China’s Desires from Pakistan

China desires Pakistan to have an unending trade surplus that benefits them. Beyond this, there may be some specific issues like Gwadar, but it is minor and less essential to Chinese plans in Pakistan or the rest of the world.

Pakistan and China have had a cumulative trade deficit of about $90 billion since 2010. It indicates that $90 billion in capital has moved from Pakistan to China in opposition to products and services moving in the other direction. The Gulf’s oil-producing nations are part of the following large deficit region.

Pakistan’s trade surplus with the US was $34 billion and $12 billion with the UK during the same time frame. It is more challenging to provide an estimate for the EU because member countries have changed over the past ten years, making it hard to manually calculate the cumulative commerce for these years, and the State Bank needs to disclose trade data for the EU as a region. However, it’s reasonable to presume that there would also be a sizable trade surplus in this case.

Participating in the US, UK, and EU economies gives Pakistan wealth, which it then spends in the economies of China and the Gulf oil-producing nations.

Fascinatingly, China did not rank as Pakistan’s top trading partner till 2010 regarding trade deficits. After 2010, it achieved such status, further solidified in 2019 by signing the second China-Pakistan Free Trade Agreement.

Along with a few other nations, Japan, South Korea, Malaysia, Indonesia, Brazil, and others ran trade surpluses with China. The rest of the world is generally at a disadvantage. For instance, India and China had a $100 billion gap the previous year.

But what separates them from us is that they can afford this gap while we cannot. Another distinction is that India has pursued its trading interests with other countries in Southeast Asia while forgoing a bilateral free trade agreement with China to protect its economic interests with that country.

Conversely, Pakistan has deepened its loss-making relationship with China and grown more dependent on Chinese financing. A College of William and Mary research lab Aid Data report offers helpful information.

China has given Pakistan $70 billion in development financing since 2000, including emergency loans for budgetary support. $56 billion was committed after 2013 when the Belt and Road Initiative (BRI) was underway. Although the report only includes information on commitments and not actual expenditures, it is easy to understand how commitments and disbursements would be equal in some categories.

General budget support is one of these kinds. $16 billion of China’s $56 billion commitment to Pakistan during the post-BRI era was towards budget support. Budget assistance credits were $4.6 billion during 2000–2012, which preceded the Bridge Investment.

China started giving Pakistan increasing amounts of credit for budgetary support as the trade gap increased. What do these credits intend to accomplish? Thus, with each year that goes by, Pakistan will likely lose more and more to them.

China is acting lawfully in this regard. It is a rather typical trading strategy for a rising superpower. The trajectory of all major powers has been similar. They maintain long-term trade surpluses with the rest of the globe, accumulating capital in their economy over time.

Moreover, China starts selling this capital to other people. It eventually modify the game’s rules to make their currency the primary reserve asset and the medium of exchange in international trade settlements as their economy grows to become the world’s leading producer of goods and services and the leading supplier of capital.

To reiterate, China is not acting improperly. It is the typical trade policy of an emerging country, and this is how most of the world sees it. There is a lesson for Pakistan to eliminate any feelings from the connection as a first step.

There should be an end to this “higher than the highest peak.” The second step is to evaluate the two free trade agreements we already have with China and determine whether or not we wish to extend them in 2024 and the conditions of any renewal.

It is crucial to realize that the game’s goal is to earn capital, not borrow it or get money through sporadic, fire sales of assets. Pakistan has to orient all of its international contacts around this idea.

It would help Pakistan to build relationships with those who assist it in gaining capital. Changes and reforms should be made in Pakistan’s foreign policy to control the embezzling of money from the country. The nation can only escape its never-ending cycle of borrowing if it does that.

Opinions expressed in this article are those of the author.

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