The friendship between Pakistan and China is trustworthy, above time, and tested. The recent visit of Prime Minister Shaukat Aziz was to further strengthen the socio-economic cooperation in various fields between the two countries. Many meaningful mega projects of economic interest (investment in Diamar-Bhasha dam, opening of Chinese banks in Pakistan) have been finalised and wide-ranging important agreements have been signed. The government has asked China to increase its trade volumes, import and export, to boost the two economies. Pakistan treats China as its most reliable strategic partner and China considers Pakistan most trustworthy and a friend indeed.

Main focus

The emphasis has been on strengthening business-to-business relations between the private sector and various development and investment agencies and institutions of the two countries. The existing cooperation between the two countries involves sectors such as infrastructure, development, defence, space technology, trade and economics. The PM emphasised the scope of cooperation in various other economically important sectors.

Important discussions

(1) Both the countries have agreed that the volume of trade will be expanded from the existing five-billion-dollar per annum mark to $15 billion over the next five years.

(2) The Gwadar development project, construction of an international airport, at a cost of $100 million which will not only put the new port city on the international aviation and trade map, it will also create considerable employment opportunities in the economically backward region.

(3) More cooperation on satellites technology and facilities and some purchases after an agreement between Suparco and the Chinese Space Centre.

Detail of the agreements

Pakistan and China signed 13 agreements, which covered areas like finance, trade and investments, and scientific and technological cooperation.

(a) Cooperation in fields such as space (Paksat-IR), telecommunications, education.

(b) Legal assistance.

(c) Vowing to raise the strategic partnership.

(d) Implement the free-trade agreement and a five-year plan for economic and trade cooperation.

(e) Accelerate negotiations on service trade cooperation.

(f) Encourage the mutual investment from the two business communities.

(g) Exchanges in cultural and humanitarian fields to consolidate the traditional friendship.

(h) Cooperation in campaigns against cross-border crime.

(i) Intensifying coordination and communication on multilateral issues in an effort to safeguard stability.

(j) Promote investment and development in the South Asia region.

Monetary benefits

It is estimated that Pakistan would attract $1.8 billion investment to be made by the Chinese companies as a result of recently executed agreements and MoUs.

Commitment of both the countries

(a) China will also continue to encourage the small-medium sized companies and strengthen cooperation on agriculture, manufacturing and the service industry for the betterment of both the economies.

(b) Pakistan has showed its willingness to attract foreign direct investments and joint venture in infrastructure facility, water resources, minerals, farming and services industries.

(c) The two countries have decided to implement the mechanism of free trade agreement. In this connection, China established its first overseas trade and economic cooperation zone, Haier-Ruba Economic Zone, in Pakistan. The economic advisor of the government stated that the economic zone, which mainly produces household appliance, would help promotes the economic and technological cooperation between the two countries.

Trade volumes

The Pakistan-China two-way formal trade totalled $3.1bn in 2005-06 as compared to $2.196bn in 2004-05. The rising volume of bilateral trade indicated that there was still huge potential existed which should be explored as the balance of trade is hugely in favour of China. During 2005-06 Pakistan’s export to China stood at $470m from $355m the previous year, and imports showed more rapid increase at $2.7bn against $1.842bn the previous year. The trade volume between the two countries hit 5.25 billion U.S. dollars last year, up 23.1 per cent year on year. It is estimated that the volume will increase to eight billion by the end of 2008. (see table-1)

Chinese involvement in Pakistan

According to latest reports there are some 100 Chinese companies functioning in Pakistan while over 3,000 engineers, technicians and Chinese entrepreneurs are working on various projects that shows the levels of socio-economic ties and geo-strategic aims of both the countries.

Potential future sectors

Light industry, automotive parts and components of manufacturing industry, electric appliances, and parts of bicycle, CNG, machine tools and miscellaneous sub-sectors products.

Commissioning of JF-17 in Pak-Air force

The joint production of JF-17 Thunder Aircraft holds strategic significance for Pakistan and its inclusion in the fleet of Pakistan Air Force is significance move forward and a milestone in the Pak-China relationship. Now, the government is considering positively to explore its market in other countries in the Middle East and the West.

Balance of trade

It is suggested that more bilateral trade between the two countries is desirable. Presently, Pakistan’s balance of trade is in favour of China, which needs to be corrected. It was emphasised that still there is great scope and potential to be tapped. According to latest reports the bilateral trade is around $4.2 billion, investment $200 million and exchange of tourists visits are just $1.1million and these figures are much less than the potential that exists.

Some suggestions

(i) There were about 145 private Chinese companies in Pakistan in 2003. In next three year 2006 there are in all 52 Chinese companies left in Pakistan, which should be taken seriously.

(ii) The FPCCI] does not have any office anywhere in China, which is creating difficulties in enhancing bilateral trade volumes.

(iii) China has no banking representation in Pakistan, while National Bank of Pakistan has a representative office in China, which will be further strengthened to add to banking facilities.

(iv) ‘Language barrier’ is identified as one of the major factor that has discouraged local businessmen from investing in China.

(v) Deteriorating law and order situation in the country is considered to be the key reason of declining Chinese FDI and FPI in Pakistan.

Concluding remarks

Joint venture should be the mantra of the government in order to achieve its short and long term socio-economic goals. The rapidly changing geo-political and geo-strategic scenarios around the globe and especially in our region strongly demand to have close socio-economic relationships and strong geo-political and geo-strategic ties with China for the benefit of the two countries.

TABLE - 1

Year Exports Imports Total Balance

1999-2000 180.326 471.527 651.853 (-) 291.201

2000-2001 303.548 524.138 827.686 (-) 220.59

2001-2002 228.631 575.219 803.85 (-) 346.588

2002-2003 244.591 839.056 1083.64 (-) 594.465

2003-2004 288.259 1153.470 1441.729 (-) 865.211

2004-2005 354.092 1842.775 2196.867 (-) 1488.683

Source: Ministry of Commerce, Government of Pakistan.

table-2: FDI from China

(July 2004-June 2005)

Sectors (10,000 USD)

Metal Products 5,214

Transport Equipment

(Motorcycles & automobiles) 151,068

Construction 189,000

Communications 22,287

Others 76,194

Total 443,763