The China-Pakistan Economic Corridor

Carnegie India, in collaboration with the India International Centre, New Delhi, brought together a number of scholars and policymakers in a roundtable discussion on the China-Pakistan Economic Corridor (CPEC) and its implications for the region. The discussion was led by Daniel S. Markey of John Hopkins University and moderated by the former Indian Ambassador to Pakistan, T.C.A. Raghavan.

DISCUSSION HIGHLIGHTS

• The Trajectory of an All-Weather Partnership: Pakistan and China share a strong strategic relationship that dates back to the middle of the last century, participants explained. The CPEC, which is being developed as part of China’s One Belt One Road (OBOR) initiative, marks a further consolidation of what has long been billed as an all-weather partnership. Markey underlined China’s current imperative to export excess infrastructural capacity and Pakistan’s massive need for such investments. The economic rationale is reinforced by a powerful strategic quest in Beijing to strengthen its position in the critical regions of Southwest Asia and the Arabian Sea. Although based primarily on economic principles, the project is also driven by broader strategic and security based rationale, Markey added. This, he said, makes the project invulnerable to a purely commercial cost-benefit calculus.
   
• Regional Dynamic: As a long standing supporter of economic development in the region and a recent proponent of the idea of a New Silk Road that revives the historic commercial links between Central Asia and the subcontinent, the United States has reason to welcome the economic dimension of the CPEC, participants argued. Washington hopes that this economic development will in turn help promote Pakistan’s stability and security. However, participants added, the strategic rationale of the CPEC and Beijing’s growing strategic weight in the pivotal region of Southwest Asia and the Gulf generate considerable political concern in Washington. Markey expressed concern about the prospect of two power blocs—Pakistan and China on the one hand and India and the United States on the other—circling each other in the region. Some participants suggested that this regional dynamic is not new; the region has seen similar jockeying involving India, Russia, Pakistan, China, and the United States from the 1960s through the 1980s. This time around, though, Beijing looms much larger than either Moscow or Washington, they added. 
   
• Indian Response: The CPEC initiative will raise significant issues for the emerging partnership between India and the United States, as well as play a role in the Sino-Indian relationship, participants stated. The discussants debated scenarios for Indian policy, depending on the progress of the project. Markey noted the potential positive effects on Pakistan’s economic growth, which would be beneficial not just to India but also to the wider region. For example, CPEC could be a platform that engages unemployed, bringing peace and stability. If other countries are invited to participate in the project as a part of OBOR, Markey said, India should not see it as a threat. On the other hand, Markey also noted the development of the Gwadar port and China’s growing strategic presence in the Arabian Sea has generated concerns in India. He acknowledged the paradox: in the short term, CPEC could be an opportunity to generate jobs and growth, but over the longer term, its strategic consequences could reshape the regional balance of power in favor of China.
   
• Pakistan’s Internal Constraints: The participants discussed the security and political challenges in implementing the CPEC project while underlining India’s objections to the part of the project running through the sensitive region of Kashmir. Markey, however, cautioned that India should not write off the CPEC as unviable. The military and political community in Pakistan is completely on board with this project and has a positive outlook toward the initiative. They are keen for CPEC to succeed, which would signal a viable investment environment in Pakistan and perhaps attract further initiatives. However, he said, the scenario on ground at the grass root level is bleaker than in Islamabad.  Local communities in Pakistan are not as positive about the project as their political leaders. They are not necessarily looking at the project as an avenue for opportunity and jobs, but rather contemplating the disruption in their daily lives given a higher security aspect in project implementation. Differences between the capital and the provinces might disrupt and delay the progress of the project. Markey offered as an example that CPEC could lead to restriction in movement for the locals as well as requirements to carry identity cards for security concerns, which could risk alienating the local communities from the central government.
   
• Estimating Outcomes: China is aware of the risk that Pakistan’s internal instability could undermine the CPEC, Markey said. The best-case scenario, in his opinion, is one where Chinese investments in Pakistan would successfully transform Pakistan’s economic landscape and make it a more attractive destination for other international investments. In the worst case scenario, however, the initiative could crumble under multiple internal contradictions, pull China deeper into Pakistan’s domestic politics, and push the triangular relationship between Delhi, Islamabad, and Beijing towards greater turbulence.

This event summary was prepared by Neha Dewan and Karan Khandelwal, interns with Carnegie India.