Xi Jinping and Imran Khan Discuss CPEC and Kashmir

Pakistan under the Prime Minister Imran Khan is becoming increasingly assertive in its foreign policy ambitions. The Khan-led team has made some significant inroads in expanding Pakistan’s influence in the region, from becoming part of the US-led Afghan Peace Process to mediating between the regional arch-rivals Saudi Arabia and Iran.

The new-found vigour and Khan’s celebrity status has helped him form a narrative against India in the wake of New Delhi’s move to strip away Kashmir’s special status. After making a widely-acclaimed speech at the United Nations General Assembly last month lambasting the Indian atrocities against Kashmir’s citizens, Khan left for Beijing earlier this week to meet Chinese President Xi Jinping to discuss the regional situation and the stalled China-Pakistan Economic Corridor.

Although the visit was meant to be for two days, a large entourage of foreign ministers, economic advisers, army chief and director-general of the country’s spy agency accompanied Khan to Beijing to discuss the entire spectrum of bilateral relations, security cooperation and the CPEC. The visit also came at an opportune moment, just as PM Narendra Modi was preparing to host Xi for a summit in India.

Subsequent to the Xi-Khan meeting, the two sides issued a joint statement which read that, “China is paying close attention to the current situation in Jammu & Kashmir and … is a dispute left from history, and should be properly and peacefully resolved based on the United Nations Charter, relevant UN Security Council resolutions and bilateral agreements.”

In addition, President Xi Jinping said that he is watching the situation in Kashmir and would support Pakistan in issues related to its core interests, the Chinese state news agency Xinhua reported. Xi further told Khan that, to China, the rights and wrongs of the situation in Kashmir were clear while adding that, “China supports Pakistan to safeguard its own legitimate rights and hopes that the relevant parties can solve their disputes through peaceful dialogue.”

The statements, despite being vaguely worded, were not received well in India, which was irked by China’s stance on the issue. Just a day before Xi’s scheduled arrival in Chennai, the Indian foreign spokesperson, in an answer to his statement said that, “China is well aware of our position. It is not for other countries to comment on the internal affairs of India.”

Although, Kashmir was a top-priority item on the agenda for the meeting, Khan was also in Beijing to discuss the stalled $60-billion China-Pakistan Economic Corridor investment project. The two sides were set to discuss ways to begin Phase II of the CPEC investment project.

The work on the corridor, which aims to link Pakistan’s Gwadar Port with China’s Kashgar province, has slowed down in the last 12 months. The project stalled after Pakistan found itself in the midst of a balance of payments crisis after it went on a borrowing spree to finance its imports. The investments under the project, which were meant to help Pakistan build a network of roads and railways, ended up inflating imports bill and weakened its currency by almost 50 per cent.

As Pakistan’s imports, under the Belt and Road Initiative announced in 2014, increased so did its reliance on ‘friendly nations’ for loans. The machinery and construction-related imports to install optic fibre lines, build rail networks, motorways and improve Pakistan’s infrastructure capabilities ended up widening the country’s account deficit to $18.13bn in 2018 from $3bn in 2014, when the project was announced.

The unravelling resulted in massive slide in rupee’s value and forced Islamabad to call on the doors of the International Monetary for a bailout. Under the IMF’s extended fund facility, Pakistan cut development spending to avert a crisis and put CPEC projects on the back burner.

Although both Beijing and Islamabad remain committed to the CPEC, the fate of the project relies upon Pakistan’s success in achieving macroeconomic stability. Commenting on the project, both sides in the joint statement said “the two sides expressed determination to speedily execute CPEC so that its growth potential can be fully realized making it a high-quality demonstration project for BRI.” PM Khan also announced to set up a CPEC Authority to expedite projects and make arrangements for the Gwadar Port.

Although he did not elaborate on the scope of the authority, but reports suggest that the authority will likely be added to Khan’s already-bloated portfolio. Later, Pakistan’s maritime minister announced that the China Overseas Port Holding Company will get a 23-year tax exemption for carrying out development works at the Gwadar Port.

Despite facing delays in kick starting the second phase of the project which entails setting up Chinese industries in the CPEC special economic zones, Pakistan has completed much of the early harvest projects including power projects, transmission lines, motorways, airports, optic fibre network and special economic zones.

Although, much of the groundwork for the economic corridor has already been laid, the future of the project relies entirely upon Pakistan’s ability to implement economic reforms. Until then, however, the CPEC is on hold.