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Reeling under trade wars, China refuses to help Pakistan

Akshay Narang by Akshay Narang
6 November 2018
in Asia Pacific, Geopolitics
Imran Khan, China

PC: AP News

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Pakistan has been going through a phase of deep economic crisis. Pakistan has been looking for loans from other countries in its fight for survival. Pakistan today stands on the verge of bankruptcy and desperately needs financial aid from other countries. Pakistan PM Imran Khan was able to secure financial aid from Saudi Arabia. Pakistan PM even claimed that Saudi Arabia’s USD 6 billion assistance package had eased pressure on Pakistan’s foreign exchange reserves. Thereafter, Pakistan turned to its ‘friend’ China for more help. Imran Khan departed on yet another desperate tour- this time to China.

Imran Khan would have been expecting that China would come to Pakistan’s rescue, however, Pakistan was in for a massive jolt. The Chinese president Xi Jinping seems to be able to extend only minimal aid to Pakistan in face of a sluggish Chinese economy and trade wars that the Chinese economy is facing. China clearly conveyed that it would extend help to Pakistan but only within its limits. It means that Imran Khan cannot expect the extent of help that he desperately needed from China. What is embarrassing for Pakistan is the fact that its Prime Minister’s visit was structured around a begging bowl, but the extent of help that Pakistan needed has been denied.

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Chinese premier Li Keqiang is learned to have stated that China was willing to help Pakistan but “within our capability”. Imran Khan’s meeting with Chinese vice-foreign minister Kong Xuanyou, made matters even worse for Pakistan. In this meeting, it was said that China had, “made it clear in principle that (it) will provide necessary support and assistance to Pakistan in tiding over the current economic difficulties”. This clearly manifests that China is going to extend financial assistance in view of its own economic difficulties. This is going to make matters worse for Pakistan as it means that, most probably, the amount of aid is going to much lower than what Pakistan so desperately needed.

China is holding cards close to its chest. The Chinese have made it clear that they can only extend limited help citing their own economic difficulties. What the quantum of that help will be, has not been disclosed. This means that it is solely the discretion of China. Of late, Pakistan and China have hit what can be described as a roadblock in their friendly relations. Pakistan was reported to be giving a rethink to Chinese ‘Silk Road’ projects fearing a debt trap. This mega rail project in Pakistan happens to be the biggest Belt and Road Initiative (BRI) project in Pakistan. With Pakistan giving it a rethink, it is possible that the terrorist nation might have unknowingly and unintendedly irked China and now China seems to be giving a cold shoulder to Pakistan over its desperate request for financial aid. These are ominous signs for Pakistan which is battling an economic crisis on the verge of a total breakdown.

The last option for Pakistan is financial assistance from the IMF. Pakistan’s trusted ally having refused much help, Imran Khan would be pinning his hopes on the IMF. However, the way ahead is not going to be easy. In an interview, Pakistan prime minister Imran Khan had said unless Pakistan gets loans from friendly countries or the International Monetary Fund (IMF), it would not have enough foreign funds in another two or three months to service its debts or pay for its imports. However, even though Pakistan has already requested IMF to open negotiations for the country’s second potential bailout in five years, there are no reports of any development on IMF aid to Pakistan. Moreover, considering that IMF aid being subject to consensus from Washington and the dislike that Trump has for Pakistan, any IMF financial assistance to Pakistan does not seem very likely. With China having agreed to help only within its own capabilities, it is clear that Pakistan is in a dire situation and possibly heading towards a catastrophic economic collapse. 

Tags: China Pakistan Economic CorridorChina-Pakistanchinese economyPakistan
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