China-Pakistan Economic Corridor will change the region: Andrew Small

Published: July 3, 2015 - 13:24 Updated: July 3, 2015 - 14:09

Andrew Small, a fellow with the Asia program at the German Marshall Fund of the United States, is an expert on Chinese policy in South Asia. His most recent book, The China-Pakistan Axis, explores Pakistan's role in China's geostrategic ambitions and its emerging struggles with Islamic militancy. In this interview with Hardnews, Small explains Beijing's changing relationship with Islamabad

Sanjay Kapoor Delhi

Two months ago, Chinese President Xi Jinping visited Islamabad and announced Beijing's biggest investment in recent times: $46 billion, to build the China-Pakistan Economic Corridor (CPEC). Is there a message in the fact that this occurred just weeks before Indian Prime Minister Narendra Modi’s first visit to Beijing?

Not really. In fact, China was keen to decouple the Xi visit to Pakistan and Modi’s visit to China as much as possible. The cancellation of the Chinese president’s originally-scheduled trip to Islamabad last year provided an opportunity for Beijing to shift the usual optics of these visits when he finally made it there in April. This was the first time in decades that a Chinese leader has visited Pakistan and India separately. Although there is, of course, an important strategic component of the China-Pakistan relationship that is India-focused, there are many elements that really have no reference to India. The China-Pakistan Economic Corridor is one of them.

So what is the purpose of these projects?

The investments are partly about helping to bring stability to Pakistan itself, partly about the broader package of Silk Road initiatives to build new trade corridors and markets to China’s west, partly about exporting excess industrial capacity, and partly about building alternative transportation routes that leave China less exposed to choke-points such as the Malacca Strait. The announcement in Pakistan did send the message that good relations with China will yield economic rewards as this whole “Belt and Road” agenda moves forward, but the audience for that message is far wider than just South Asia. Plus more and more aspects of the China-Pakistan relationship now look west and south­ – to Afghanistan, to the Gulf, to the Indian Ocean – rather than just at their mutual neighbour.    

How will this enormous investment affect the region?

The Pakistan investments are only one part of an initiative that will potentially add up to hundreds of billions of dollars, and perhaps even – by some Chinese estimates – several trillion dollars. The sheer scale is potentially transformative. There are clearly significant economic benefits that should accrue from fixing the region’s painfully lagging connectivity and infrastructure. But beyond that, Beijing’s hope is that it can provide an economic anchor, a center of gravity so powerful that it will eventually shift incentives for actors in the region, whose security goals have trumped everything for so long.

So would that be a game changer for India?

It won’t cool longstanding historical rivalries, any more than it has in East Asia, but it should push the costs of outright conflict up and – hopefully – enable trade and investment to move ahead even among strategic opponents. There is no guarantee that these plans will succeed, and there are serious political and security risks to such a dramatic increase in China’s economic presence, as the fights over the route of the China-Pakistan Economic Corridor illustrate. But as a whole, this is a serious effort on Beijing’s part to try to shift the terms of the game in the region and for all the understandable concerns about the expansion of China’s influence that would result, there will be real collective benefits if it comes off.

In an earlier interview, you have stated that this corridor changes the economic geography of the region. Do you think it will dampen enthusiasm for improving trade ties between India and Pakistan? What about India's attempt to access Central Asia through Pakistan and Afghanistan?

China has, for some time, been encouraging Pakistan to improve its economic relationship with India, and these pressures from the Chinese will, if anything, go up as a result of the corridor. Although there are strategic elements to these investments, there are basic economic factors motivating them too; there is no doubt that Beijing would like see a better-integrated South Asian market: it wants the corridor to function as a locus of regional trade. Afghanistan is already making efforts to connect its own infrastructure plans with the economic corridor, as is Iran to a certain extent, but the whole venture looks far more commercially attractive if India is in play, too.

How likely is that?

This may not happen in the short term, but over time the whole venture should form part of a process of economic normalization for Pakistan, which ultimately means improved east-west connections as well as the more logistically difficult north-south ones. If that doesn’t happen, it’s not clear that the changing economic geography of the region will really work to Pakistan’s advantage: there are continued questions in China about whether the trade connectivity aspects of the corridor are credible without Pakistan being fully economically embedded in the region.

To the great dismay of a section of Afghan society, Pakistan’s ISI and NDS of Afghanistan have signed an MOU to build closer ties. India has also expressed its reservations about this union. How far is President Abdul Ghani willing to accommodate Pakistan in his endeavour to bring peace to his war torn country?

Ghani is under no illusions about what he’s doing. He has undoubtedly gone out on a limb to try to fix the relationship with Pakistan, but if it doesn’t deliver results he will have to walk it all back, which would be at a real cost to Pakistan too. He has done as much as he can to demonstrate a genuine good faith effort but, beyond some friendly bilateral visits, it hasn’t yet yielded any tangible outcomes, and time is rapidly running out before his stance becomes politically unsustainable. The ball is in Pakistan’s court: leaders in Kabul who are willing and able to take these steps don’t come along often, and it’s hard to imagine any comparable initiative in the foreseeable future if Ghani’s overtures fail.


China recently hosted talks between the Afghan government and the 'good Taliban' in the presence of senior Pakistani officials. Another round of talks is expected soon. Do you think a deal with Taliban will secure Chinese interests in Afghanistan? Also, what made the Chinese engage so actively in the process ?

For China, political reconciliation has been seen as the single solution that will safeguard its interests – not just in Afghanistan, but in the region as a whole. China has been very reluctant to get involved but, as the US drawdown neared, it saw various dynamics in both Xinjiang and Afghanistan begin to deteriorate, so it felt obliged to step up its political efforts.

What were its worries?

Its main concern is that Afghanistan will become a safe haven for Uighur militant groups again, as it was in the 1990s, and that security problems there will destabilize China’s ambitions for its whole western periphery. Beijing knows that it is uniquely placed to exercise some influence, given its close relationship with Pakistan, the economic incentives it can put on the table, and the fact that it has decent working relations with virtually every major political force in Afghanistan. That hasn’t been enough to make a decisive difference yet, but it has helped to get talks closer to the starting line.

Pakistan refused to send its army to join the coalition Saudi Arabia organized to combat Houthi rebels in Yemen. Why? Is China behind this decision? Some believe that China encouraged them to stay away from Yemen.

Pakistan was very reluctant to join Saudi Arabia’s venture anyway, but China’s discouraging stance helped to tip the scales even further. Xi Jinping quietly cancelled his planned trip to Saudi Arabia as a result of the action in Yemen, and there was a risk that the economic package that was being rolled out in Pakistan could have been adversely affected if they had joined the coalition. More importantly, the new resources coming from Beijing made it easier for Pakistan to weather the financial repercussions of Saudi Arabia’s displeasure. Pakistan saw membership in the Saudi campaign as detrimental to its interests in all sorts of ways – relations with Iran, the potential of embroiling the Pakistani army in a messy conflict and so on – and the sole reason to acquiesce would have been for the sake of the relationship with Riyadh. But as Pakistan knows well from its relationship with China, being “all-weather friends” doesn’t commit you to getting directly embroiled in each other’s ill-advised wars.

The Chinese promptly vetoed India’s attempt to get Pakistan punished in the UN for releasing 26/11 mastermind Zaki-ur Rehman Lakhvi, though the US and other permanent members of the Security Council also supported opposition to his release. Why is China taking a manifestly unpopular position?

China has long been willing to provide diplomatic protection to Pakistan in certain areas, and this is one of the most important examples of that determination. There have been periods of pressure where China has felt obliged to moderate its stance, such as in the aftermath of the Mumbai attacks.  Generally speaking, however, Beijing makes it as difficult as possible to use the UN sanctions committee as a mechanism to target groups and individuals close to Pakistan’s army. It is possible to get movement from China – they actually agreed to lift some holds on Lashkar-e-Taiba designations over the last year – but this is an aspect of the China-Pakistan relationship where the default position is to offer cover unless everything has been fully squared with Beijing in advance. Although China has its reservations about certain of Pakistan’s methods, it is willing to put up with some unpopularity for the sake of its friendship. To return to an old quote from the Chinese general, Xiong Guangkai, to his US counterpart: “Pakistan is our Israel”.     

Do you think Chinese investment in Pakistan and its “Belt-and-Road” policy will help stabilise Asia, or will it aggravate tensions?

There will certainly be some political bumps. As China knows well from its economic development efforts in Xinjiang and Tibet, rapid influxes of investment can increase resentment and tension, especially if particular groups feel that they’re losing out. We’ve seen Chinese investments become politically sensitive in Myanmar and Sri Lanka in recent years, too, in ways that have run entirely counter to China’s interests. Money will be wasted; there will be corruption scandals; there will be terrorist attacks on Chinese workers and so on. But looking over a longer timeframe, one only needs to travel around the Chinese interior to see the beneficial impact of connecting up parts of the world that have been so distant from the global economy, and even from their neighbors. Virtually everyone accepts the need for these infrastructure investments. While China may be the catalyst for these efforts, if countries respond to the initiative well, improving connectivity and developing markets in the region need not be inherently China-centric.

In an interview with Hardnews, Small explains Beijing's changing relationship with Islamabad
Sanjay Kapoor Delhi 

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