A Comparative Study on CPEC and CCWAEC
Tang Jun (Director of Pakistan Research Center, Honder College of IMNU, China [email protected] )
ARTICLE INFO
Submission Date: 15April 2019 1st Revision:28 April 2019 2nd Revision: 2 May 2019 3rd Revision: 13 Aug 2019 Accepted: 28 Aug 2019 Pages: 01-08
ABSTRACT
The One Belt, One Road (OBOR) initiative is transforming China‟s position across multiple regions. In particular, its role in South and Central Asia is increasing significantly, commensurate
with its rising interests in both regions. Central to OBOR are five
cooperation priorities: policy coordination, facilities connectivity,
unimpeded trade, financial integration, and people-to-people
bonds. This paper presents case studies of two corridors, the
China-Pakistan Economic Corridor (CPEC) and the China-Central
West Asia Economic Corridor (CCWAEC), mapping political and
economic interactions to each of these cooperation priorities. This
paper will analyze levels of existing interdependence between
China and the states in question in order to determine which
cooperation priorities require greater resources and which have
already achieved a measure of success. As such, it anticipates
future areas of focus for Chinese policy in both regions, indicating a possible trajectory of China‟s political and economic interactions in South and Central Asia.
Keywords: Chinese Foreign Policy, One Belt One Road, China-Pakistan Economic Corridor,
China-Central AsiaEconomic Corridor, Central-South Asian Connectivity
Introduction
The Silk Road Economic Belt and 21st Century Maritime Silk Road, or One Belt, One Road (OBOR) has signaled China‟s plan for a greater presence across Eurasia, and Central and South Asia have prominent roles in the development of the architecture of OBOR.Central to OBOR are five cooperation priorities articulated by the Chinese government in its policy document released in March 2015.1 These priorities - policy coordination, facilities connectivity, unimpeded trade, financial integration, and people-to people-bonds – indicate the shape
of OBOR cooperation, and also indicate the what kind of role individual states can be expected to play within OBOR. Policy coordination calls for intergovernmental cooperation, enhanced political trust, expanding shared interests, and coordinated
economic development strategies and
throughout OBOR, under the framework of the Asian Infrastructure Investment Bank (AIIB), BRICS New Development Bank, Silk Road Fund, and Shanghai Cooperation
Organization Development Bank.
People-to-People bonds are the soft power initiatives of OBOR, promoting cultural and educational exchanges, tourism, and media cooperation.
This paper analyzes two OBOR economic corridors, the China-Pakistan
Economic Corridor (CPEC) and
China-Central West Asia Economic Corridor (CCWAEC), assessing four of the five policy goals: policy coordination, facilities connectivity, unimpeded trade, and financial integration. Measured against these goals, CPEC is clearly the better developed corridor for the time being, and the bilateral nature of CPEC, as opposed to the
multilateral CCWAEC, indicates that
China‟s OBOR objectives can be more easily achieved with CPEC than CCWAEC.
China-Pakistan Economic Corridor
Of the six OBOR
corridors(China-Mongolia-Russia, New
Eurasian Land Bridge, China-Central and West Asia, China-Indochina Peninsula , China-Pakistan,
China-Myanmar-Bangladesh-India), CPEC is currently the best developed one.
CPEC is an important regional integration initiative that would link the western region of China with the port of Gwadar through roads and railways. The connectivity would not only enhance China‟s trade competitiveness by reducing shipping time for markets in Europe and Africa but also will help Pakistan upgrade its existing logistics infrastructure and facilitate establishment of economic zones on the
proposed routes.CPEC has been represented with the formula of a 1+4 cooperation structure. It represents the economic corridor and 4 represents the pillars that support it: the Gwadar port, energy, infrastructure, and industrial collaboration.13 Underwriting this formula is close political cooperation, security coordination, trade, and FDI. In
examining CPEC against the vision
statement for OBOR, it is clear that the policy goals of OBOR are already at an advanced stage in this corridor, especially relative to CCWAEC.
Policy Coordination
Sino-Pakistan relations have evolved over time from primarily a Cold War era response to external threats to a relationship that also encompasses domestic stability for both states, emphasizing the importance of the bilateral relationship. China‟s importance has been described as “the cornerstone of Pakistan‟s strategic foreign policy.”14
The resulting relationship has expanded to include extensive trade ties and geopolitical considerations, as Pakistan also provides China with a bridge to the Middle East. The diplomatic relationship has been useful for China over the years, as Pakistan was used as a diplomatic conduit for establishing ties with the USA and Saudi Arabia, and today Pakistan has come to be regarded as “a central part of China‟s transition from a regional power to a global one.”15
The relationship deepened with a visit from Premier Wen Jiabao in 2005, when China and Pakistan signed the Treaty of
Friendship, Cooperation and Good
established the all-weather strategic partnership, which is generally viewed as China‟s highest level of bilateral relations, involving the “full pursuit of cooperation and development.”16
These existing high level bilateral relations provide opportunities to enhance policy coordination within CPEC, as evidenced with the CPEC Summit held in Islamabad in August 2016.
In addition to bilateral relations, Sino-Pakistani policy coordination is facilitated by participation in multilateral organizations, especially the SCO. Pakistan had observer state status since June 2005 and its request for full membership passed in June 2016 at the SCO Heads of State Summit at Tashkent, Uzbekistan. Pakistan became a full member June 2017.17 While SCO policy coordination involves security related issues rather than the economic and development coordination stressed by OBOR, full membership status in the SCO will further promote intergovernmental cooperation, expand shared interests, and enhance political trust.
Facilities Connectivity
This objective is central to CPEC. As noted above, the 1+4 cooperation structure is the basis of CPEC, and requires dense levels of cooperation in terms of infrastructure development. Gwadar represents an end point to this corridor, and China‟s role in developing the port as well as the associated
infrastructure demonstrates a clear
commitment to this goal, as well as political and economic interests for the Chinese government in the continued development of
CPEC. Currently there are several
infrastructure projects associated with CPEC, including the Peshawar-Lahore-Karachi railway, power plants in Tharparkar and Port
Qasim, the Gwadar-Nawabshah natural gas pipeline, the Karot hydropower project, the Jhimpir wind farm, Gwadar airport, the Karachi-Thatta expressway, and the M-9 Hyderabad-Karachi motorway.18 With $46
billion promised in infrastructure
development loans from China, facilities connectivity is a major component of CPEC.
Unimpeded Trade
During Premier Wen‟s state visit in
February 2005, China and Pakistan
announced the beginning of negotiations on a free trade agreement (FTA) that was signed when President Hu visited in 2006. Since then, trade has intensified significantly. China has become Pakistan‟s most important trade partner, with 8.8% of its2015 exports directed to China, and 28.2% of its imports
coming from China, representing a
tremendous increase from 9.8% in 2006.19 According to IMF data, China has been Pakistan‟s top source of imports every year since 2006. (See Table-1)
Table 2: Value and Ranking of China’s Exports to/Imports from Pakistan (Millions of US $)Source: (IMF, Direction of Trade by Country)
As with many of China‟s bilateral trade partners, the relationship is heavily one-sided.
While China ranks as Pakistan‟s top import partner, Pakistan ranks as China‟s 33rd largest source of imports. In terms of export destinations, China is 2nd highest for Pakistan, while Pakistan is 67th for China.20 The trade deficit is significant, with the value of Pakistan‟s imports from China consistently considerably larger than the value of its exports to China. (See Tables 1 and 2) In terms of trade, China is much more important to Pakistan thanPakistan is to China. However, Pakistan‟s geopolitical
significance gives it a weight
incommensurate to its trade volume.
Financial Integration
This OBOR policy goal also indicates a pre-existing cooperative relationship. Pakistan is a founding member of the AIIB, and was the recipient of funding for one of its three initial projects, a 64 kilometer stretch of highway connecting Khanewal to Shorkot.21 The AIIB has also announced a $300 million loan for an expansion at a hydropower project, co-financed by the World Bank.22 Likewise, Pakistan was chosen as the first investment for the Silk Road Fund, with a $1.65 billion investment to construct the Kohat dam on the Jhelum River, a „priority project‟ for CPEC.23
China-Central Asia Economic Corridor
The size and scope of this corridor, as compared with CPEC, underscores the difficulty in realizing such an ambitious and wide-reaching initiative. CCWAEC requires China to coordinate with actors in six states of varying levels of development and political stability: Turkey, Iran, Uzbekistan, Turkmenistan, Kyrgyzstan, and Tajikistan. To emphasize the disparity among the states in this corridor, Turkey‟s 2016 GDP forecast
Year Imports
from China Exportsto China
2006 $4,664.81 $915.61
2007 $6,363.41 $1,004.78
2008 $6,590.55 $915.53
2009 $3,774.17 $973.82
2010 $7,629.26 $1,572.70
2011 $9,281.85 $1,929.88
2012 $10,206.93 $2,855.63
2013 $12,117.16 $2,915.51
2014 $14,573.27 $2,509.44
Year
Exports to Pakistan
Imports from Pakistan
2006 $4,664.81 $915.61
2007 $6,363.41 $1,004.78
2008 $6,590.55 $915.53
2009 $3,774.17 $973.82
2010 $7,629.26 $1,572.70
2011 $9,281.85 $1,929.88
2012 $10,206.93 $2,855.63
2013 $12,117.16 $2,915.51
is three times larger than the four Central Asian states combined.24 While there are a number of shared interests betweenChina and the CCWAEC states, and several pre-existing cooperative initiatives, this
corridor appears more difficult to
successfully coordinate than CPEC.
Policy Coordination
In terms of bilateral relationships, China has official diplomatic relations with each of the six states in this corridor. It has comprehensive strategic partnerships with Iran (January 2016) and Uzbekistan (June 2016), and strategic partnerships with Turkey (2010), Tajikistan (2013), and Kyrgyzstan (2013). In 2014 China and Turkmenistan committed to developing their relationship to a strategic partnership by 2018. Given the resources devoted to OBOR, it can be expected that each of the strategic
partnerships will be upgraded to
comprehensive in the near future;
partnership upgrades are used to emphasize the importance of diplomatic events and usually take place during state visits.25
As multilateral partners, Kyrgyzstan, Tajikistan and Uzbekistan are all members of the SCO, and Iran has observer state status while Turkey is a dialogue partner. Turkmenistan alone has no formal status within the SCO, attending as a guest but committed to permanent neutrality since a declaration at the United Nations in 1995, under which it does not participate in multilateral defense organizations.
One concern with policy coordination is the issue of political trust. While Sino-Iranian ties are well-established, China and Turkey have little in the way of a shared
cooperative history. Tensions with
China‟sUighur population in Xinjiang presents a potential stress point in its
relations with Turkey. Central Asian states also are reluctant to become overly reliant on relations with China, with the concern that the volume of Chinese trade creates potential political influence, a concern for states that have a long history of being dominated by larger neighbors. For China‟s part, the Central Asian states are seen as vulnerable to terrorism and radical Islam, and a base for Uighur separatists.26 The recent embassy bombing in Bishkek emphasizes the Chinese concern of security threats in the region.
Facilitates Connectivity
There is significant room for
development with regards to this goal. Turkey has over $35 billion invested in current infrastructure development projects, mostly in transportation and logistics, representing opportunities for cooperation in emerging projects. Given China COSCO Holding Company‟s recent purchase of 67% of the Port of Piraeus in Greece, Turkey‟s continued infrastructure development will be a priority forChina.27 Iran also has significant infrastructure investment needs, and in the wake of the July 2015 Joint Comprehensive Plan of Action, Iran‟s economy is expected to record 4.5% growth rates in 2016-2017, the highest in the Middle East.28 Chinese firms are currently involved in several Iranian transportation and energy projects,
including oil and gas fields, the
oil refinery in Kyrgyzstan, and highway construction projects.30
At the same time, the nature of
CCWAEC underscores the potential
problems in coordinating projects with a wide range of states. Turkey and Iran pose little in the way of infrastructure risk, whereas Central Asian states have significant physical infrastructure needs that limit connectivity and availability of facilities required for sourcing projects, and relatively higher legal and regulatory risk as well.
Unimpeded Trade
This OBOR policy goal is at a considerably less advanced stage than with CPEC. This can be attributed to the difficulties inherent in managing relations across a group of six states rather than one. According to IMF data, the total volume of trade between China and CCWAEC states reached over $96 billion in 2014, up from $3.7 billion in 2000. Of course there is significant variation in trade among CCWAEC states. On one end of the scale, Turkey had a GDP of $733.6 billion in 2015. On the other end are the four Central Asian states, with a combined GDP of $115.826 billion. In between is Iran at $387.6 billion. Taken as a whole, this represents a combined GDP of $1.237 trillion, more than four times greater thanPakistan‟s GDP of $270 billion in 2015. As a bloc, therefore, CCWAEC provides a larger potential source of trade than CPEC, but the lack of free trade agreements means that the OBOR objective of unimpeded trade does not yet exist within this corridor.
Financial Integration
In terms of financial integration, cooperation is at an early stage. All
CCWAEC states but Turkmenistan have joined the AIIB as founding members. Tajikistan has already been approved for funding in one of the AIIB‟s first projects, a joint project with the European Bank for Reconstruction and Development (EBRD).
With a relatively deep representation in the SCO, many opportunities exist to deepen financial integration among its member states, with regular annual meetings for
Ministers of Finance. The SCO
Development Bank is expected to facilitate this goal, although this institution is still at a nascent stage. Leaders of SCO member states signed an agreement in 2011 to establish the Development Bank, with the
expectation that it would provide
mechanisms to facilitate financing for the SCO‟s strategic projects.
Conclusion
CPEC is already at a more advanced stage of development. This can be attributed to three factors. First, it is a bilateral agreement between two states with a long history of cooperation and shared interests, making the coordination of OBOR policy objectives less complex than the multilateral CCWAEC. Second, much of the framework of CPEC was in place when OBOR was announced, and was consistent with OBOR policy objectives, making it a relatively easier corridor to develop. Third, that Gwadar Port is the end point of this corridor is important; China‟s economy is reliant upon Persian Gulf energy, a situation that is projected to increase. In providing a direct link to the Strait of Hormuz, Gwadar will play an important role in China‟s energy security.
has two end points: Iran, also in the Persian Gulf, and also an important source of energy, and Turkey, providing land and maritime access to European markets. The potential economic benefits of this corridor are significant, and it is in China‟s interests to see a stable political and economic environment in the four Central Asian states that link it to Turkey and Iran. As such, more Chinese funding for OBOR projects in Central Asia should be anticipated.
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30
