All about China Pakistan Economic Corridor & Its effects on India

About China–Pakistan Economic Corridor:

  • The ambitious project – part of China’s “One Belt and One Road” or new Silk Road project – is a series of roads, railways, pipelines, hydropower plants and other development projects, being built from the restive Xinjiang province in China to Gwadar in southwestern Pakistan.
  • CPEC is intended to rapidly modernize Pakistani infrastructure and strengthen its economy by the construction of modern transportation networks, numerous energy projects, and special economic zones.
  • Modern transportation networks built under CPEC will link seaports in Gwadar and Karachi with northern Pakistan, as well as points further north in western China and Central Asia.
  • CPEC’s potential impact on Pakistan has been likened to that of the Marshall Plan undertaken by the United States in post-war Europe.
  • The corridor, which came into operation last November, passes through Gilgit-Baltistan in Pakistan-administered Kashmir – a territory claimed by India. Both the South Asian neighbours claim the disputed Kashmir region in full, but control parts of it.

Impact of CPEC on China & Pakistan:

  • The project promises to be an immense economic and strategic windfall for China and Pakistan.
  • By 2050 China is projected to become the world’s largest economy.
  • The CPEC is anticipated to boost Pakistan’s economy, where the GDP is expected to grow by more than five percent by 2020, according to an IMF growth forecast. 
  • The 3,200km-long corridor is intended to connect the world’s second largest economy, China, with the Middle East and Central Asia, reducing the alternative sea route distance – via the Malacca Strait – by 10,000km.
  • The report estimated that the economic corridor would create some 700,000 direct jobs between 2015 and 2030, and add up to 2.5 percent to the Pakistan’s growth rate.

Impact on India:

India’s Sovereignty

  • India has continuously opposed the project since it passes through the Pakistan-occupied Kashmiri territory of Gilgit-Baltistan – a claim opposed by Pakistan.
  • However, a well-connected Gilgit-Baltistan that attracts industrial development and foreign investment, if CPEC proves a success, will further consolidate the region’s perception as internationally recognised Pakistani territory, diminishing India’s claim over the 73,000 sqkm piece of land which home to more than 1.8 million people.

Chinese Control Over Trade Via Sea

  • Major US ports on the East Coast depend on the Panama Canal to trade with China. Once CPEC becomes fully functional, China will be in a position to offer a ‘shorter and more economical’ trade route (avoiding travel through the entire Western Hemisphere) to most North and Latin American enterprises.
  • This will give China the power to dictate the terms by which the international movement of goods will take place between the Atlantic and the Pacific oceans. 
  • Located a mere 600 km from the Strait of Hormuz, Gwadar places China in close proximity to the Iran-controlled water channel, which supplies 35% of the world’s oil requirements. 
  • India, with over 60% of its oil supplies passing through the Strait (mainly from Saudi Arabia, Iran and Iraq), will be no exception.

Chinese String of Pearls

  • China has been increasing its presence in the Indian Ocean with the ‘String of Pearls’ ambition: A term coined by the Americans and often used by Indian defence analysts to refer to a Chinese game-plan of encircling India through a network of airfields and ports.

Emergence of Pakistan as an Outsourcing Destination

  • Often referred to as the ‘Marshall Plan’ of China – named after a historic US plan to provide financial aid to western Europe in the aftermath of World War 2, which helped Europe rebuild itself – CPEC is poised to speed up Pakistan’s economic progress.
  • Development of commercial towns adjoining the corridor and better rail and road connectivity enabling the movement of a skilled workforce from the hinterlands to the urban centres can help Pakistan emerge as a key destination for contract-manufacturing-outsourcing for the WEestern economies. This is more probable at a time when India is becoming costlier and Bangladesh has performed poorly on quality and regulatory standards.
  • With the logistics of cost and transit time coming down, Pakistani exports, especially from the MSMEs, will also gain an international market, posing serious competition to Indian OEMs and handicraft manufacturers that rely largely on overseas consumers.
  • Pakistani exports, mainly in the textile and construction material industry, compete directly with those of India in the US and UAE – two of the top three trading partners of both countries. With the supply of raw material from China becoming easier, Pakistan will be suitably placed to become a regional market leader in these sectors – mainly at the cost of Indian export volumes.

Stronger OBOR and Chinese Dominance in Trade Leadership

  • China’s one-belt-one-road (OBOR) project that focuses on the trade connectivity between China and the rest of Eurasia through a network of ports, roads and railways has been often seen as China’s plan to dominate the region politically. CPEC is one giant step in the same direction.
  • The recent US withdrawal from the TPP (Trans Pacific Partnership) has already left the member countries of Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam looking to China for global leadership in trade.
  • An uncertain EU after Britain’s withdrawal and a weakened NAFTA, the renegotiation of which seems certain in the Trump regime, will only help establish China’s superiority across the globe.
  • A China that is more accepted and integrated with the rest of the global economy will have a better say in the UN and with individual nations, which may prove to be bad news for an India aspiring to acquire a permanent seat at the UN Security Council.

Some Positives concerns from India:

  • India shows apprehension about this project not because it is going to impact economically but due to the fact that part of it involves building roads in disputed area of State of Jammu and Kashmir which is right now partly occupied by Pakistan and where maintaining status quo is important.


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