A weekend summit between the leaders of China and Pakistan highlighted the strategic and economic drivers shaping one of Asia’s strongest partnerships. On Nov. 2, Pakistani Prime Minister Imran Khan paid his first visit to Beijing since coming to power in August. While there, Khan met with several of China’s key political leaders — including President Xi Jinping, Premier Li Keqiang, Vice President Wang Qishan and top legislator Li Zhanshu.
During the four-day trip, Khan’s appeals for Beijing to extend his government billions of dollars worth of foreign aid to shore up Pakistan’s diminishing foreign exchange reserves proved the most important topic of conversation. China did promise to offer Pakistan financial help, but stopped short of detailing the exact sum. Negotiations also touched on the China-Pakistan Economic Corridor (CPEC), and the two sides agreed to focus on socioeconomic development, jobs and accelerating progress on developing the port in Gwadar. Moreover, the two countries promised to hold the next meeting of the Joint Cooperation Committee — CPEC’s key decision-making body — in Beijing by year’s end.
Why It Matters
China is Pakistan’s strongest global ally. Beijing’s support is an important guarantor of Pakistan’s stability, especially when it comes to ensuring the country maintains an environment conducive to participating in CPEC. And as Khan prepares to request money from the International Monetary Fund (IMF), the assistance of international partners such as China will be key to lessening the amount the prime minister requests. Pakistan has gone to the IMF 21 times since 1958, and another bailout — reportedly to the tune of at least $7 billion — will come with strings attached. In exchange for its assistance, the IMF will likely require Khan’s government to implement politically unpopular austerity measures to reduce Pakistan’s fiscal and current account deficits. The tough measures are expected to hinder Khan’s vision for an “Islamic welfare state” — in which the government focuses on development measures such as health care and education to improve the lives of those in poverty — by shaving up to one full percentage point off the country’s economic growth rate. At 5.8 percent, the most recently reported growth rate is Pakistan’s highest in over a decade.
Continue reading on Stratfor