Pakistan and China Agree to Upgrade CPEC: Key Developments and Implications

Introduction:

1. Pakistan's Prime Minister Shehbaz Sharif's 5-day visit to China resulted in an agreement to upgrade the China-Pakistan Economic Corridor (CPEC).
2. The agreement aims to advance high-quality development of CPEC in its second phase.

What is CPEC?

1. CPEC is a $62 billion project that links Xinjiang, China with Gwadar, Pakistan, passing through Pakistan-occupied Kashmir (PoK).
2. It is a flagship project of China's Belt and Road Initiative (BRI).
3. Goals: modernise Pakistan's transportation systems and connect Pakistani ports with China's Xinjiang province.

Phases of CPEC:

1. First Phase: infrastructure creation (energy, infrastructure, port development, and railway line construction).
   1. Progress has been patchy, with 14 out of 21 power projects and 6 out of 24 transport projects completed.
   2. Brought $25.4 billion in direct investment to Pakistan by 2022.
2. Second Phase: industrial cooperation agreement signed in February 2022, focusing on Special Economic Zones development and industrialization.

Challenges facing CPEC:

1. Chinese concerns: corruption, bureaucratic delays, and political instability in Pakistan.

2. Security situation in Gwadar: terrorist attacks by Baloch militants, killing Chinese nationals.

3. Limited job creation for Pakistani youth due to Chinese companies not partnering with local companies.

4. Pakistan's security issues: a major concern for future Chinese investments.

Implications for India:

1. CPEC passes through Gilgit-Baltistan area of Kashmir, occupied by Pakistan, violating India's sovereignty and territorial integrity.
2. Chinese military presence in the area poses a security threat to India.
3. China's naval base in Gwadar port is seen as encircling India in the Indian Ocean.

Debt burden of Pakistan and China's role:

1. China's share of Pakistan's external debt has risen from $4 billion in 2013 to $30 billion of the current $126 billion.
2. Pakistan's debt burden is unsustainable and may turn it into a client state of China.
3. IMF's bailout package: conditions include rescheduling Chinese debt instruments to prevent a positive net outflow from Pakistan to China.

Additional Information:

1. Xinjiang province: an autonomous territory in northwest China, home to many ethnic minority groups, including the Turkic Uyghur people.

2. International Monetary Fund (IMF): promotes global economic growth and financial stability, encourages international trade, and reduces poverty.