China-Pakistan Economic Corridor (CPEC) has announced establishing two large hydro projects and the refurbishment of the country’s colonial-era rail infrastructure in Pakistan. This hydro power project is a part of the 4,470 MW power projects China is constructing in Pakistan. China has already, completed nine power projects producing 5,320 MW of electricity worth $7.9 billion in Pakistan.
The timing and location of the dams is also very peculiar. The hydro projects are a clear reversal of its policies and meant to put pressure on New Delhi as they are located in Pakistan-administered Kashmir which is also claimed by India. The move will add further tension to India’s already difficult relations with China.
The Chinese investments are without doubt essential to Pakistan. Few international companies and banks are willing to take similar risks as the Chinese do. Although the motives are obviously partly political, the CPEC could eventually transform Pakistan’s backward economy. The stakes are high for both countries, but so are the rewards.
Beijing border conflict with India is an important reason for the timing of the announcement. In June a long simmering rivalry erupted in the Himalayas killing dozens of Indian soldiers and an unconfirmed number of Chinese. The strengthening of ties with the former’s arch-rival Pakistan fits in the context of this conflict.
For Beijing, the strengthening of ties with Pakistan doesn’t only serve political goals but ensures a steady output for Chinese made products. Over the decades, a tremendous industry and production capacity has been established in an increasingly saturated country when it comes to infrastructure projects. Investing in Pakistan ensures an export market for surplus Chinese products due to industrial overcapacity.
In several ways, Pakistan is China’s only real ally. Beijing’s disdain for formal alliances stems from its believe that it could restrain the country from pursuing its interests. Pakistan is an exemption that China is willing to tolerate due to the south Asian country’s weaknesses and dependence on its giant neighbor.