Eye on Asia | Why US criticism of the China-Pakistan Economic Corridor will fall on deaf ears

US warnings of debt trap, job losses and economic toll will go unheeded as Pakistan soaks up China’s concessionary loans in a project that aims to fundamentally improve its economic prospects

Reading Time:3 minutes

Pakistani Prime Minister Imran Khan meets Chinese President Xi Jinping at the Diaoyutai State Guesthouse in Beijing on October 9. Photo: Xinhua

Published: 3:00pm, 15 Dec 2019Updated: 10:24pm, 15 Dec 2019

Washington’s critique of the China-Pakistan Economic Corridor (CPEC) is becoming a bit predictable. Alice Wells, the top United States diplomat for South Asia, reiterated the Trump leadership’s long-term position on the project last month: aid is an illusion, Pakistan is headed for a debt trap, and Beijing will consolidate all profits.

Interestingly, what began as a warning quickly transpired into a proposition: US multinational engagement in Pakistan should increase. But as long as Washington overlooks the key consistencies in the Sino-Pakistan bilateral engagement, its view on the economic corridor is unlikely to make gains with Islamabad.

First, Pakistan’s repayments to China are stretched over 20 years, a timeline aligned with the corridor’s prospective operations. According to official documents with the Ministry of Planning, total payments amount to US$39 billion – where US$28 billion account for infrastructure and energy projects, and US$11 billion account for dividends (a sum extracted out of profits).

These specifics contest Well’s assertion that the “bulk of payments start to come due in the next four to six years”, and that “the corridor is going to take a growing toll on the Pakistan economy”.

Moreover, what frequently escapes American discourse is how Pakistan and China manage their deferrals. For instance, many of the deferred project investments under CPEC are marked by concessionary loans – designed to suit Pakistan’s revenue generation limitations.

The same is the case with bilateral loans and grants. Beijing has pushed across billions this year to bolster Islamabad’s dwindling cash reserves and socio-economic challenges. This judicious tailoring of investments to Pakistan’s economic limitations – a long-standing hallmark of Sino-Pakistan cooperation – is largely absent in Pakistan’s experience with the US.