China says AIIB won’t be used for $46 billion Pakistan deal

Chinese diplomat says several different facets will be utilised for financing projects in Pakistan

China does not plan to use either its new Asian Infrastructure Development Bank (AIIB) or Silk Road fund to finance the $46 billion Pakistan-China Economic Corridor, with money to come from both countries instead, a senior diplomat said on Friday.

President Xi Jinping’s trip to Pakistan next week is expected to focus on the corridor, a planned network of roads, railways and energy projects linking Pakistan’s deepwater Gwadar port on the Arabian Sea with China’s far-western Xinjiang region.

It would shorten the route for China’s energy imports, bypassing the Straits of Malacca between Malaysia and Indonesia, a bottleneck at risk of blockade in wartime.

Chinese Assistant Foreign Minister Liu Jianchao said the project would be good for Pakistan’s economic development, but would not be drawn on financing details.

“Several different facets will be utilised for the financing of these projects. Both sides will increase cooperation, to jointly provide financing support,” he told a news briefing.

“As to whether the AIIB or the Silk Road fund will be used, at present these [projects] are being looked into, or are in the planning stages. So at the moment we are not considering using these mechanisms or platforms or financial organisations to provide financing,” Liu said.

“The money needed is quite large, and China is willing to provide financing support to Pakistan,” he added, saying details would be released during the visit.

China announced last year it would contribute $40b to set up the Silk Road infrastructure fund to boost connectivity across Asia. The Beijing-founded AIIB will also invest in regional infrastructure.

Xi’s trip is his first outside of the country this year, and also the first visit by a Chinese head of state to Pakistan in nine years. While the two countries refer to each other as “all-weather” friends, China has serious security concerns in Pakistan.

Beijing, concerned about stability in its far western region of Xinjiang, has long urged Islamabad to weed out what it says are Islamist separatists from there holed up in a lawless tribal belt on the Pakistan-Afghanistan border, home to a mix of militant groups.

Liu said that said China and Pakistan had very effective cooperation in tackling the militants, and Beijing approved of Islamabad’s “resolute and decisive” actions on the problem.

Xi’s trip will also include Indonesia, where he will attend the 60th anniversary of the Bandung Conference, a gathering of Asian and African leaders opposed to colonialism.