Pakistan is Not the Only Country China is Trapping Near India

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To secure a special friendship, 50 years ago, Pakistan’s foreign minister gave a box of mangoes to Mao Zedong. Who knew that this friendship will take another level in their relationship. After ending diplomatic relations with Taiwan and recognizing People republic of China as a Country, China and Pakistan shares special relationship. Maintaining good relation with China is part of Pakistan’s foreign policy.

Now, the US has stopped giving aid to Pakistan and situation is that latter completely relies on China for everything. Whether it is infrastructure or weapons or technology. It received $62 billion from China as part of Xi Jinping’s belt and road initiative to build the China Pakistan economic border.

China Pakistan economic border

In the meantime, Srilanka’s Hambantota port and Pakistan’s Gwadar port are leased to China for 99 and 43 years, and it is expected to serve as Chinese naval bases in future. India is in alarming situation with China crossing Pakistan occupied Kashmir, a disputed area since 1948.

Gwadar port in Pakistan

Although China has promised largest sum to Pakistan but they are providing $34 billion to Malaysia. According to the Nomura securities, Pakistan has broken ground on projects  that is add up to half of its amount running in Pakistan.

Malaysian Prime minister Najib Rajak two visits to Beijing within a half year proved fruitful by bagging him good financer for country’s projects. The $14 billion east coast rail link was 15% financed by local banks while export import bank of China financed remaining 85%.

By 2017, annual trade of US dollar 160 billion was done between Malaysia and China, making China its largest trading partner. Cultural similarities between both the countries and encouragement of Malaysian government to learn Mandarin language for easier communication in common language their trade will surely boost their relation further. The ringgit which was more than 3% this year, is likely to rise by 3.60 per dollar making Malaysia as the best growth story among emerging markets of South Asia.

Lately, Central bank of Pakistan called off the idea of further devaluation as Pakistani rupee is weakening.

Source:Bloomberg

Last year China planned to use Yuan as a medium of exchange for Gwadar port as well as Diamer Bhasla dam, which has put Pakistan in a very uncomfortable situation.

The foreign exchange reserve of Pakistan is $11.4 billion but external debt is $90 billion by the end of 2017, adding China $62 billion investment pledge. If China continues to import Pakistan like this, debt would be doubled.

source:Bloomberg…

While Malaysia got loan at the rate of 3.25% for $14 billion rail link, Pakistan is financed with 5% higher loan.

According BBC world service poll in 2014, 85% Of Pakistanis take China positively. So it will be very interesting to see where Pakistan will be after completely relying on China, and what price they will for it.