Escolar Documentos
Profissional Documentos
Cultura Documentos
Author:
Hung Hin (Henry) Chan
Professor:
James Coyle
Academic Year:
2017 – 2018
China’s emergence as a rising power has no doubt been one of the most significant events
of the 21st century. Since the establishment of the People’s Republic of China in 1949 following
a bloody civil war, the country has seen tremendous economic growth, political and social
development, as well as expansion of military power. Initially the Communist party had
quality among other issues following years of turmoil. In 1960, the nation’s gross domestic
product stood at a mere $30.55 billion.1 The Great Leap Forward, an economic and social reform
campaign led by Mao in 1958, was a disaster that caused widespread starvation and produced
little economic output. The Cultural Revolution following also caused social unrest and the
destruction of the country’s cultural heritage. It is clear that China was not exactly in the best
shape.
The liberalization and opening up of Chinese markets to the world led by Deng Xiaoping
ushered in a new age of wealth for this once glorious nation. Shortly following Mao’s death in
1976, Deng found himself in power in 1978. Having witnessed the carnage wrought by Mao’s
radical policies, Deng sought to reverse the damage done through political, social, and economic
reform.2 The ideological extremism of the Cultural Revolution was stymied, as he believed the
turmoil was detrimental to the country’s capability for economic growth. Not only did he
privatize numerous domestic industries, his diplomatic actions were critical to China’s success
today. Deng was responsible for the Treaty of Peace and Friendship with Japan in 1978, which
introduced Japanese goods and investment, as well as much needed technical knowledge to the
country. His tour in the United States in 1979 was also crucial in opening the country up to the
$218.50 billion to $407.85 billion.4 The country was well on its path to becoming a global power
Foreign direct investment had become one of China’s largest driving factors by 1990.
Large scale capital investment financed by foreign companies went hand in hand with
productivity in growth. In 2005, foreign-invested enterprises made up over half of all Chinese
exports and imports. China had taken its role as the world’s factory, surpassing the United States
as the largest manufacturer in 2010.5 This position fell into place naturally due to the country’s
inherent advantage in its enormous population and low wages. However, as China progressed as
a country, its living standards and therefore its wages rose. In 1990, the average monthly wage
was just $37. By 2016, the average monthly wage would rise to $854, with a 213% increase from
2007 to 2016.6 As a result, numerous firms have pulled out China in favor of cheaper
manufacturing countries. For example, Seagate Technology PLC and Western Digital Corp had
shut down its Chinese operations early 2017 in favor of a larger investment in Thailand.7
China recognized this shift in the economic system and has implemented its policy
accordingly. A domestically centered economy simply would not be able to compete on the
world stage. In 1999, China instituted a Go Out policy to encourage outward foreign investment
and take advantage of the world market.8 This policy has grown and evolved as China’s economy
3Vogel, Ezra F. "China under Deng Xiaoping's Leadership." East Asia Forum. September 26, 2011. http://
www.eastasiaforum.org/2011/09/27/china-under-deng-xiaopings-leadership/.
4"China GDP 1960-2018." Digital image. China GDP. 2018. https://tradingeconomics.com/china/gdp/
survey.
5Morrison, Wayne M. "China’s Economic Rise: History, Trends, Challenges, and Implications for the
United States." Congressional Research Service, February 5, 2018.
6 Ibid.
7Suk-yee, Jung. "China No Longer Manufacturing Powerhouse nor Attractive Consumer Market."
BusinessKorea. March 05, 2017. http://www.businesskorea.co.kr/news/articleView.html?idxno=17429.
8Wang, HongYing. "A Deeper Look at China’s “Going Out” Policy." Centre for International
Governance Innovation, March 2016.
has matured. The government has recognized the need for a sustainable economy and thus has
economy. By reaching outward, much needed technology, information, and influence is obtained
to help Chinese firms elevate their status on the global market. They seek to pursue product
diversification, brand recognition, and basically anything they lack domestically. Oftentimes,
firms even acquire entire companies- one such case being Lenovo Group Limited’s purchase of
IBM’s personal computer division in 2005. This outward foreign investment is largely fueled by
the country’s massive foreign exchange reserves, which amounted to $3.1 trillion in 2017 and is
Having overtaken Japan as the world’s second largest economy in 2011 after years of
double digit GDP growth, China must find more avenues to sustain its growth rate. The search
for new markets and natural resources has never been vital in the country’s history. According to
the graph below, China’s foreign direct investment outflow was poised to surpass its inflow by
2015. It clearly illustrates the trend of increasing inflow of foreign direct investment following
liberalization in 1990, and a shift in policy and momentum regarding outflow around 2005. 10 In
2015, China’s foreign direct investment outflow was 18% higher than its inflow, at $145.7 billion
versus $135.6 billion.11 This is an indicator of the government’s plans to transition towards a
9Morrison, Wayne M. "China’s Economic Rise: History, Trends, Challenges, and Implications for the
United States." Congressional Research Service, February 5, 2018.
10"Outward and Upward." The Economist. June 27, 2014. https://www.economist.com/graphic-detail/
2014/06/27/outward-and-upward.
11Barber, Vaugh, Kevin Kang, and Fergus Naughton. "China ODI Exceeded FDI in 2015 for the First
Time..." KPMG. https://home.kpmg.com/cn/en/home/insights/2016/09/china-odi-exceeded-fdi-2015-
private-sector.html.
!
Now where exactly is all this foreign direct investment outflow going? China has
instituted far reaching plans in order to further its economic and political agenda. The most
significant of which is the One Belt One Road Initiative (OBOR), officially unveiled by Xi
Jinping in 2013. The initiative is clearly representative of Xi’s ambitious vision for China’s
future as a key global player. It plans to connect and modernize a series of land and naval routes
that stretch all the way from Western Europe to Africa to Oceania and all the countries in
between. The project will cost an estimated $4 to $8 trillion and will connect 71 countries, 65%
of the world’s population, 40% of world GDP, and an innumerable amount of products and trade
routes.1213 The plan alludes to the ancient Silk Roads, which the government utilizes to portray
12Ho, David. "Complex Arrangement: Cost of Funding 'Belt and Road Initiative' Is Daunting Task."
South China Morning Post. September 27, 2017. http://www.scmp.com/special-reports/business/topics/
special-report-belt-and-road/article/2112978/cost-funding-belt-and.
Griffiths, James. "Just What Is This One Belt, One Road Thing Anyway?" CNN. May 12, 2017. https://
13
www.cnn.com/2017/05/11/asia/china-one-belt-one-road-explainer/index.html.
A far cry from Deng’s isolationist sentiments, this new and powerful China recognizes
the economic benefits they can reap from their neighbors. The country’s fast rise to the top
inevitably came with growing pains, with domestic overproduction as one of many glaring
byproducts. The OBOR seeks to alleviate that by providing capital investment into countries so
that they can become consumers of your products. In a way, China has adopted what Western
countries had once done for them and implemented it according to uniquely Chinese
characteristics. Many of these countries are in dire need of infrastructure and investment, making
China’s engagements particularly enticing. Unlike most Western nations, China does not require
an extensive vetting process for loans nor do they ask for any political reform- choosing to
The political benefits associated with the OBOR are carefully hidden behind a narrative
of increased cooperation and trade. China utilizes the plan as an medium for soft power
initiatives across the world, in order to further cement its status as a superpower. Though the
OBOR is classified strictly for peaceful development, its capacity to build connections, improve
dialogue and cooperation upon common goals make it a powerful tool for China to spread its
political influence around the world. With over $300 billion already put into place, the project
currently looks toward a planned expenditure of $1 trillion over the next decade.15 It will be used
to develop six main economic corridors: China-Mongolia-Russia, China-Central and West Asia,
14"Who Benefits from China's "One Belt, One Road" Initiative?" Foreign Policy Research Institute. July
21, 2017. https://www.fpri.org/2016/10/benefits-chinas-one-belt-one-road-initiative/.
15Dreher, Axel, Andreas Fuchs, Bradley Parks, Austin M. Strange, and Michael J. Tierney. "Aid, China,
and Growth: Evidence from a New Global Development Finance Dataset." SSRN Electronic Journal,
2017. doi:10.2139/ssrn.3051044.
Corridor. Of all these, the China-Pakistan Economic Corridor (CPEC) is the most developed,
with the Chinese already having pledged $46 billion into the project. 16
Thesis
In this paper, I will analyze the current state of CPEC, its risks, its rewards, and its
ramifications for the United States’ interests in the region. The proper implementation of CPEC
possesses numerous challenges regarding infrastructure, security, and trade, due to the sheer
scope of the project and complicated geopolitical situation in the region. While its potential to
transform Pakistan into a productive economic hub is ultimately beneficial for the United States,
the regional influence, military advantages, and possible security issues involving neighboring
state actors make it a large risk to the future of United States’ interests in the Asia Pacific Region.
Pakistan
Prior to the announcement of OBOR and CPEC, China and Pakistan already had a very
close economic partnership, especially since the construction of the Gwadar Port by the Chinese
in 2006 which was paired also with the signing of a free trade agreement. The volume of trade
between the two nations has grown substantially from $4 billion in 2006 to nearly $14 billion in
2015. Due to the geographical significance of Pakistan as an avenue to the Middle Eastern
market as well as their prior relationship, it would only make sense for China to choose Pakistan
as one of their main partners for the OBOR. The primary aim is to connect the Kwadar Port with
the Xinjiang province, a landlocked region that borders Pakistan in much need of economic
Pakistan has suffered from long periods of stagnation due to poor governance, especially during
16Khan, Orangzeb, Peter Tase, Binoy Kampmark, Said Temsamani, Bahauddin Foizee, Observer
Research Foundation, IDN, and Foreign Policy Research Institute. "China-Pakistan Economic Corridor
(CPEC): Challenges, Prospects And Recommendations – OpEd." Eurasia Review. September 13, 2017.
https://www.eurasiareview.com/13092017-china-pakistan-economic-corridor-cpec-challenges-prospects-
and-recommendations-oped/.
Prime Minister Gillani’s reign.17 Energy outages are routine and last for as long as 12 hours, even
in the country’s capital of Islamabad.18 The Chinese have positioned OBOR as a game changer
that will bring Pakistan to prosperity, stimulate the economy, boost living standards by providing
opportunities, and provide the necessary experience on how to properly manage resources and
the government. Pakistani sentiments of Chinese influence as result have been overwhelmingly
positive, with 75% of Pakistanis having a positive view according to a BBC poll.19 This is
evidence of the effectiveness of China’s soft power initiatives. China’s relationship with Pakistan
signals at its capacity to influence other states, a sign that it may be on its way to becoming a
Much of those positive sentiments are due to the fact that the Chinese have already begun
to improve the conditions of people in Pakistan as they see real tangible results. The most
significant project is the Gwadar Port, and is currently undergoing an expansion project worth
$1.02 billion under CPEC. It includes the addition of nine additional berths and terminals, a
desalination plant for the growing city, a new international airport, energy infrastructure, and
even a joint vocational institute for training locals to work at the port. 20 The CPEC Free Zone
started construction in 2016 and will cost the Chinese $2 billion to create this tax-free and
customs-free economic zone. Over 300 factories are projected to be established in this zone,
"Gilani's Term Was Worst Ever in Pakistan: TIP." Pakistan Herald. July 16, 2012. http://
17
www.pakistanherald.com/Articles/Gilanis-term-was-worst-ever-in-Pakistan-TIP-3023.
18Jorgic, Drazen. "Pakistan Sees End to Routine Power Outages by Year's End." Reuters. February 13,
2017. https://in.reuters.com/article/pakistan-energy/pakistan-sees-end-to-routine-power-outages-by-years-
end-idINKBN15S1L2.
19 Country Rating Poll. Report. BBC. 2014.
Gul, Ayaz. "China Turning Pakistan Port Into Regional Giant." VOA. October 24, 2017. https://
20
www.voanews.com/a/pakistan-china-gwadar-port/4084175.html.
creating an estimated 40,000 jobs.21 The Chinese aim is to transform Gwadar from a fishing
village into a global port city by the likes of Dubai or Hong Kong. The Chinese aim is to
transform Gwadar from a fishing village into a global port city by the likes of Dubai or Hong
Kong. In return for their investment, China will receive 91% of revenue for 40 years, granting
The majority of the $45.6 billion pledged by China for CPEC will go towards building
energy infrastructure with an investment of $33.8 billion. This will ease Pakistan’s reliance on its
neighbors, especially Saudi Arabia, for oil and gas imports.23 According to the CPEC website,
four coal plants, several wind farms, and a solar farm have been completed, with an energy
production potential of 3790 megawatts. Numerous projects are currently still underway, with a
potential of 5753 additional megawatts once the projects halfway finished or more are
completed.24 Pakistan currently has a total capacity of only 25,000 megawatts. The completion of
CPEC led projects will revolutionize the Pakistani energy sector by providing more than a 20%
increase in energy capacity.25 China has learned from its years of reckless domestic development
which has caused serious environmental and health issues, as well as long term economic
deficiencies. Rather than promoting a policy of short term profits, it has instead chosen to adopt a
more sustainable growth strategy for CPEC by investing in a mixture of renewable and
nonrenewable energy sources. This adds credibility to China’s commitment to assist its allies
21 "Construction of Industrial Free Zone in Gwadar Begins ." The Express Tribune. June 20, 2016. https://
tribune.com.pk/story/1126021/gwadar-development-industrial-free-zone-construction-begins/.
22Khan, Iftikhar A. "China to Get 91pc Gwadar Income, Minister Tells Senate." DAWN.COM. November
25, 2017. https://www.dawn.com/news/1372695.
23Kugelman, Michael. "The China-Pakistan Economic Corridor and Energy Geopolitics in Asia." Wilson
Center. January 16, 2018. https://www.wilsoncenter.org/blog-post/the-china-pakistan-economic-corridor-
and-energy-geopolitics-asia.
24"CPEC Project: Energy." CPEC Latest News. July 17, 2016. http://www.cpecinfo.com/energy-
generation.
25GOVERNMENT OF PAKISTAN MINISTRY OF ENERGY (POWER DIVISION). "About Pakistan."
PRIVATE POWER & INFRASTRUCTURE BOARD. June 2017. http://www.ppib.gov.pk/
N_about_pak.htm.
with peaceful development while at the same time distancing themselves from colonialist
tendencies.
As much as China wants to promote the economic integration and prosperity of its
neighbors, one of their primary motives for CPEC is to install a system of gas pipelines linking
the oil rich Middle East to its interior Xinjiang region. The government understands the need to
expand outwards for natural resources in order to sustain its growth. China’s petrol consumption
has risen at an alarming rate, with an additional 690,000 barrels per day demanded in 2017
totaling a consumption of 11.67 million barrels per day.26 Currently, they mainly rely on the
Dubai-Shanghai-Urumqi route for crude oil with over 70% of oil imports originating from the
Persian gulf. It is a naval route that spans a distance of over 10,000 kilometers, passing through
the pirate infested Strait of Malacca and South China Sea. Not only would CPEC pipelines
reduce travel to a mere 2,500 kilometers at sea and 2,800 kilometers on land, cutting the distance
traveled nearly by half, it would also greatly alleviate security risks associated with naval
routes.27 China has committed to assist in building a $2.5 billion gas pipeline stretching over 700
kilometers that links Iran and Pakistan, opening up a new route for oil. 28 Correspondent to the
OBOR’s vision of creating a globally integrated economy, the benefits China will gain from
increased efficiency and cost saving certainly justifies their large investment.
the CPEC, which have been divided into three main corridors: the Karakoram Highway, Eastern
Alignment, and Western Alignment. $10.63 billion has been allocated by CPEC towards
26Rapier, Robert. "China's Oil Demand Is Growing At More Than Double Last Year's Pace." Forbes.
September 18, 2017. https://www.forbes.com/sites/rrapier/2017/09/18/chinas-oil-demand-is-growing-at-
more-than-double-last-years-pace/#3417b82c3ec0.
27CPEC. "CPEC to Connect Gwadar and Kashgar through an Oil Pipeline." CPEC Latest News. June 13,
2016. http://www.cpecinfo.com/news/cpec-to-connect-gwadar-and-kashgar-through-an-oil-pipeline/
NTMyNA.
28Shah, Saeed. "China to Build Pipeline From Iran to Pakistan." The Wall Street Journal. April 09, 2015.
https://www.wsj.com/articles/china-to-build-pipeline-from-iran-to-pakistan-1428515277.
transportation infrastructure.29 The Karakoram Highway is 887 kilometers long and stretches
from the China-Pakistan border to the town of Burhan, which then extends to Islamabad through
the M1 motorway. Also known as the China-Pakistan Friendship Highway, the major roadway
dates back to 1959 and was completed in 1979.30 CPEC recognizes the Karakoram Highway as
the most vital linkage network for Pakistan domestically and has instituted a series of
improvements along sections of the road. The most significant of which has been deemed the
Krakoram Highway Phase 2 Project, which concerns itself with repairs and upgrades to the 487
kilometer section between Burhan and Raikot and also aims to build a 4 lane highway
connecting Burham and Havelian. This was especially needed following the extensive damages
wrought by the 2010 Pakistan floods. Construction had begun on April 2016, with an estimated
cost of $1.26 billion and due to be completed in three and a half years.31 The Eastern Alignment
corridor centers on connecting Pakistan’s Sindh and Punjab provinces, and is considered the
most important as it links Pakistan’s wealthiest and most populated regions. Divided into four
sections, with connections between Karachi and Hyderabad under the M9 motorway, Hyderabad
and Sukkur, Sukkur and Sultan, and Sultan and Lahore. Projects in the Eastern Alignment will
total an estimated $6.6 billion.32 The scope of its Western Alignment, which seeks to connect the
provinces of Balochistan, Khyber Pakhtunkhwa, and Punjab, is considerably smaller. The most
extensive project being a connection between the Karakoram Highway at Burhan to Yarik at an
29Shah, Syed. "China–Pakistan Economic Corridor." MWC News. March 17, 2017. http://mwcnews.net/
focus/politics/64341-chinapakistan.html.
30Hays, Jeffrey. "KARAKORAM HIGHWAY IN CHINA." Facts and Details. http://factsanddetails.com/
china/cat15/sub104/item441.html.
31The Express Tribune. "Pakistan, China Ink Agreements worth $4.2b." The Express Tribune. May 04,
2016. https://tribune.com.pk/story/1096762/cpec-eastern-alignment-pakistan-china-ink-agreements-
worth-4-2b/.
32The Express Tribune. "Karachi-Lahore Motorway: Project to Be Completed in 3 Years." The Express
Tribune. January 28, 2015. https://tribune.com.pk/story/829305/karachi-lahore-motorway-project-to-be-
completed-in-3-years/.
estimated cost of $1.05 billion.33 The completion of CPEC backed roadways will revolutionize
Pakistan by encouraging interconnectivity and opening up many new areas for economic
development.
Likewise, railways are yet another essential component in CPEC’s plan to promote
economic integration. Pakistan’s rail system is divided into three main lines, with the first one
account for over 70% of traffic. China’s strategy centers on modernizing and expanding the
freight capabilities of Main Line 1, with moderate but similar investment into the other two lines.
Main Line 1 stretches from Karachi to Peshawar, effectively connecting the Southern and
Northern parts of the country.34 The first phase of the project was implemented in April 2018 and
cost $3.2 billion to upgrade four sections of the track. Upgrades consist of the construction more
efficient railway routes, repairs of existing ones, and the introduction of newer trains which all
contribute to a significantly faster travel time between stops.35 The next phase, which is poised to
be completed by 2021, will cost an estimated $8.2 billion and will include an even more
CPEC no doubt has played a huge part in Pakistan’s economic recovery. In 2009,
Pakistan suffered a 1.7% loss to its GDP following the 2008 financial crisis. Although the
economy bounced back to a 4.3% gain in GDP the next year, the country was a long ways away
from being economically stable. In 2018, Pakistan experienced a 5.79% real GDP growth rate,
33Caudary, Zahid. "Rs. 180 Billion for CPEC Projects in Fiscal Budget, Rs. 38 Billion for Western
Alignment of CPEC Route." CPEC Latest News. May 30, 2017. http://www.cpecinfo.com/news/rs-180-
billion-for-cpec-projects-in-fiscal-budget-rs-38-billion-for-western-alignment-of-cpec-route/MzEzOA==.
Sost Today. "Havelian to Khunjerab Railway Track to Be Upgraded under China-Pakistan Economic
34
contributed to that growth, it goes without saying that the increased energy infrastructure,
transportation efficiency, and expansions to Gwadar Port among other economic opportunities it
CPEC Financing
With all this money and infrastructure flowing into Pakistan, how exactly are they
affording it all? Pakistan is by no means a wealthy nation and cannot dream of taking on a such
weak financial situation and urgent need for capital investment and infrastructural support, an
“Early Harvest” scheme was implemented to take place preceding the main CPEC plans. To be
completed before 2019, the “Early Harvest” portion of CPEC consists of several deals for power
plants which will generate over 10,000 megawatts in order to quickly address Pakistan’s glaring
need for energy. This portion of CPEC is unique in that interests rates are relatively low to
accommodate for Pakistan’s dire situation and to help jumpstart its economy.38
China has shown that it is extremely willing to take risks in order to cement its role in
Pakistan under CPEC. Nearly all of CPEC related projects in Gwadar was financed through a
series of interest free loans totaling $757 million in which Pakistan is only expected to pay back
the principal. Such a deal is still a huge benefit to China due to the agreement that they will gain
control of Gwadar Port for 40 years plus a hefty 91% of profits. 39 Nonetheless, such an
investment carries many risks in the event that Pakistan is unable to pay back those loans. Critics
37 Asian
Development Bank. "Pakistan: Economy." Asian Development Bank. June 12, 2018. https://
www.adb.org/countries/pakistan/economy.\
38 Ahmad, Riaz, and Hong Mi. "China-Pakistan Economic Corridor and Its Social Implication on
Pakistan: How Will CPEC Boost Pakistan’s Infrastructures and Overcome the Challenges?" Arts and
Social Sciences Journal 08, no. 02 (2017). doi:10.4172/2151-6200.1000265.
39Khan, Iftikhar A. "China to Get 91pc Gwadar Income, Minister Tells Senate." DAWN.COM.
November 25, 2017. https://www.dawn.com/news/1372695.
have accused China of using CPEC as an avenue for veiled colonialism in Pakistan in order to
economically exploit the country. They point towards the lack of transparency, preference shown
towards Chinese firms, and considerable debt that will be left in the wake of the project if
Pakistan maintains its current level of output. 40 However, we must take into account the
increased productivity that CPEC will bring, especially by solving the energy crisis which was
bringing down the country’s GDP growth rate by an estimated two percent annually.41 Its long
term potential for job creation, poverty eradication, as well as benefits from social, health, and
education infrastructure was not taken into consideration. Furthermore, the credit rating agency
Moody’s gave Pakistan a B3 rating, which looks optimistically on the country’s infrastructural
overhaul programs, despite a slew of problems: high debt burden, wide fiscal deficit, foreign
reserve inadequacies, unstable domestic politics, and geopolitical risk.42 Pakistan must be careful
so as to not follow down the footsteps of their neighbor Sri Lanka. A debt crisis coupled with
irresponsible loaning by China meant that Sri Lanka was unable to pay back $301 million
borrowed at an interest rate of 6.3%- just a fraction of its total national debt of $64.9 billion and
$8 billion to China. As a result, Sri Lanka had to hand over a 99 year lease on its Hambantota
port to China.43
It is true that CPEC greatly benefits China politically and economically, but ultimately it
is a bilateral economic initiative that is a win-win situation for both countries. Without the
infrastructural investment that China is dumping into Pakistan, they simply do not have enough
40Venkatachalam, K.S. "Can Pakistan Afford CPEC?" The Diplomat. June 16, 2017. https://
thediplomat.com/2017/06/can-pakistan-afford-cpec/.
Houreld, Katharine. "Pakistan Government, Frustrated by Power Crisis, Changes Tack." Reuters.
41
does lose some of its sovereignty when it agrees to a deal like allowing China to control Gwadar
Port for forty years. Despite that, as a rational actor, Pakistan recognizes that the benefits
outweigh the costs. Under neoliberal political theory, nations that cooperate with each other gain
more than by acting by themselves. It is clear that Pakistan sees this and thus takes great
Pakistan’s history is ripe with conflicts and continues to be so in recent history. In 2017, a
series of bomb attacks across the country perpetrated by the Islamic State killed over 80 people.44
The country’s risk of violence and its proximity to Afghanistan poses as the most significant
challenge to effective implementation of CPEC. The success of the initiative depends greatly on
peace and stability in the region. To account for this, the Pakistan military has initiated a force of
over ten thousand dubbed the Special Security Division whose main job is to protect Chinese
workers under CPEC. Nevertheless, the Taliban and other militant groups present a serious
security issue which hinders economic progress. One such example of this is the cancellation of
the $14 Diamer-Bhasa Dam, motivated partially by fears over security in the region.
China and Pakistan must take this opportunity to act on cooperative security solutions so
as to further develop and strengthen the relationship and understanding between the two
countries while protecting mutual economic interests. Security crisis’ create considerable tension
between countries, such when an unfortunate Chinese worker was killed by a lone gunman in
Pakistan on February 2018.45 The war against terrorism is multi faceted issue that can only be
44Ibrar, Muhammad, Jianing Mi, Muhammad Rafiq, and Arodh Lal Karn. "The China-Pakistan Economic
Corridor: Security Challenges." DEStech Transactions on Economics and Management, no. Apme (2017).
doi:10.12783/dtem/apme2016/8730.
45"China Tells Pakistan to Improve Security after Chinese Killing." The Economic Times. February 06,
2018. https://economictimes.indiatimes.com/news/defence/china-tells-pakistan-to-improve-security-after-
chinese-killing/articleshow/62804445.cms.
solved through transparent communication and joint programs. China’s choice to take their place
in the backseat regarding the domestic politics in other nations could hurt them in the future.
Pakistan’s political instability presents the serious risk of a regime change jeopardizing the future
of CPEC and other Chinese investments in the region. 46 Nevertheless, Pakistan has placed great
spending. It is also the hope that economic growth from CPEC will consequently stabilize the
region. The Baluchistan province, the poorest in Pakistan, will benefit especially from economic
stimulus as much of the violence and unrest in the region stems from poverty, with just under
Political Implications
Although CPEC is an economic initiative, a project of this scope no doubt comes with far
reaching political implications beyond the borders of Pakistan. A series of domestic violent
incidences perpetrated by Muslim groups in 2009 and 2013 signaled to Beijing the importance of
world, China understands that events thousands of miles away can have far reaching domestic
consequences. Influence and security may not be easily quantifiable but that does not them any
less important under the scope of OBOR and CPEC. Economic stability in Pakistan could mean a
China’s rising influence on the world stage also incentivizes them to build a considerable
international network of allies built on soft and hard power, just like the United States’, should
they ever hope to challenge their place as the most powerful nation on Earth. Although China
46"Pakistan's Internal Security and CPEC." Daily Times. January 22, 2018. https://dailytimes.com.pk/
186619/pakistans-internal-security-cpec/.
47 Ibid.
48Hameed, Maham. "The Politics of the China―Pakistan Economic Corridor." Nature News. June 05,
2018. https://www.nature.com/articles/s41599-018-0115-7.
vehemently espouses a narrative of non interference in domestic matters under OBOR, growing
influence is simply inevitable as China becomes more economically integrated with those
countries. The non transparent nature of many CPEC agreements suggests underlying political
and militaristic motives.49 The geopolitical incentives that come with an economic initiative with
Pakistan look to be too enticing to ignore. The country’s proximity to Afghanistan, Iran, and
India, all of which China have a significant vested political interest in make Pakistan an
irreplaceable ally. Their shared interests regarding other nations, especially India and the United
The United States and Pakistan have had a history of good relations until recently when
jihadist groups have created tensions between the countries. In 1947, the United States was one
of the first in the world to establish diplomatic relations with Pakistan who had just achieved
independence from Britain. Pakistan became an important military ally during the Cold War
when the United States rented out Peshawar Air Station in order to spy on the Soviet Union.
Diplomatic relations between the countries remained fairly cordial until the 2001 September 11
attacks. Pakistan’s border to Afghanistan meant that it was a key strategic location in the United
States’ war against terrorism. Pakistan was reluctant to let the United States’ and allies to use its
countries as a base of operations and were not exactly given a choice. Unintended Pakistani
civilian and military casualties from drone strikes furthered tensions. The breaking point came in
2011 when the United States accused Pakistan of not doing enough to fight terrorism and
49 Ahmad, Riaz, and Hong Mi. "China-Pakistan Economic Corridor and Its Social Implication on
Pakistan: How Will CPEC Boost Pakistan’s Infrastructures and Overcome the Challenges?" Arts and
Social Sciences Journal 08, no. 02 (2017). doi:10.4172/2151-6200.1000265.
subsequently ended $800 million in military aid.50 The United States still holds considerable
Pakistan and United States relations have not fully recovered since, greatly boosting
China’s attractiveness as an ally. Although China and the United States are not exactly
adversaries, the two share a complicated relationship as the world’s leading economies. They are
not exactly friends either but rely on each other to survive as each other’s largest trading
partners.51 An increasingly close economic partnership between China and Pakistan could pose
some threat to their dominance in the Asia-Pacific region. As China continues to take on a more
global role, the United States will inevitably lose some of their influence. China’s first military
expansion internationally through its naval base in Djibouti, which neighbors the Unite States’
base, shows that China is increasingly taking tangible steps towards becoming a world
superpower.52
The impact of CPEC on the United States’ interests in the Asia-Pacific region remains to
be seen according to how CPEC develops in the future. A wealthier, better connected, and more
stable Pakistan as a result of CPEC can lead to higher trade and integration. A healthy economy
is one that is attractive to foreign investment of all kind, and as the sixth most populated country
in the world with rich natural resources- Pakistan represents a market with great potential.53 At
the same time though, a very close economic partnership between China and Pakistan could
50Erickson, Amanda. "Analysis | The Long History of Incredibly Fraught Relations between the U.S. and
Pakistan." The Washington Post. January 05, 2018. https://www.washingtonpost.com/news/worldviews/
wp/2018/01/05/the-long-history-of-incredibly-fraught-relations-between-the-u-s-and-pakistan/?
noredirect=on&utm_term=.aa2322bda2be.
51Gray, Sarah. "These Are the Biggest U.S. Trading Partners." Fortune. April 3, 2018. http://fortune.com/
2018/03/07/biggest-us-trade-partners/.
52Oladipo, Tomi. "Why Are There so Many Military Bases in Djibouti?" BBC News. June 16, 2015.
https://www.bbc.com/news/world-africa-33115502.
53United States Trade Representative. "Pakistan." Countries & Regions | United States Trade
Representative. 2018. https://ustr.gov/countries-regions/south-central-asia/pakistan.
mean that the United States would get shut out of deals in favor of their closer ally. Although
China currently has not instituted any trade restrictions on Pakistan, this could change in the
future especially if Pakistan is unable to pay China back like Sri Lanka. The loss of sovereignty
from poor borrowing practices could mean that China will impose some sort of exploitative
economic policy that prevents Pakistan from trading with the United States.
The Trump administrations criticisms of Pakistan and withholding of aid has already
directly led to increased trade with China, with an official adoption of the Chinese yuan as the
currency of trade between China and Pakistan just a few days after Trump’s Twitter out lash
towards Pakistan.54 United States trade with Pakistan has diminished in recent years from $5.8
billion in 2011 to $5.5 billion in goods traded a year two ways in 2017.55 Meanwhile, Sino-
Pakistan trade has grown considerably from $7 billion in 2011 to an incredible $20 billion in
2017.56 Recent behavior by the administration has only driven that divide further as the country
The most significant geopolitical tool China has gained from CPEC is definitely the
Gwadar port. It effectively grants China a naval presence in the Arabian Sea, an area the United
States is especially interested in due to the sheer volume of oil that is produced in the region.
China will be able to position itself to better defend its interests and engage with the United
States. Once the pipelines and infrastructure is set, CPEC also grants China a significant tactical
military advantage. Currently, China faces a security weakness deemed the “Malacca Dilemma.”
The dilemma stems from the fact that 80% of Chinese oil is imported through the Strait of
54Iyengar, Rishi. "Pakistan Cozies up to China on Trade after Trump Tweet." CNNMoney. January 3,
2018. http://money.cnn.com/2018/01/03/news/economy/pakistan-china-trump-trade-yuan-dollar/
index.html.
55United States Trade Representative. "Pakistan." Countries & Regions | United States Trade
Representative. 2018. https://ustr.gov/countries-regions/south-central-asia/pakistan.
Kumal, Junaid. "Dynamics of Pakistan’s Trade Balance with China." April 2017. http://
56
www.sbp.org.pk/publications/staff-notes/Pak-China-trade-balance.pdf.
Malacca in the Persian Gulf. Its potential adversaries, such as India an the United States have
shown that they are capable of blockading it through their extensive naval presence in the region.
An effective embargo coupled with a naval blockade of the Strait of Malacca could leave China
extremely vulnerable with no direct source to much needed fossil fuels. CPEC essentially
completely eliminates this dilemma by producing a oil route that is both faster and less
susceptible to blockades. 57 By losing a very effective strategy to deal with China, the CPEC
indirectly challenges the United States’ dominant role on the world stage.
India, Pakistan’s arch nemesis and ally of the United States, plays a significant role
and their already hostile relationship with Pakistan, it’s no surprise that India vehemently
opposes the initiative. Adding on to all this, Sino-Indian relations have long been tense since the
Sino-Indian War in 1962.58 India views China’s expanding relations with Pakistan as a
significant threat and an example of encroachment onto their sphere of influence. Furthermore,
Chinese backing of Pakistan through CPEC could make the country much more confident in
threatening its power balance with India. Pakistan could take increasingly riskier tactics against
India such as increasing their presence in the disputed territory of Kashmir, especially due to
India has responded with a comprehensive strategy against CPEC, with its own
international investment guidelines. It has in recent years increased its military spending,
especially in regards to its navy to counteract rising Chinese influence in the oceans.
57Center for International Maritime Security. "Reinforcing China's Malacca Dilemma." September 15,
2016. http://cimsec.org/reinforcing-chinas-malacca-dilemma/28117.
58IndiaToday.in. "India-China War of 1962: How It Started and What Happened Later." India Today.
November 21, 2016. https://www.indiatoday.in/education-today/gk-current-affairs/story/india-china-war-
of-1962-839077-2016-11-21.
Additionally, India has also sought to seek stronger diplomatic relations with the United States
and Japan as a means of balancing against the Chinese-Pakistan alliance. 59 It is the perfect
example of balancing as anarchic actors look towards each other for help in surviving an
inherently flawed and ruleless system. CPEC has contributed towards the beginning of the
formation of factions in the region. This poses a significant risk for conflict to the United States
due to their growing relationship with India. If the proper steps are not taken towards
deescalation, a minor spat between the Indians and Pakistanis could turn into all out war as allies
attempt to protect each other’s interests. The pace of Southern Asia’s strategic environment is
ever changing and state actors must correctly assess the situation, adapt accordingly, and be able
to utilize a wide range of tactics. The increased levels of strategic competition and conflicting
interests must be solved through peaceful diplomatic means. A war in the region would not
Conclusion
China’s path towards the OBOR wasn’t easy but its evolution was natural as China
continues to place its foothold in the world. Building upon their past successes and failures,
China has sought to impart that knowledge to its neighbors to establish stronger diplomatic
relations. The country’s quest towards a more interconnected world through its OBOR initiative
will likely be as tumultuous as its rise as a world power today. It’s flagship component of the
OBOR initiative, CPEC has alerted to the world China’s economic vision and its capacity to lead
large scale economic projects. The extensive development and investment into Pakistan’s ports,
roadways, railways, and energy infrastructure has seen success so far in igniting an economic fire
in the region.
59Markey, Daniel. "Why The China-Pakistan Economic Corridor Will Worsen Tensions in Southern
Asia." War on the Rocks. September 28, 2017. https://warontherocks.com/2017/09/why-the-china-
pakistan-economic-corridor-will-worsen-tensions-in-south-asia/.
The OBOR in Pakistan so far has not presented any immediate threats to the United
States. Its potential to transform Pakistan into a productive economic hub is ultimately beneficial
for the United States. Nevertheless, the opportunity for CPEC to curate regional influence,
military advantages, and possible escalation of security issues involving neighboring state actors
make it a large risk to the future of United States’ interests in the Asia Pacific Region. The role of
India is integral to future of consequences that CPEC may bring the United States. It will be
interesting to see the future of CPEC what it holds for Pakistan. Will China be able to transform
a nation with a long list of economic, political, and social issues into an economic powerhouse?
If China were to succeed in Pakistan, its success could be replicated across other developing
nations- thereby accomplishing its goal of establishing strong alliances with state actors. The
world’s movement towards a bipolar system becomes more and more apparent each day.
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