LAHORE: As China keeps pouring money into China-Pakistan Economic Corridor (CPEC), could Pakistan be in danger of becoming another Venezuela?
An opinion piece published on Bloomberg has raised such spectres as Venezuela was once targeted by the Chinese to secure vital oil supplies and major loans provided by China Development Bank (CDB).
Ongoing CPEC development projects worth $6 to $7 billion are predominantly being funded by the Chinese and paltry financing of $470 million is being provided by Pakistani banks.
Venezuela which received billion-dollar loans from the Chinese, last month defaulted on its debts and has been plagued by political strife, uncertainty and hyper-inflation.
Various projects setup by Chinese money in Venezuela stand desecrated, abandoned which includes a partly built high-speed railway, the opinion piece read.
Bloomberg claims CDB and other Chinese state-owned banks like Agricultural Development Bank of China (ADBC) and Export-Import Bank of China (EIBC) depend on market funding rather than its own deposits.
In late November, CDB led a syndicate with EIBC for funding a $1.5 billion power plant in Hub, Balochistan and jointly being setup by China Power International Holding Ltd (CPIH) listed in Hong Kong.
Chinese bonds experienced a rout in last week of November, which thwarted funding plans of these state-owned lenders. EIBC delayed a three-part sale and CDB left a ten-year note deal from its auction due to this rout.
Adding to the difficulties, China Banking Regulatory Commission revised rules for policy banks to improve their capital position by January. Combining the balance sheets of these three above mentioned lenders added up to $3.8 trillion of assets, which is equivalent to those of China’s largest commercial bank, Industrial & Commercial Bank of China (ICBC) Ltd.
As Profit reported in November, Pakistan rebuffed a Chinese offer to use its renminbi currency (RMB) in the Gwadar Free Zone under CPEC framework.
Pakistan asserted such a move would violate its economic sovereignty. This message was communicated to Chinese authorities during a Senior Officials Meeting (SOM) held in Islamabad in third week of November.
Adding insult to injury, it was revealed last week in Senate that China would receive 91 percent of the revenues and Gwadar Port Authority (GPA) 9 percent from Gwadar Port for a period of forty-years.
China’s demand of ownership rights and other strict conditions for Diamer-Bhasha dam also forced Pakistan to exclude the project from CPEC.
The opinion piece concluded “professions of brotherly love are all very well, but Beijing needs to avoid another Venezuela.”
It is clear that in next 5 years Pakistan will become a client state of China. Chinese language, currency, companies and masters will dominate Pakistan and Pakistanis will take orders and work for their Chinese masters. No power on Earth can stop this inevitable future.
Comparing Pakistan with Venezuela is pointless. Pakistan is physically contiguous to Chinese infrastructure, thus the Port and highway, railroad, pipelines will become economically successful as Chinese economy grows and transitions to import-based supply chain. Pakistan is not beholden to any economic/political dogma (as Venezuela) but quite open to reforms to adapt to changing Chinese supply needs. Pakistan allows China to access Persian Gulf, Arab world and Africa while Venezuela has no such benefits. The comparison is an exercise in futility by an Indian origin person straining to sow doubts among Pak investors.