Besides, China would like Pakistan to reciprocate any additional concessions by enhancing reduced-tariff access for more products from China into Pakistan.
Bilateral trade between the two stood at $5.5 billion in 2009-10. During the visit of the Chinese Premier Wen Jiabao to Pakistan at the end of last year, the signing of
MoUs to boost trade between the two countries envisaged this figure to balloon to $15 billion by 2015.
Recent developments
Five years ago China was not on the list of Pakistan’s top 10 export destinations. Now it ranks fourth after the US, the UAE and Afghanistan, while the bilateral trade ranks third just behind the UAE and the US if the value of trade is computed on balance of payments format.
The signing of an accord during last visit of Prime Minister Yousuf Raza Gilani to Beijing, on opening up of two bank branches — one of a Chinese bank in Pakistan and the other of our National Bank in China — is expected to spur bilateral trade.
High economic growth in the last decade and the resultant changes in the dynamics of Chinese domestic markets have enabled Pakistan to sell more of its raw materials and low-to-medium value-added products there.
During Gilani’s visit, two other accords were also signed – one on bilateral economic and technical cooperation and the other on extending Chinese contract for the Saindak gold and copper mining up to 2017. This project is one of the key success stories of Chinese investment in Pakistan.
China’s total investment since 1960s carries a current market price tag of $40 billion and more than 10,000 Chinese are working with 126 companies of Chinese origin in Pakistan. One can easily spot some familiar names in the list of these companies – Zong, BGP (Pakistan) International, Saigol-Qingqi Motors and China Metallurgical Corporation.
The Punjab government and a Chinese company entered into an agreement last month to finance rapid mass transit system in Lahore. A Chinese firm – Noranko – has agreed to invest $1.7 billion in the project. During the first phase of the project, a 27km distance from Shahdra to Gajju Matta will be covered, while another Chinese company, Fotan, will ply 200 new buses on various urban routes of the city.
A few months after the July-September 2010 deluge in Pakistan, China signed $35 billion investment deals when Premier Wen Jiabao visited Islamabad in December that year. The deals included $20 billion government-to-government contracts and about $15 billion investment financing agreements between the private sectors of the two countries in over three dozen development projects. The areas covered ranged from trade and industry, gas and electricity, water, agriculture, fisheries, telecom to physical infrastructure. On a government-to-government level, much of the $20 billion of promised Chinese investment was meant for building roads, highways and other infrastructure to connect Pakistan with the Xingjiang province in China to expand bilateral trade. There are lot of export opportunities are available such as prepared and packaged food items, leather products, artificial jewellery, sport goods, home textiles, finer clothing for women and kids and cosmetics would grow in China in coming years.
