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China-Pakistan Economic Corridor: Balancing risks and strategic interests

Written by Jacob Dickinson


Gwadar Port Authority, Lowy Institute



In March 2024, there was a surge in terrorist attacks in Pakistan against Chinese nationals working on infrastructure projects. As one of China’s closest diplomatic relationships, Pakistan is a substantial recipient of Chinese investment and military collaboration. Yet Pakistan’s persistent instability and insecurity  raises problems for sustaining investment in the country. Beijing has demanded that Pakistan protect Chinese nationals and infrastructure. What are the implications of the increase in attacks and how might they affect China-Pakistan relations? 


Pakistan in China’s Belt and Road Initiative 


The Belt and Road Initiative (BRI) was officially launched by Chinese president Xi Jinping in 2013. Intended as a vast infrastructure project to center international trade and finance around China, the scheme initially stretched far beyond the ancient Silk Road to span Latin America, Africa and Europe. By the end of 2023, a report by Griffith Asia Institute found that cumulative BRI engagement breached $1 trillion, with around $634 billion in construction contracts and $419 billion in non-financial investments. 


Pakistan is one of the largest receivers of BRI investment through the China-Pakistan Economic Corridor (CPEC). This multi-years project is a $62 billion infrastructure investment scheme aiming to modernize Pakistan’s infrastructure, communications and energy networks. This comes with Chinese influence over infrastructure. For instance, the Gwadar Port Authority is operated by the China Overseas Ports Holding Company which Pakistan leased in 2017 to the Chinese government until 2057. 



The BRI also holds geostrategic implications. According to Germany’s Strategy on China released in 2023, the BRI includes a structured framework for China’s diplomatic and geoeconomic relations. China has a long-term strategic interest in developing Pakistan's Gwadar Port Authority and CPEC. China imports up to 70% of its oil from the Middle East through the narrow Strait of Malacca which could be easily blocked to prevent oil supplies from reaching China in the event of a conflict or sanction enforcement (see Fig.1). The Gwadar Port Authority provides an alternative route for China’s oil imports through the Arabian Sea. 


At the annual Belt and Road Initiative forum in October 2023, Pakistan’s Prime Minister declared that more than 50 BRI projects have been constructed in Pakistan, worth over $25 billion. Yet the persistent instability in Pakistan has raised questions about the CPEC and Gwadar Port Authority’s future funding. China’s investment funding for Pakistan has slowed in recent years. At a high-level meeting on CPEC projects, China refused some of Pakistan's proposals to fund CPEC projects. Beijing cited Pakistan’s political instability and security concerns for rejecting the proposals. 


Rise in Terrorist Attacks in Pakistan 


Pakistan’s security situation has worsened considerably after the US’ chaotic withdrawal from Afghanistan in 2021 and the Taliban’s return to power. In 2023, more than 1,500 people were killed in terrorist attacks in Pakistan, a 50% increase from the previous year. Islamabad accuses the Afghanistan-based Taliban of arming terrorist groups in Pakistan. One of the groups affiliated to the Taliban, the Tehreek-e-Taliban Pakistan (TTP) has claimed responsibility for the rapid increase in suicide and terrorist attacks. This has fuelled the hostility between the Taliban and the Pakistan military, with Pakistan ordering the forced displacement of over 1.7 million Afghan refugees based in Pakistan in October 2023, resulting in widespread human rights abuses. Pakistan also bombed Pakistani Taliban targets in Afghanistan in March 2024, for the same reasons. 


Reports have emerged that the TTP is attempting to broaden its appeal and reach out to other armed groups. One of those groups is the Balochistan Liberation Army (BLA). Founded as a separatist movement pushing for secession from Pakistan, it has conducted several attacks in Pakistan against Chinese nationals and infrastructure since the beginning of the CPEC project. The BLA demands that China stops the CPEC deals which travel through mineral-rich Baluchistan, stating that jobs do not go to Baluchistan locals, highlighting the environmental degradation in the region. 


The frequency and boldness of the attacks against Chinese nationals and infrastructure by the BLA has surged since 2021. Given the acute challenges posed by the Taliban, Islamabad and China have expressed concerns over the common security threat. On March 25, Pakistani security forces reportedly killed four BLA insurgents who fired on Chinese citizens near the Gwadar Port Authority. Armed groups also attacked one of Pakistan’s naval bases, claiming that they destroyed several drones. Militants killed five Chinese nationals and a Pakistani driver after claiming responsibility for a suicide attack driving into an explosive-filled vehicle into a convoy in the north Pakistan Khyber Pakhtunkhwa province. 


China and Pakistan’s ‘Almost’ Alliance


With so many terrorist attacks targeting Chinese infrastructure, will China gradually loosen or strengthen ties with Pakistan? The attacks by the BLA seem to be working. China’s contractors paused three hydropower projects in light of the attacks. China started a separate investigation into the terrorist cells to find those responsible for the attacks, suggesting that it does not trust Pakistan’s security services to succeed. Beijing has demanded that Pakistan does more to protect Chinese nationals. 


Despite the persistent attacks, the surge is unlikely to disrupt Pakistan-China relations. One Chinese diplomat compared the country’s military support to that of US-Israel by stating “Pakistan is our Israel”. China is wary of declaring official alliances, but Pakistan is probably its closest military partner. China is the leading supplier of Pakistan’s conventional weapons and higher-end offensive strikes capabilities. They conduct regular naval and military exercises together and cooperate on intelligence sharing between the Afghanistan-Pakistan border. 


Their close cooperation is due to their shared rivalry with India, and the emerging naval competition around the Arabian Sea. The Gwadar Port Authority is carefully monitored by regional rival India due to the shared naval cooperation and potential use of the Chinese Navy for the port. While US and India ties warm up to secure military deals, China and Pakistan see a mutually firm military relationship that can counter the emerging axis in the Indo-Pacific. 


Conclusion


The surge in terrorist attacks against Chinese nationals in Pakistan pose challenges to the CPEC deal in the country. Pakistan’s chronic political and economic instability adds to the difficulties of maintaining substantial infrastructure projects in high-risk areas. Yet China’s policy makers have doubled down on their relationship with Pakistan to counter the US and India’s power projection in the Indo-Pacific. While Pakistan faces chronic instability, the strategic significance of CPEC to China’s will likely strengthen their relationship in the future. 



 

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