Belt and Road

Terror in Karachi

The pressure builds on Pakistan corridor plan


Increasingly a target?

On the morning of Friday November 23, three armed men attacked the Chinese consulate in Karachi in Pakistan. They were members of the Baloch Liberation Army, a militant group which wants greater autonomy for Balochistan – a large, resource-rich province on Pakistan’s southwest coast.

Before the attack – in which two security guards and two civilians were killed – the men made a video demanding that China and Pakistan stop their exploitation of Balochistan’s resources, or attacks “will be further intensified”.

The work on China’s Belt and Road Initiative in Pakistan is more expansive than in most other countries. Beijing is investing $62 billion in a group of infrastructure projects collectively termed as the China-Pakistan Economic Corridor (CPEC). The theory is that new roads, power plants, ports and other infrastructure upgrades will help the south Asian country emerge as a more prosperous logistics and manufacturing hub.

But the plan’s critics have labelled it as “debt-trap diplomacy” and warned that Pakistan is being steered into a series of expensive, opaque deals from which the Chinese are sure to gain most.

Pakistan’s new prime minster, the former cricketer Imran Khan, has promised to renegotiate some of these deals or make the terms of them public. But the opposition – which agreed to the contracts when it was in government – says such a move would be illegal as the agreements have “secrecy” clauses built into them.

Khan was in Beijing recently trying to negotiate a more immediate bailout for his government, which needs about $8 billion to cover a balance of payments crisis. Pakistan is also in talks with the International Monetary Fund, but financial aid from the IMF would probably require Islamabad to curtail its other borrowing and become more transparent about its existing debt, something that China may not want, its critics allege.

Opponents of the CPEC say this is because the deals are intrinsically unfavourable to the host nation. Chinese banks are giving loans at commercial rates for projects which are largely built by Chinese companies. But the commercial viability of some of these projects is questionable – hence other organisations are not willing to fund them – so the loans are often backed up with valuable collateral.

Critics allege that some of the projects seem to further China’s strategic interests – such as the opening up of a new route for exports from western China down to the Arabian Sea. The concern is that China could also take control of the underlying assets if Pakistan falls behind on it payments.

“The projects that China is supporting are often intended not to support the local economy, but to facilitate Chinese access to natural resources, or to open the market for its low-cost and shoddy export goods,” Brahma Chellany, the academic who coined the phrase “debt-trap diplomacy” has warned.

The Chinese are having to counter other complaints about CPEC. Local businesses gripe that Chinese companies are getting preferential treatment, leaving little benefit for Pakistani firms (the Chinese counter that the locals don’t have the capabilities to do much of the specialised work).

Back in Balochistan, home to the Gwadar deepwater port – one of the largest CPEC projects – the Chinese have to navigate the longrunning conflict between Baloch militants and Pakistan’s central government. This, plus the presence of Islamic militant groups such as ISIS, means that the Chinese government is increasingly worried about the safety of its citizens. An executive from state-owned shipping line Cosco was shot in the head in what police said was a targeted killing in Karachi in February. And in August three Chinese mining engineers were injured when a suicide bomber blew up their bus near a copper and gold mine in Balochistan.

No Chinese citizens died in last Friday’s attack but China’s deputy chief of mission in Islamabad took to social media – as he often does – to lead tributes to the two police officers who died protecting the consulate. “China and Pakistan are Iron Brothers,” he wrote, posting photos of the two policemen “to pay respect”.

© 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.