Foreign Policy Magazine Article by Michael Kugelman published on

February 9th, 2023

Have China and Pakistan Hit a Roadblock?
Beijing-funded infrastructure projects have slowed, but their longtime partnership
remains inevitable.

Are China-Pakistan Ties Shifting?

Pakistani Prime Minister Shahbaz Sharif unveiled a new Chinese-designed reactor at the
Karachi Nuclear Power Plant last week. Construction of the $2.7 billion unit was funded by
China as part of a project to refurbish the facility and strengthen Pakistan’s energy security. But
the reactor is one of few new Chinese-backed infrastructure projects Pakistan has completed in
recent years, despite its long-standing cooperation with China.

Work on the new reactor began in 2016, shortly after the formal launch of the China-Pakistan
Economic Corridor (CPEC), part of Beijing’s Belt and Road Initiative. Although both sides have
recently engaged in public rhetoric about injecting fresh momentum into CPEC, the reality on
the ground is that Pakistan has been slow to complete infrastructure projects and China has
been slow to fund new ones.

The slowing pace of CPEC projects stems in part from Pakistan’s ongoing economic crisis—it
increasingly cannot afford infrastructure loans—as well as Beijing’s own economic slowdown.
When Sharif visited Beijing last November, he formally requested a rollover of $6.3 billion in
debt. China hasn’t indicated if it will grant the request, even as it announced a two-year debt
moratorium for Sri Lanka. (Pakistan’s finance minister has claimed that China will roll over
more than $4 billion in Pakistani debt, but Beijing has not confirmed this.)

But the infrastructure slowdown is just one sign of a potential setback in China-Pakistan ties. On
the diplomatic stage, observers noted last year that China didn’t oppose India’s move to exclude
Pakistan from a high-level meeting on the sidelines of a virtual so-called BRICS summit that
included other emerging economies. In the past, China—which hosted the event—might have
stepped in to help Pakistan. Some analysts have argued that Beijing views the current Pakistani
government as too unstable to be a viable partner.

Chinese officials are also increasingly worried about security risks in Pakistan, which is
experiencing a concerning uptick in terrorism. A few recent attacks have targeted Chinese
investments and nationals in Pakistan—including at a dental clinic in Karachi last September, a
Confucius Institute in Karachi last April, and a luxury hotel in Baluchistan hosting a senior
Chinese delegation in 2021. After Sharif met Chinese President Xi Jinping in Beijing last
November, a Chinese foreign ministry statement noted that Xi had “expressed his great concern
about the safety of Chinese nationals in Pakistan.”

However, it would be misguided to think that the China-Pakistan relationship is in serious

trouble. Chinese loans keep flowing into Pakistan—although not all for infrastructure projects.
Pakistan received nearly $22 billion in short-term loans from China between 2018 and last
summer, most for balance of payments relief. This shows Beijing is willing to try to ease
Islamabad’s economic stress. Last June, China authorized a new $2.3 billion loan at a
discounted interest rate.
China’s own economic struggles mean that sustained support at this level is no guarantee,
especially as Pakistan’s crisis continues to worsen. Last month, inflation reached its highest level
since 1975; its foreign reserves currently cover less than three weeks’ worth of imports. On
Thursday, Islamabad announced that the most recent round of talks with the International
Monetary Fund had failed to produce an agreement to release new funds.

China may prefer to engage with a more stable government in Islamabad. But then again, it has
a rapport with Sharif’s family; the current prime minister’s brother Nawaz Sharif also served as
prime minister when CPEC was formally launched. The previous government led by Imran Khan
didn’t endear itself to China either, calling for a review of past CPEC agreements in the name of
anti-corruption efforts. At any rate, Pakistan’s powerful military has the final word on policy
decisions regarding key partners, such as China.

Current geopolitics make a continued alliance between China and Pakistan inevitable. Growing
U.S.-India security ties unite Beijing and Islamabad in concern over their common rival, New
Delhi. Increasing U.S.-China competition puts limits on cooperation between Pakistan and the
United States, extending Islamabad’s reliance on Beijing for economic and military assistance.
Pakistan’s own push for a greater partnership with Russia comes amid a deepening China-
Russia alliance.

Even the closest partnerships experience bumps, but the China-Pakistan relationship has
guardrails to keep it from veering too far off track.

As geopolitics shift, FP columnist C. Raja Mohan argues this week that the West should bring
India into the G-7 to bridge north-south divides and help New Delhi effectively deal with
challenges from China.

What We’re Following

Countries rally earthquake support. Bangladesh, India, and Pakistan are among the
countries sending assistance to Turkey after its recent devastating earthquake, which has killed
more than 20,000 people in the country and in neighboring Syria. On Tuesday, Turkey’s
ambassador to Bangladesh told local media there that the country has agreed to send search and
rescue as well as medical teams. Indian rescue and relief workers had already arrived. Pakistan
also sent rescue workers and supplies to Turkey, a close partner.

Islamabad initially announced that Sharif would visit the country on Wednesday, but the trip
was postponed. Some Pakistanis questioned why top officials would travel to Turkey given that
their own country is on the brink of economic collapse. Other nations across the region have
issued messages of solidarity and support to Turkey and Syria, including Nepal—which
experienced its own catastrophic earthquake in 2015.

Conflict and sanctions have complicated global efforts to get aid to northwest Syria, but India
has managed to deploy four aircraft with relief supplies to the country.

Funeral held in Pakistan for former leader Musharraf. Pakistani officials attended a
funeral on Tuesday for former President Pervez Musharraf, who died Sunday in Dubai, where he
spent most of the last decade. As Army chief, Musharraf seized power in a coup in 1999 and led
Pakistan until 2008, when he stepped down following protests in response to his suspension of
the constitution. Before his health deteriorated, Musharraf had established a new party and
contemplated returning to Pakistan to make a political comeback but was dogged by legal
charges.

Although he was a controversial figure, leaders from all of Pakistan’s major political parties and
several former military leaders attended Musharraf’s funeral. This is notable; after all, Shehbaz
Sharif’s brother Nawaz Sharif was overthrown in the 1999 coup that catapulted Musharraf to
power. It ultimately underscores the respect that Pakistan still confers to the military, which has
taken hits to its popularity in recent months.

Sri Lanka marks 75th anniversary, gloomily. Last Saturday, Sri Lanka marked the 75th
anniversary of its independence with a military parade and speech from President Ranil
Wickremesinghe. But the mood was not so celebratory; Sri Lanka is still reeling from its worst-
ever economic crisis. Wickremesinghe himself acknowledged that “we have reached the point of
destruction.” Some religious leaders led a boycott against the festivities while other activists
voiced their anger about a bankrupt country spending money on a celebration.

Despite the recent debt moratorium offer from China, Sri Lanka’s economy remains severely
strained. Inflation currently sits at 59 percent, and Colombo has failed to reach a formal bailout
agreement with the International Monetary Fund.

Under the Radar

This week, the Taliban disclosed that Saudi diplomats have relocated from their embassy in
Kabul to Islamabad. The Taliban administration said the officials left for training, but their
foreign ministry also indicated that the Saudi Embassy had closed on Feb. 2 due to threats of a
possible attack from the Islamic State-Khorasan. Turkey and the United Arab Emirates have
also announced plans this month to downsize their missions in Kabul out of security concerns.

Sources told Foreign Policy that concerns about Taliban policies may also be behind the moves.
For the Taliban leaders in Kabul who seek formal recognition for their regime and value
international engagement—as opposed to hard-liners in Kandahar—these developments are bad
news. The Taliban have cordial ties with Turkey, Saudi Arabia, and the UAE, which struck a deal
last year to provide security at Hamid Karzai International Airport in Kabul.

The shift could lead the Taliban to place even more importance on their relationship with China,
which has an open embassy in Kabul and inked an oil deal with the regime last month. Still, the
Islamic State-Khorasan claimed an attack against Chinese nationals last December, and the
Taliban can’t take China’s continued diplomatic presence for granted.