China, Pakistan Ink New CPEC Agreement


    In Context

    • China and Pakistan have signed a new agreement on industrial cooperation as part of the China Pakistan Economic Corridor (CPEC) plan.


    • The agreement for the Second Phase has been signed between China’s National Development and Reform Commission (NDRC) and Pakistan’s Board of Investment. 
    • The agreement is a key part of what is being called “phase two” of CPEC, “phase one’’ includes investments in energy & road infrastructure.
      • Phase two mostly revolves around the creation of Special Economic Zones (SEZs) and industrial cooperation between the two countries.

    China Pakistan Economic Corridor (CPEC)

    • About:
      • Launched in 2015. It is the flagship project of China’s Belt and Road Initiative (BRI), & traverses through Pakistan-occupied Kashmir (PoK).
        • BRI was launched in 2013 by President Xi Jinping, and is aimed at enhancing China’s influence around the world through China-funded infrastructure projects. It connects China to Central Asia, Europe and Africa through alternate routes. It consists of two complementary connectivity projects:
          • Silk Road Economic Belt (SREB): This is an overland route connecting China to Europe, through land-locked Central Asia.
          • Maritime Silk Route (MSR): It is a marine route starting from China and passing through Southeast Asia, South Asia, Middle East, Africa, finally ending in Europe.
      • CPEC is an almost 3000 kms long, multimodal connectivity project, connecting the Xinjiang Autonomous Region of China with the Arabian Sea, through the Gwadar port. 
      • Under CPEC, China will strengthen connectivity infrastructure by constructing highways and railways, overhauling existing highways and laying pipelines for transporting goods and crude oil across Pakistani territory. 
      • Mutual Benefit for China and Pakistan: For China, the project will bypass the Strait of Malacca, which can be a choke point in case of a conflict with the US or other adversaries. On the other hand, Pakistan expects CPEC to be a lifeline for its deteriorating economy, leading to a multiplier effect on production and employment generation and sustainable economic growth. 

    Concerns for India

    • Violation of Indian Sovereignty: The project violates the sovereignty of India as it passes through Pakistan-occupied Kashmir (PoK), which is a disputed territory between India and Pakistan. As per well-established international conventions, no construction is allowed in any disputed territory, without taking the other country into confidence.
    • Exploitation of Natural Resources: Under CPEC, China plans to build two mega-dams on the Indus, named Bunji Dam and Bhasha Dam. This will put a heavy strain on the Indus Water Treaty.
    • Security Concerns for India: CPEC has led to concerns in security circles like:
      • Increase in China’s Activities in IOR: With Gwadar being a part of CPEC, India fears an escalation of PLA Navy activities in the Indian Ocean Region. 
      • Threat to Indian Trade and Connectivity: As a majority of Indian tangible imports pass through the Strait of Hormuz. China can easily create impediments to its access to the Middle-east in case of a conflict, jeopardizing India’s energy security.
      • Enhanced threat from Pakistan: With the overhauling of the Karakoram Highway, Pakistan will enjoy an advantage in mobilizing troops as well as heavy military equipment to PoK. At the same time, an increase in financial returns to Pakistan through CPEC may expand its ability to fund military infrastructure as well as state-sponsored terrorism in Kashmir, thus destabilizing the region.

    Way Forward

    • Maintain Communication: Experts have advocated that India maintains communication with its nuclear-powered neighbors. In such a context, India has done well to keep participating in forums like Shanghai Cooperation Organization to maintain communication with both Pakistan and China.
    • International Collaboration: It is well settled that India cannot compete with China in the matter of financing developmental projects like CPEC in other developing countries. Therefore, it needs to collaborate with agencies like Japan International Cooperation Agency (JICA) to offer soft loans to save them from falling into the Chinese debt trap.
      • Similarly, India needs to leverage projects like the Blue Dot initiative, which encourages private investment in developing countries by certifying them on the metrics of financial transparency, environmental sustainability and impact on development in the region.
    • Security Concerns: Developing countries, especially the countries of Southeast Asia have pinned their hopes on India to counter China’s hegemony in the region. Here, India needs to build on alliances like Quad to maintain the balance of power in the Indo-pacific region.
      • Quadrilateral Security Dialogue (or Quad, in short) is an alliance of democratic countries viz. India, USA, Japan and Australia, to maintain freedom of navigation and democratic values in the world. China has alleged that it has been formed as an anti-China alliance, a charge denied by the members of Quad.


    • CPEC is a part of the large Belt and Road Initiative (BRI) of China. Despite its economic potential, it has been plagued with reports of land grabs under China’s debt-trap diplomacy. Pakistan would do well to realize its consequences before it is too late and its dependency on China’s finance becomes irreversible.

    Source: IE