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In-depth - On The Cover

Mother China: A 'Chinese revolution' sweeps across Pakistan

Updated Jan 28, 2017 04:37pm

It is quite late in the night but Rawalpindi’s China Market is still swarming with customers. An array of shops in narrow alleys selling imported Chinese goods next to the bustling Raja Bazaar, the market is stuffed with all kinds of merchandise, leaving little space for the tired customers to move around. “Be careful; you may break the vase. It is expensive,” a salesman in a crockery shop warns a little girl trying to feel the smooth surface of a vessel on display.

At another shop, a woman is haggling over the price of what looks like a Versace handbag. She knows it is a copy – a good one though – and wants the shopkeeper to give her a hefty discount on it. “You are demanding a lot of money for a copy,” she politely reproaches the man at the counter who reminds her that it is a “first” copy and not just an “ordinary” bag. But then he agrees to give her a handsome discount.

Able to buy the copies of branded luxury goods, which look as good as originals, and at prices that are within the shopping budgets of most middle-class households across Pakistan, customers in the country have much to thank traders in China Market for. “The best thing about these goods is that our middle-class people can now afford to live in style,” says Noshad Sheikh who runs a shop at China Market. “[Shopkeepers selling these goods have] brought international brands within the reach of local customers who, otherwise, would see those brands only in movies and on television shows,” he says. “Of course, I am talking about copies and not the original products,” he adds with a smile.

Also read: China—Corridor of power

Shopkeepers in the market are not bothered by the fact that they are dealing in counterfeit products. On the contrary, they take pride in what they are doing. “We are helping middle-class consumers access new trends and fashions in the world,” says Mohammad Ishaq, another trader at China Market. He goes on to acknowledge that the real credit is owed elsewhere. “This was not possible before China entered our market.”

How have ‘Made in China’ products become so easily available all over Pakistan and at prices that almost everyone can afford? The answers lie in a free trade agreement between China and Pakistan.

Like most traders across Pakistan, he wonders if Pakistan’s retail sector could have blossomed like it has in the last decade or so if there were no China. “We wouldn’t have built sprawling markets at such a fast pace or created thousands of jobs [in the retail business] if we did not have these Chinese goods to sell,” says Ishaq. The new commercial culture introduced by China has not just facilitated the middle and low-income consumers in Pakistan, it has also helped small traders like Ishaq and Sheikh to explore options they could have only dreamt about without access to Chinese merchandise. Foreign travel was the prerogative of rich businessmen and exclusive domain of large-scale traders when business and trade destinations were mostly Western countries. China’s arrival on the scene has allowed even small-scale traders to go abroad and purchase their merchandise first-hand: visas are easy to get; expenses for travel and boarding and lodging are not as big as they would be for European or American destinations; and goods in demand back home are dirt cheap when purchased in bulk in China.

“You can go to China every week, depending on your sales and cash flow,” says Mohammad Usman, who deals in mobile phone accessories at Lahore’s Liberty Market. Pakistani traders usually go to Yiwu city in Zhejiang province, about 300 kilometres to the south of Shanghai. The city, according to the United Nations, houses the “largest small commodity wholesale market in the world”. What has made all this possible? How can Pakistani traders go out and shop for Chinese imports with such ease? How have ‘Made in China’ products become so easily available all over Pakistan and at prices that almost everyone can afford? The answers lie in a free trade agreement (FTA) that came into effect between China and Pakistan in July 2007.

Two Chinese cyclists take a break on a footpath in Peshawar | White Star
Two Chinese cyclists take a break on a footpath in Peshawar | White Star

At first glance, Peshawar’s Karkhano Bazaar would appear to be just another market in Pakistan where, in the first half of the day, the number of parked cars far exceeds the number of buyers inside the shops. Its distinctive features, however, emerge in the afternoon when the trickle of customers changes into a steady torrent.

The bazaar is a cluster of several markets clumsily built on a stretch of land just a kilometre or so long — on Jamrud Road that leads out of Peshawar. Located just short of Khyber tribal area, the bazaar is, and has always been, about exploring the world, so to speak, at prices much cheaper than anywhere else in Pakistan. Its fabled tales comprise some of the most remarkable deals ever struck in the country. Everyone here swears by the old bazaar logic — the deeper you explore the more likely you are to strike the best bargain. That explains why the biggest deals are cut in small shops in the back alleys rather than at shiny stores on the main road.

Also read: The pursuit of Kashmir

Karkhano Bazaar has long served as a gateway to Pakistan for anything that the world produced but was not allowed into the country through legal routes — from sturdy German appliances to no-frills-attached Soviet products. The latest goods to flood the bazaar come from China. The television set that you have just purchased, after a long and twisted tour of shops overflowing with merchandise, is sold to you as a Japanese product but, on closer scrutiny, may turn out to be made in China. The toys dangling out of the shopfronts are all Chinese manufactured as is so much else within your sight: cosmetics, toiletries, blankets, loose cloth, musical instruments, watches, shoes, crockery, ceramic tiles, vases and many other things.

Durability is the word most commonly heard as prospective buyers sift through goods and haggle over prices. “Why doesn’t China send us products it sells to countries likes the United States?” is a common refrain. That Chinese goods do not last long is a universal complaint among Pakistanis who miss Western appliances well known for their robust structures.

Asif Ali Zardari presents a portrait of Chinese Prime Minister Li Keqland to the latter | White Star
Asif Ali Zardari presents a portrait of Chinese Prime Minister Li Keqland to the latter | White Star

The other difference between the products from these two parts of the world is how they make way into Pakistan: the western goods were mostly smuggled; the Chinese ones are imported under a legal trade regime. Pakistan has been trading with the People’s Republic of China since 1949, but the first serious attempt to boost economic and commercial cooperation was made in 1963 when the two countries signed a bilateral agreement. Yet, the value of goods traded between Pakistan and China stood at a meagre one billion US dollars in 2003. (In contrast, the value of goods traded between India and China has passed the 75-billion US dollars mark even though the two sides established commercial links only in the late 1990s.)

The size of commercial ties between China and Pakistan has been even smaller before the 2000s. Data released by the International Monetary Fund shows that Pak-China trade stood at just 18 million US dollars in 1960 and rose to a little over 100 million US dollars in 1977. The first major increase in bilateral trade came towards the end of the 1970s; by 1980, the two countries were trading goods worth 401 million US dollars.

Analysts attribute this sluggish growth to the nature of Chinese economy rather than to any Pakistan-specific factors. This is how Ahmed Rashid Malik, a senior research fellow at the Institute of Strategic Studies Islamabad (ISSI) who regularly studies China’s political, economic and military relations with Pakistan, explains it: “China was a socialist, state-controlled economy until Deng Xiaoping took over the reins of the republic and started implementing economic reforms in 1978 to integrate his country with the global economy.” Also, he says, China started producing surplus for export at a mass level only in the 1980s when American, European and South East Asian companies first relocated their factories to China to take advantage of the extremely low cost of manufacturing there.

Initially, the impact of these developments on Pak-China trade was not as big as that on China’s trade with Western countries. While Chinese goods had swarmed markets in the West by the early 2000s, the value of trade between Pakistan and China reached only 800 million US dollars in 2000. This certainly did not reflect the close ties between Islamabad and Beijing, particularly in diplomatic and military fields.

Besides China’s late entry into the international market, several other factors have been responsible for the slow growth of its trade with Pakistan. One major reason was Pakistan’s policy of linking its economy closely with the US, Europe and other open market economies rather than with socialist China, explains Shahzad Azam Khan, a Lahore-based businessman who has strong connections with Chinese manufacturers. “Although Pakistani leadership, especially Benazir Bhutto, repeatedly pledged to adopt a “Look East” policy for economic growth in the middle of the 1990s, no one took steps to actually boost economic cooperation with China,” he says.

While Chinese goods had swarmed markets in the West by the early 2000s, the value of trade between Pakistan and China reached only 800 million US dollars in 2000.

The wish to deepen economic ties with China, therefore, mostly remained confined to political rhetoric and memorandums of understanding. Pakistani businessmen continued to prefer producing for and trading with the Western markets because of the ease of doing business in the markets they knew well and because of Pakistan’s historical and political linkages with Europe and the US.

The Chinese, too, did not show much enthusiasm for increasing trade links with Pakistan because they were focused on wealthy consumers in the bigger and high-growth economies. “A slow-growing economy like Pakistan, which produced little or nothing needed by the Chinese manufacturers and consumers, didn’t offer much to Chinese businesses with large economies of scale. The size of Pakistani consumer market was also not big enough to attract Chinese manufacturers who produce and export at a mass level,” stresses businessman Khan.

Given these factors, influx of Chinese goods into the Pakistani market during the last decade and a half has been spectacular. From a few hundred million US dollars in 2000, the value of bilateral trade grew to around 16 billion US dollars last year — though tilted heavily in China’s favour. Even before the two countries signed the FTA in July 2007, the value of their bilateral trade had already increased to almost 7 billion US dollars. After the FTA became operational, that value surged further and reached 14 billion US dollars in 2013, making China Pakistan’s biggest trade partner. The two governments expect the value of bilateral trade to reach 20 billion US dollars by 2020 but analysts like Malik say it could rise faster than “we can now imagine”.

Low trade volume in the 1980s and 1990s, however, did not mean that Pakistanis had no access to Chinese products all those years. Initially, the goods were brought in smaller quantities by Muslims living in the westernmost Chinese province bordering Pakistan, Xinjiang, when they were allowed by their government to travel through Pakistan for performing Hajj in the 1980s. Later, Chinese consumer goods started pouring into Pakistan via the Afghan Transit Trade route, through indirect imports routed from Dubai or on trucks passing through the Khunjerab Pass that links Pakistan’s northern areas with Xinjiang.

These routes continued to supply Chinese goods to markets, such as those at Karkhano Bazaar, well into the 2000s. Prominent businessmen in Lahore claim they had to raise alarm about the negative impacts of such smuggled goods on Pakistani trade and industry before the government took note. One of the people at the forefront of those protestations was Anjum Nisar who runs chemical manufacturing, leather and other businesses in Lahore. Some of his enterprises were under serious threat from the smuggled Chinese goods. “It was only after Pakistani businessmen started making noise about the smuggling of Chinese goods that the government secured its borders,” he says.

Many business people in Pakistan may now be ruing the result of those efforts. Instead of providing the protection they were seeking, the tightening of borders increased the volume of Chinese goods entering Pakistan — this time through legal and official channels. “[Official] bilateral trade thus began to increase quickly in the early 2000s,” says Nisar.

Also Read: CPEC — Corridor of uncertainty

The implementation of FTA a few years later further reduced the need for traditional smuggling routes. “It became much more convenient and cost-effective for traders in Punjab to import directly from China than to buy smuggled Chinese stuff from Peshawar,” says Ijaz A Mumtaz, president of the Lahore Chamber of Commerce and Industry (LCCI). “The days when [Afghan] transit route was the biggest source for supplying Chinese goods in Pakistan’s markets were over,” he adds. Karkhano Bazaar, therefore, lost its monopoly over the import of cheap Chinese goods and direct trade through the port of Karachi became the most important source of bringing China’s merchandise into Pakistan.

The FTA has brought down import taxes on both sides of the Pak-China border and removed many non-tax barriers which, in the past, disallowed bilateral trade in certain goods and commodities. This has led to a deluge: from high-end electronics to low-end toys, from replicas of art pieces to handbags, from sanitaryware to shoes and sunglasses, from cell phone accessories to kitchenware, Chinese consumer goods are ubiquitous in Pakistani markets. Large malls and markets ‘specialising’ in Chinese products have come up in almost every big city in the country; Rawalpindi’s China Market being just one of them.

But it is perhaps the busiest places to buy everything Chinese. “Now the customers do not have to travel all the way from Lahore or Faisalabad to Peshawar to buy ‘imported’ Chinese good to decorate their homes or shop for their daughters’ dowries,” says Sheikh, the China Market trader.

Chinese President Xi Jinping in Islamabad in 2015 | Tanveer Shehzad, White Star
Chinese President Xi Jinping in Islamabad in 2015 | Tanveer Shehzad, White Star

Emco Industries is a large-scale industrial unit located almost midway on the road that connects Lahore with Sheikhupura. Its specialty: ceramics — from electric insulators to sanitaryware to acid-proof tiles. A couple of years ago, it shut down its tile manufacturing unit and sacked 500 people working there. The reason, says Abdul Waheed, an executive at the Emco Industries, was the heavy influx of Chinese ceramic tiles in Pakistani markets. These Chinese tiles are available at prices below the production cost of local tiles. “Chinese manufacturers have captured almost 70 per cent of the ceramic tiles market in Pakistan,” says Waheed. “We cannot compete with them because of our higher cost of production.”

A Karachi-based tile manufacturer, who does not want to be mentioned by name, believes Chinese tile manufacturers and their Pakistani importers are doing something unlawful to ensure that the prices of their merchandise continue to drop. All cost indicators, such as wages and transportation charges, are going up in China but surprisingly the import trade price of Chinese tiles is still going down in Pakistan, he says. “The import trade price of Chinese tiles came down from 4.57 US dollars per square metre in 2011 to 2.51 US dollars per square metre in 2013.” How has that become possible is a mystery for trade authorities in Pakistan to resolve. Local tile manufacturers, in the meanwhile, chafe under its negative impact. “The 40-billion-rupee local tile manufacturing industry is suffering losses and teetering on the brink of closure,” the manufacturer claims.

Nobody, it seems, took such threats to the local industry into consideration while negotiating the FTA with China. Trade officials in Islamabad, instead, expected the agreement to help Pakistani manufacturers gain access to the ever-expanding Chinese market — imagine the lure of more than one billion consumers living right next door to you. And the agreement did increase Pakistan’s exports to China – at least initially – from one billion US dollars in 2008 to over three billion US dollars in the next five years. Yet, in spite of this rather extraordinary growth, the share of Pakistani exports in China’s market remains tiny.

On the other hand, the import of Chinese consumer goods and industrial raw materials under the FTA has hit Pakistani manufacturers hard. The LCCI chief explains: China mass produces goods for its buyers in Western markets; the produced goods, however, always exceed export orders. These excess goods are, then, sent to countries like Pakistan at almost throwaway prices. “This is uprooting factories in countries like ours,” Mumtaz says. “If you ask me, we are almost done.”

The agreement has also reduced government revenue earned from the import of consumer goods from China without corresponding benefits in export earning, says a Pakistani diplomat who has conducted a research study on the FTA’s impacts on Pakistani industry and exporters. Pakistan hasn’t succeeded in taking advantage of the concessions offered by China under the FTA primarily because of high cost of domestic production, energy shortages and the fact that products made by Pakistan’s competitors from East Asian countries invariably attract zero per cent tariff in China, he explains. As a result, Pakistan has so far utilised only five per cent of the FTA concessions; China has utilised 60 per cent of them.

Also read: The coast is clear: The vanishing mangrove forest of Karachi

The expected direct Chinese investments in the post-FTA period have also not materialised — not at least so far. Apart from China Mobile that operates in Pakistan as Zong, no other Chinese company has made any significant investment in Pakistan since 2007. Beijing also went back on its commitment to give tariff concessions to Pakistani textiles and fish exports in the first five years of the agreement’s operation.

Trade officials in Islamabad, instead, expected the agreement to help Pakistani manufacturers gain access to the ever-expanding Chinese market.

Then there are ingenious Pakistani importers. They have found ways to bring down even the concessionary import taxes levied under the FTA. They heavily misreport the actual worth of their imports from China (called under-invoicing in tax parlance) and thereby have miniscule import taxes levied on their merchandise. A recent study by Pakistan Business Council shows that Pakistani importers under-invoiced their imports from China to the tune of 3.42 billion US dollars in 2013. For that year, China claims to have exported goods worth 11.02 billion US dollars to Pakistan whereas Pakistani authorities report to have received Chinese imports worth just 7.6 billion US dollars. Major discrepancies in the data collected by the two governments were found in the trade of electronics and electrical equipment, machinery, man-made filaments and staple fibres, iron and steel, organic chemicals, plastics, fertilizers and rubber.

The effects of under-invoicing are dire for many industries in Pakistan — tyre manufacturers being among the most affected. “We could be a 25-billion rupees company – almost triple our present size – in a matter of very short time, if the government pulls the plug on under-invoiced imports of tyres from China,” says an executive of the 50-year-old General Tyre Company. The data seems to prove him right: almost 55 per cent of all the tyres being imported into Pakistan come from China; they are under-invoiced almost by 40 per cent.

Faced with such desperate situations, some businesses have adopted a smart survival strategy: if you can’t beat Chinese manufacturers, join them. They have shifted their production to China to reduce manufacturing costs. “In 2003, we decided to make China a part of our footwear supply chain,” says Omar Saeed, chief executive officer of Servis Industries, one of the leading shoe-manufacturers in Pakistan. The decision was necessitated by the fact that China dominates cheap non-leather footwear categories due to its low-cost mass production. “The cost of production in China is 20 per cent lower than ours,” says Saeed.

Not just Servis Industries but almost every notable footwear manufacturer in Pakistan has shifted its manufacturing to China and not just due to lowerf production costs. In Pakistan, you have to procure parts of a product from several vendors; in China, you can get all those parts from one place, Saeed says. While this strategy has helped individual Pakistani businesses to not just survive the Chinese onslaught but thrive in collaboration with it, its impacts elsewhere in the economy have been devastating. In shoe-manufacturing alone, according to Saeed’s estimate, at least 20,000 jobs have shifted from Pakistan to China.

Businessmen also complain the government in Islamabad sometimes gives Chinese investors special project-specific concessions with negative consequences for local manufacturing. Kamal Amjad Mian, a director at Fast Cables, for instance, points out that the 1,000 megawatt solar power project in Bahawalpur requires several hundred kilometres of cable which could have created an opportunity of a lifetime for local cable manufacturers. “It would have been cheap and convenient for Chinese investors to place orders from Pakistani vendors, given that cable imports from China attract sizeable import taxes,” he tells the Herald. But the government waived taxes on cable imports from China specifically for the solar power project on the ground that “local manufacturers would have taken longer to meet the demand”.

Women buy jewellery from a Chinese vendor in Rawalpindi’s Raja Bazaar | Tanveer Shehzad, White Star
Women buy jewellery from a Chinese vendor in Rawalpindi’s Raja Bazaar | Tanveer Shehzad, White Star

Syed Nabeel Hashmi manufactures gardening accessories – such as shovels, baskets, tubs – from plastic. Only a few years ago, his manufacturing unit in Lahore was facing a bleak future. “China had almost captured the plastic market in Pakistan,” he says. Instead of giving into under-invoiced imports from China, however, he decided to compete. He cut production costs and brought prices down to a level which products imported from China could not afford. “Today you will not find Chinese gardening accessories in the local market,” he says proudly.

Some others have taken another route. Instead of competing with them, they have convinced Chinese manufacturers to set up their production facilities in Pakistan. Shah Faisal Afridi is one of the pioneers of this trend. As the director of Haier Pakistan, a local subsidiary of the Haier Group, a Chinese firm specialising in consumer electronics and home appliances, he also oversees the 300-acre Haier-Ruba Economic Zone near Raiwind in Lahore. A joint venture of Haier Group of China and Ruba Group of Pakistan, the zone was inaugurated by the then Chinese President Hu Jintao in November 2006. It is one of the eight Beijing-recognised economic zones outside China where Chinese firms are encouraged to set up their productions facilities.

When on April 20, 2015, China’s President Xi Jinping visited Pakistan in what the government of Prime Minister Nawaz Sharif self-flatteringly called a “historic occasion”, Afridi was one of the happiest people in Lahore. The major reason for his happiness was the announcement of Chinese plans to invest 46 billion US dollars in Pakistan’s transport and energy infrastructure, including the construction of the China-Pakistan Economic Corridor (CPEC) that will connect Kashgar in China’s Xinjiang region with Gwadar Port in Balochistan, over the next 15 years. Since that announcement, he has hosted several high-level Chinese government officials as well as top executives of several Chinese companies. All of these people, he says, have shown interest in setting up Chinese industries in Pakistan. Afridi is, therefore, planning to acquire 2,000 to 5,000 acres of land along the Lahore-Islamabad Motorway to expand his economic zone so that it can house around 100 more Chinese companies interested in relocating to Pakistan. Chinese investment, he says, will “pour in as the CPEC makes progress.”

Slowing economic growth, rising production costs and scarcity of labour in China are forcing many Chinese companies to relocate their factories to other countries with abundant cheap labour.

Afridi has been working in partnership with Chinese manufacturers since the early 2000s. His business relations with several Chinese firms, such as Haier, have given him the confidence to plan new joint ventures with them. “By next year, we plan to bring a Chinese car-maker into Pakistan besides starting local production of mobile phone handsets [with Chinese help],” he says.

Unlike many businessmen who complain that Pakistani leaders and government officials always exhibit an obsequious attitude while dealing with the Chinese and never protect their own country’s economic and commercial interests, Afridi believes the opposite. He argues that now is the best time to woo Chinese investors, through whatever it takes. Slowing economic growth, rising production costs and scarcity of labour in China are forcing many Chinese companies to relocate their factories to other countries with abundant cheap labour, he explains and adds that Pakistan is already one of the prospective destinations for such relocation. “The Chinese are seriously interested in relocating many of their industries to Pakistan particularly after the recent progress on the CPEC. [These companies] will create millions of jobs here,” Afridi says. To make those companies shift their production to Pakistan, he suggests, Pakistani authorities need to provide them more concessions, not less.

Afridi also claims that Chinese firms treat Pakistanis like they treat no one else. “They have a special place for Pakistan in their heart,” he says and, as proof, cites his own experience of working with the Haier Group. “They are very liberal in transferring technology to us” unlike most Western companies which are quite stingy on this count. Not that this technology transfer has been a free gift. In return, Haier Group has been making massive inroads into the Pakistani market for electronics and electrical appliances. As things stand today, it has already become one the top three home appliances brands in Pakistan.

A teacher at the Pakistan Embassy College in Beijing with students | China Daily Images
A teacher at the Pakistan Embassy College in Beijing with students | China Daily Images

In a popular Beijing market early last January, a young salesgirl hugs a Pakistani tourist no sooner than he enters her shop along with his three other countrymen. “You are from Pakistan? You, my friend,” she says exuberantly as the tourists move around decoding price tags, converting renminbi into rupees. “You get special discount today ... on anything you buy from my shop,” she goes on. As soon as these reassuring words come out of her mouth, the Pakistanis go on a buying spree, transferring almost everything on the shelves into their shopping baskets. “I told you the Chinese love us,” one of them reminds the others.

This illusion does not last long. Soon they find out that the “special discount” promised to them is, after all, not so special and, indeed, is available to all customers, regardless of places of their origin. “Oh, I promised that I’ll give you a special discount but you want these things for free,” the salesgirl smiles as they try, meekly, to haggle with her and remind her of her “love” for Pakistani “friends”. Once back in their hotel rooms, they compare prices and find out that they would have spent far less money if they had purchased the same goods from Lahore.

Like many love affairs, the one between China and Pakistan is made of unrealistic expectations – mostly among Pakistanis – and a hard-nosed pursuit of strategic goals and political and economic objective — mostly by the Chinese. The language of this love affair, however, is such that it raises more expectations than it encourages a sober analysis of the ground realities — “higher than the Himalayas, deeper than the sea and sweeter than honey” are the most common phrases to describe this more than six-decade-old “all-weather friendship”.

Andrew Small has been looking at this love affair as a fellow with the Asia programme at the German Marshall Fund of the United States for years. He has recently published a well-received book, The China-Pakistan Axis: Asia’s New Geopolitics, and sees no problem with the hyperbolic language that the leaders and opinion makers in both China and Pakistan employ to describe their ties. “The language … is actually quite accurate,” he tells the Herald. Explaining the nature of Pak-China relations, he says: “It is not an alliance, insofar as the two sides don’t have formal defence treaty commitments.” It is a “relationship of trust” that has been “tested out” over several decades. “[It] is closer in some important aspects than most alliances,” Small adds.

He also argues the relationship between the two countries has never been a one-sided affair — with Pakistan always asking for something and China always giving that. “It would have been impossible to maintain the relationship if it were entirely one-sided.” Pakistan, he says, has tended to benefit more, mainly because “China has long had the economic, military, diplomatic and technological wherewithal” to extend certain benefits to Pakistan that Islamabad cannot readily reciprocate. “But that hasn’t been out of a spirit of goodwill.” The benefits accruing to Pakistan, says Small, have “corresponded very closely to China’s strategic interests in the region and beyond”.

Also read: Worrying development: Field notes on war and peace in Balochistan

He gives the example of CPEC to make his point. Why the economic corridor “looks so promising” at the moment is that its “benefits accrue so clearly to both sides”. At other times, he argues, “the impetus for economic projects of this nature has only really been coming from Pakistan, but now the political, commercial and strategic rationale for China is very clear, too.” The most basic constituent of that rationale is the realisation in Beijing that Pakistan “is poised to play an important role in China’s transition from a regional, East Asian power to a global one”.

According to Small, China has very strong reasons to take economic and commercial cooperation with Pakistan to the level that the two countries are aiming at with the announcement of plans to build CPEC. “As a rare, trusted partner, Pakistan is one of the few countries that China would count on in a crisis,” he argues. Whether it is transit routes or development of naval facilities such as Gwadar Port, Pakistan, says Small, has a unique role to play in Chinese economic and strategic calculations. “In recent years, other supposed partners such as Myanmar and Sri Lanka have proved notably less reliable than might have been hoped.”

The corridor is so important for China, both from strategic and commercial angles, that Beijing is willing to provide soft loans to Pakistan for its completion, says Dr Zafaruddin Mahmood, who worked as a banker for the better part of his life and has served as Pakistan’s consul general in Shanghai in 2009. Another important aspect of Chinese investment in CPEC is that a significant portion of it will go into the social sector — a first as far as the history of China’s spending in Pakistan is concerned. Some of the money will go into projects such as the construction of a hospital in Gwadar and establishment of vocational training institutes, says Mahmood who divides his time between China and Pakistan and works as a consultant for both Pakistani and Chinese firms.

Pakistan has already done quite a bit to earn this Chinese generosity. It, indeed, was the first Muslim state and the third non-communist nation to recognise the People’s Republic of China in 1950 and establish diplomatic relations with Beijing the next year. Since then, Pakistan has been backing China at international forums very regularly. “Pakistan has supported China on every diplomatic issue involving the latter whether it was the economic blockade that it faced on the Taiwan issue or its claim for a permanent seat at the United Nations Security Council. We have stood by Beijing in every difficult moment it has faced,” says a foreign ministry official in Islamabad. He does not want to be named because he is not authorised to issue public statements on foreign policy.

Chinese president Xi Jinping and members of his delegation exchange views with the Pakistani  military leadership during his recent visit to Islamabad | Tanveer Shehzad, White Star
Chinese president Xi Jinping and members of his delegation exchange views with the Pakistani military leadership during his recent visit to Islamabad | Tanveer Shehzad, White Star

And not just that. Islamabad played a major role in bringing China and the US closer by facilitating President Richard Nixon’s secret visit to Beijing in 1972. That visit helped the Communist Party regime in Beijing to get the official United Nations recognition. “President Xi Jinping acknowledged all this in his speech to parliament during his recent Islamabad visit,” says the anonymous official.

Masood Khan, a soft-spoken, bespectacled former diplomat who now heads ISSI, an official think tank that studies diplomatic, strategic and military affairs, seconds the official point of view. “China has helped Pakistan immensely in all spheres — strategic, economic and diplomatic,” he says, though never as a favour. In an unemotional tone perfected during years of working as the foreign office spokesman, he goes on to argue that the military and technological assistance provided to Pakistan by China demonstrates the Chinese leadership’s gratitude for diplomatic support that Islamabad has provided to Beijing at “every critical point” at international platforms.

Pakistan was the first Muslim state and the third non-communist nation to recognise the People’s Republic of China in 1950 and establish diplomatic relations with Beijing the next year

Mushahid Hussain Sayed, who has had an eventful career as an academic-turned-journalist-turned-minister, readily endorses these official and semi-official narratives but adds to them a historical and regional perspective. He has been in public life in various capacities since the early 1980s – as a newspaper editor, as information minister, as the secretary general of the then ruling Pakistan Muslim League Quaid-e-Azam between 2002 and 2007 and, currently, as a member of the Senate. He now wears an additional hat — swathed in the dark greens and blood reds of Pak-China friendship: in 2009 he set up the Pakistan China Institute (PCI), a think tank devoted to promoting people-to-people diplomacy and relationship between the two countries. Recently, he has also been involved in track-II tripartite diplomacy involving Pakistan, China and Afghanistan.

Possessing, as he does, such first-hand grounding in current affairs, Sayed does not take a narrow view of Pak-China relations. For him, these did not spring out of nowhere in 1950. Relations between the regions that constitute today’s Pakistan and the People’s Republic of China, he says, “have a long history of friendly exchanges”. This started 2,500 years ago when Taxila was the centre of Buddhism. “The world’s first Buddhist university in Taxila attracted Chinese scholars and monks, who carried back to their country techniques for creating Buddha’s images, carvings and sculpture. Around the same time, silk and tea from China reached present-day Pakistan via the Silk Route, which eventually became a bridge between China and the West,” says Sayed.

As Small points out, it was, however, India which gave an early impetus to Pak-China relationship and in many ways provided the strategic glue that has held it together. The two counties first came close to each other in the wake of the 1962 India-China war. It was then that Pakistan started looking towards China as a “counterweight” to India. Islamabad quickly settled its border dispute with Beijing and signed an agreement to establish bilateral economic cooperation. “When Washington provided military assistance to India against China, it annoyed Pakistan’s leadership. It was at that point that General Ayub Khan and [his foreign minister] Zulfikar Ali Bhutto decided to move towards China,” says Sayed. “Pakistan’s war with India in 1965 was another major turning point in our relations with China. While Americans imposed military sanctions against Pakistan, Beijing extended full diplomatic and military assistance to Islamabad. That made it abundantly clear as to who was our true friend,” he adds.

A recent study by Pakistan Business Council shows that Pakistani importers under-invoiced their imports from China to the tune of 3.42 billion US dollars in 2013.

From 1962 onwards, China’s ‘influence’ increased dramatically in many fields of Pakistani public life — to that extent that the welcoming crowd lifted the vehicle carrying Chinese Prime Minister Zhou Enlai on their shoulders when he visited Pakistan in 1964. Pakistani politics also came under a Chinese spell. “In the 1950s and 1960s, communist literature was totally banned in Pakistan but, after the [India-China] war, Chinese socialist literature, books and magazines began to pour in and were available freely everywhere,” says Professor Azizuddin Ahmed, a leftist scholar based in Lahore. “It sort of legitimised leftist politics in Pakistan.”

At the same time, Chinese influence led to a split in the leftist political parties which, till then, mostly looked towards the Soviet Union for political inspiration and ideological guidance. The National Awami Party and leftist student organisation, National Student Federation, both split down the middle among pro-China and pro-Soviet Union factions. “This divide was apparent at the 1970 peasant conference in Toba Tek Singh where the participants cheered pro-China leader Maulana Abdul Hamid Bhashani more than they applauded pro-Soviet Union Faiz Ahmed Faiz, though both shared the same stage,” says Ahmed.

Chinese presence in Pakistani political culture reached its zenith in the 1970s. Mao caps and Mao coats that Zulfikar Ali Bhutto appropriated became the political and fashion statements of the day. At least on one occasion, the entire Bhutto cabinet was photographed decked in Mao coats. It was also during the 1970s that the Chinese government started Urdu-language classes in various universities in China and the two countries initiated exchange programmes for writers, students, journalists and political activists. The generation that grew up in that decade still remembers Cheen ba Tasveer (Pictorial China), a Chinese propaganda monthly which was then an integral part of book collections in almost every middle-class household in Pakistan. “Bhutto injected Chinese culture into Pakistani politics. He would talk at length about Mao in his public speeches,” says Sayed, who first visited China as a 17-year-old student in 1971.

China-inspired political symbols started fading away and people-to-people exchanges became less frequent after General Ziaul Haq toppled Bhutto’s government in 1977. Ahmed, however, points out that those developments were not sustainable for the long run in any case. “The two countries failed to boost people-to-people interaction and build up strong cultural connections because the two societies had never had a common cultural reference point.” Except, of course, the long-forgotten Buddhist connections mentioned by Sayed, which have no contemporary echoes in a mostly atheist Chinese society and staunchly Islamic milieu of Pakistan.

Chinese Prime Minister Li Keqiang and Asif Ali Zardari, then President of Pakistan, converse in Islamabad in 2013 | China Daily Images
Chinese Prime Minister Li Keqiang and Asif Ali Zardari, then President of Pakistan, converse in Islamabad in 2013 | China Daily Images

Language barrier separates the two countries and there is little history of people from our part of the world migrating in large numbers to China, or vice versa, says Ahmed. “Our traditional migration routes have taken our people to Africa, Europe, America and, in recent decades, to the Middle East but never to China.” Little wonder then that China’s cultural footprint in Pakistan remains limited to occasional sharing of radio broadcasts, a few language training facilities, massage parlours in major cities and myriad restaurants with Chinese-sounding names, red lanterns and chopsticks where desi-styled wonton soups and spicy chow mein pass off as authentic Chinese cuisine.

Masood Khan, who has also served as Pakistan’s ambassador to Beijing recently, believes that the two countries are working hard to overcome the barriers hampering cultural linkages and people-to-people exchanges. “Language has been a barrier but this is being removed now,” he tells the Herald. The number of students going to China for studies has increased over the last few years and exchange programmes for journalists, academia and artists have also been revived, he adds.

According to PCI-collected data, more Pakistanis are studying in China than they are in the US. “The number of Pakistani students studying medicine, engineering and other subjects in China has gone up to about 10,000; this is higher than the number of Pakistani students in the US,” says PCI’s executive director Mustafa Haider Sayed. “Similarly, more Chinese are travelling to Pakistan for work, studies and tourism than they ever did in the past. At the International Islamic University Islamabad alone, there are now 200 to 300 Chinese students,” he tells the Herald. Yet, as diplomat Khan acknowledges, the two sides “need to work more vigorously in the area of people-to-people contacts” if the extent of their diplomatic, political, economic and military relations is to be reflected in how people in the two countries view, and treat, each other.

Mohammad Arif, the Beijing-based editor of Nihao-Salam, a bilingual e-magazine that promotes cultural interaction between Pakistan and China, blames Pakistani authorities for slow progress on people-to-people contacts. This, he says, is due to excessive focus among Pakistani policymakers on military and political relations. “All the programmes in recent years to promote cultural interaction between the two sides were initiated by China,” he says.

A guard keeps watch at Gwadar Port, Balochistan | AP
A guard keeps watch at Gwadar Port, Balochistan | AP

If there were three things that all Pakistanis could agree on, Senator Sayed would list them as nuclear programme, Kashmir and friendship with China. The consensus on them cuts across political and party divides, he claims.

And they are interrelated. Pakistan’s search for nuclear weapons and its desire to have a strong military owe their existence to a perpetual conflict with India mainly, though by no means entirely, over Kashmir; and China has been an active facilitator and sponsor for both advancing and materialising Pakistan’s nuclear and conventional military ambitions, providing it hardware no other country was willing to give it.

Between 1966 and 1980, China provided military equipment to Pakistan without charging any money for that, says Sayed. China has also helped Pakistan set up the Heavy Industries Complex in Taxila. It was initially meant for the repair and maintenance of Chinese-provided al-Khalid tanks in early 1980s but has been upgraded to a massive armament manufacturing industry. In a similar way, Pakistan Aeronautical Complex in Kamra has become another success story of growing Pak-China cooperation in the military sector: JF-17 Thunder, a fighter plane, is a joint Pak-China production to have come out of that complex.

In one of the most internationally embarrassing terror attacks in Pakistan, three Chinese tourists, and many other foreigners, were killed by unknown gunmen dressed as officials of a paramilitary force near Nanga Parbat peak in the Himalayas in June 2013.

Over the years, military cooperation between the two countries has only intensified. The Stockholm International Peace Research Institute says China has now become Pakistan’s largest arms supplier. Nearly 47 per cent of all Chinese international arms sales come to Pakistan. The two countries have also collaborated closely on nuclear technology — both for military and civilian purposes, according to Small. “The peak of nuclear cooperation between the two sides was in the early 1980s, for the development of the bomb, and in the late 1980s and early 1990s, for the development of missiles and missile technology,” he says. “On the civil nuclear side, China, of course, is the only country willing to press ahead with [setting up] nuclear power plants [in Pakistan] despite restrictions in the Nuclear Suppliers Group.” Beijing has already provided Islamabad two nuclear power plants, operating at Chashma, in Mianwali district; plans for setting up more joint Pak-China nuclear power plants in Chashma as well as Karachi are well underway.

Also read: A daughter’s lament—Families separated by the line of control

The growth in bilateral strategic relations has given Beijing a salient – though silent – leverage over Pakistan’s military and political leadership that no other country – except Saudi Arabia — has had in the last three decades. “Unlike our Western allies, the Chinese work rather quietly and Islamabad seldom disappoints them,” a Lahore-based analyst, who refuses to give his name, argues. Some Pakistani analysts insist that America has used this Chinese leverage to defuse Islamabad’s tensions both with Kabul and New Delhi in the recent past. “Beijing is actively involved in helping Kabul and Islamabad to work together against terrorists for stability in the region,” says the analyst.

Others say it was under China’s pressure that General Pervez Musharraf pushed ahead with a military operation on Lal Masjid in 2007 after students from its associated seminaries raided a beauty parlour and took the Chinese women running it as hostage. Senator Sayed believes China may have Pakistan’s ear but it does not possess and exercise any leverage in Islamabad. “At crucial moments China has only offered sincere and frank counsel to Islamabad. For example, it advised us in 1971 not to alienate an entire populace through military action and in 1999 urged a withdrawal from Kargil,” he says. “China also wants Pakistan to focus on economy and development, and defuse tensions [with India] without giving up its position on the contentious issues,” he adds.

Even if China is not as intrusive as some other global powers are when it comes to dealing with Pakistan, there are serious concerns that Chinese authorities would have their Pakistani counterparts address urgently and effectively. For one, China cannot remain oblivious to the threats that it faces from non-state actors operating from Pakistani territory and those threats could be the reason why it is willing to invest in strengthening and stabilising Pakistan’s economy.

Chinese expatriates working in Pakistan on important China-sponsored projects, especially those in the restive parts of Khyber Pakhtunkhwa, tribal areas and Balochistan, have suffered many serious attacks over the last decade or so. There were incidents of abductions of Chinese engineers as well as instances of the murder of Chinese workers in Pakistan. In one of the most internationally embarrassing terror attacks in Pakistan, three Chinese tourists, and many other foreigners, were killed by unknown gunmen dressed as officials of a paramilitary force near Nanga Parbat peak in the Himalayas in June 2013.

“From a security and stability perspective, Pakistan is one of China’s greatest concerns too. The long-term trends of rising extremism in the region worry Beijing, and it sees support to Pakistan’s economy as one of the principal ways to mitigate those risks,” says Small. He also links this to the Chinese view that stabilising China’s entire western periphery – which includes Pakistan, Afghanistan and the Central Asian states – and pushing an economic development agenda in the region will ultimately prove beneficial for its own troubled region of Xinjiang. “In practice, it is far from clear if throwing money at the problem will solve it but for the most part [development projects such as CPEC are] not being undertaken just for the transactional benefits of gaining additional leverage over neighbours,” explains Small.

If the Chinese do not exercise any leverage over Pakistan, as Small argues, then why do Pakistani military and political leaders pay visits to their Chinese counterparts as soon as Pakistan is faced with some internal or external crisis? Between 2008 and 2013, Asif Ali Zardari visited China at least once every year during his tenure as president — in some years even more than once. Prime Minister Nawaz Sharif and his brother Punjab Chief Minister Shahbaz Sharif have also travelled to China multiple times over the last two years. So have army chiefs and other senior military officials.

Whenever Islamabad comes under pressure from India or the US over issues such as Kashmir, cross-border terrorism or nuclear technology, one of the most sought after ploy by both civilian and military high command in Pakistan is to rush to Beijing and try to get the Chinese issue a statement that, directly or indirectly, favours Pakistan’s position. Does that suggest that policymakers in Islamabad are completely beholden to China? The answer would be a resounding yes if one were to look at the media debate that such high-level interactions between Pakistan and China have always generated.

The initiators and most participants of this debate present China as a one-window solution to all problems that Pakistan has — from tensions with India and Afghanistan to confrontation with the US and from economic and industrial development to energy self-sufficiency. Spurred on by the high-pitched official spin that China will always go out of its way to support Pakistan, pro-China and anti-West columnists, news analysts and opinion writers take to describing the unlimited benefits of being friends with China with such gusto that it becomes easy to believe for all and sundry that China will take care of any trouble that Pakistan has ever had, or will ever have.

The reality is a little less rosy. Beijing has supported Islamabad but always with caveats attached and never in a way that would lead to a confrontation between China and the West. “China has always encouraged Pakistan to maintain healthy ties with the US, in order to benefit from the financing and arms packages that come with it,” says Small. He also sees no tension between Washington and Beijing over Pak-China relationship. “The United States is actually quite pleased to see the major economic commitments that China is making through CPEC, and other Chinese efforts, to encourage Pakistan to play a stabilising role in the aftermath of American withdrawal from Afghanistan.”

Inside a Haier Pakistan factory | Arif Ali, White Star
Inside a Haier Pakistan factory | Arif Ali, White Star

Xinjiang is an autonomous region within China. Spread over a vast area – one-sixth of China’s total land mass – that borders Pakistan in the south, Afghanistan in the west and central Asian states in the north-west, this region also produces almost 40 per cent of China’s oil, gas and coal. Its geographical location in western China makes it ill-placed to benefit from the phenomenal Chinese economic boom over the last two and half decades as much as the eastern Chinese regions and cities have. It is around 4,000 kilometres away from the China’s business ports and trading hubs in boomtowns such as Shanghai, Shenzhen and Guangzhou. The other distinctive feature of Xinjiang is that it is the only Muslim-majority province in China and its Uighur natives, being of Turkic origin, are ethnically different from the Han Chinese who dominate the rest of China.

Beijing’s official strategy to overcome Xinjiang’s isolation and backwardness has rested on two prongs — to build communication infrastructure in the region to link it with the rest of China and encourage Han Chinese to move to Xinjiang to set up factories and other businesses. This, however, has led many Uighur Muslims to believe that China wants to eliminate their religion-inspired culture and turn them into a minority by changing the demographic balance in Xinjiang. Building on these sentiments, a small but violent separatist movement, organised under an armed Islamic militant group, East Turkestan Islamic Movement (ETIM), has been going on in the region since the end of anti-Soviet jihad in Afghanistan in 1989. Militants affiliated with ETIM are seen by the Chinese authorities as responsible for a spate of recent terror attacks both within Xinjiang and elsewhere in China. The most deadly of these attacks took place in Xinjiang’s capital, Urumqi, in 2009. It left 200 people dead and over 1,700 others injured.

Chinese presence in Pakistani political culture reached its zenith in the 1970s. Mao caps and Mao coats that Bhutto appropriated became the political and fashion statements of the day.

Officials and analysts in China believe that ETIM activists are trained in and operate from Pakistan’s tribal areas. Many of these militants, indeed, have died in Pakistani territories over the years in American drone attacks or in operations conducted by the Pakistani security forces. Beijing has long been putting pressure on Islamabad to uproot ETIM training camps and activists based in the tribal territories. Unsurprisingly, Pakistan has always responded positively to these demands, killing or capturing a number of ETIM leaders and extraditing the captured ones to China.

There is a lot of speculation in the media that promises being made by the Chinese government and businesses for investment in Pakistan, specifically through CPEC and its related projects, are a sort of bribe to make Pakistan do more against ETIM. Senator Sayed does not agree with that. He believes China is already getting unconditional help from Pakistan as far as fighting against terrorism in Xinjiang is concerned. “Why would China throw so much money at Pakistan to get what it already has?” he asks and adds that counterterrorism cooperation between the two sides has been going on smoothly for well over a decade now. “The two armies have been conducting joint antiterrorism exercises since the early 2000s and ISI [Inter-Services Intelligence] has been sharing counterterrorism information with the authorities in Beijing on a regular basis.”

For Sayed, increasing Chinese footprint in Pakistan is neither meant to influence Pakistan’s defence and foreign policies nor is it a bribe or reward to do Beijing’s dirty work of fighting off anti-China elements. It is a vote of confidence in Pakistan’s future, he says. “It says that China will not let Pakistan fail. It means we are in good company.”


This was originally published in Herald's August 2015 issue. To read more subscribe to the Herald in print.


The writer is a chief reporter at the daily Dawn in Lahore.

All illustrations by Sana Nasir.