Xi Jinping commemorated his landmark trip to Pakistan this week with a mention to the local media that it was like going to visit the home of his brother.
Then again, no sibling would expect such a generous gift from his visitor. In this case Xi’s Chinese delegation announced $46 billion of investment in their south Asian neighbour.
The spending will focus on the China-Pakistan Economic Corridor (CPEC), which will run 3,000km from the Arabian Sea to China’s westernmost land border. In connecting the city of Kashgar in Xinjiang with the Pakistani port of Gwadar, the programme offers the most tangible evidence yet of China’s “One Belt, One Road” plan to spearhead its economic might deeper into the Eurasian landmass.
But the plan is momentous for Pakistan too, given it is almost three times the total foreign direct investment that it has received since 2008. About $34 billion is being allocated to energy projects, and $12 billion more in loans for road, rail and pipelines through the corridor over the next 15 years.
In exchange, China will get the shortest possible route for importing oil from the Gulf, avoiding seaborne transportation for almost all of the journey.
Power is high on the agenda, with natural gas, coal and solar energy projects set to generate 16,400 MW of electricity in a much-needed boost for Pakistan’s president Nawaz Sharif, who has promised to put a stop to power blackouts. The first sign of the plan in action came on Monday, when the Silk Road Fund, the China Three Gorges Corporation and the Private Power and Infrastructure Board of Pakistan signed a memorandum of understanding for a hydropower project. The commitment for the $1.65 billion Karot dam is the first investment from the $40-billion Silk Road Fund since the Chinese government established it last year, a Chinese official told Xinhua (see WiC269 for more on Sino-Pakistani relations).
Away from the coverage of Xi’s trip, the media has also been discussing Xinjiang’s growing importance as a supplier of power – at home and, potentially, overseas. This is being made possible by advances in ultra-high voltage power (or UHV), the press reports. When electricity is forced to travel longer distances, more of it is lost in transmission. But losses are reduced if the voltage is increased, which is why China has been developing UHV grids of its own.
Policymakers hope that this expertise in transmission technology will open up opportunities for cross-border sales. Xinjiang, accounting for almost a third of China’s land border and sitting next to five of the seven countries of Central Asia, is a prime candidate as a gateway producer.
“It’s just like exporting goods such as garments and slippers, and the price for electricity in countries like India and Pakistan is very good,” Lin Boqiang, director of the China Centre for Energy Economics Research at Xiamen University, told the Global Times last month.
Lin also says that the prospects for electricity exports to neighbouring countries look good because State Grid has learned how to build power networks in remote, high-altitude terrains like Xinjiang.
The Xinjiang Daily is also reporting that the state power giant is close to announcing breakthrough deals on cross-border supply to Kazakhstan, Pakistan and Mongolia.
This fits the vision of Liu Zhenya, State Grid’s chairman and one of the pioneers of the programme to crisscross China with a series of ultra-high voltage lines by the end of the decade (see WiC235).
Critics counter that UHV is untested on a mega-scale and warn that faults could lead to countrywide blackouts (see WiC174). But Liu has a bolder vision in which power supply is less constrained by territorial borders as it is redistributed across Asia from renewable sources as distant as Mongolia, Siberia, the deserts of Central Asia, and the Bering Strait.
Naturally, Liu will see State Grid as the power broker in this tightening of energy relations across the Asian landmass, while most of the new network is going to be built by Chinese firms, and with Chinese funding.
© ChinTell Ltd. All rights reserved.
Sponsored by HSBC.
The Week in China website and the weekly magazine publications are owned
and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is
involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these
publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will
therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.
Download Apps