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ince Chinese president visit to Pakistan in Presently Chinese policy makers are trying to steer
April 2015 which kick-started the China the economy to a new normal of slower but more
Pakistan economic Corridor (CPEC) stable and consistent growth.
projects, a lot has been said and written about the
The other driving force behind enormous change
corridor and the economic revolution it ushers in
in Chinas economic policy is the year 2049
the region. While there is no dearth of general
which includes the two targets to be worlds
discussion on the macro and overall dynamics of
technological hub and leading nation in innovation
CPEC, targeted discourse as to how Pakistani
and scientific development and be in the ranks of
businesses can benefit from it, remains lacking.
innovative nations by 2020. The vision is also
The need is to discuss and analyze the business
reflected in the seminal report which was
opportunities that CPEC will bring with it, for all
published by World Bank in collaboration with
the stakeholders. For this, there is need to
Chinese Development Research Center of the
understand the reasons that triggered the change in
State Council in 2013 entitled China 2030:
Chinas economic and strategic policies especially
Building a Modern, Harmonious and Creative
in the aftermath of 2008 global economic crisis.
Society. President Xis, speech in Kazakhstan in
The fast growth of Chinese economy since 1979 2013 where he announced the New Silk Road,
economic reforms has resulted in China being the which is now popularly known as Belt part of
worlds largest economy. But, with the passage of One Belt, One Road (OBOR) is also a reflection of
time, this also caused some glitches for Chinese the same strategy. In the same year, during his
economic strength like overcapacity in some address to the Indonesian Parliament, president Xi
sectors, domestic restructuring and social announced the Road Part of OBOR strategy,
implications. Other issues include its growing commonly known as Maritime Silk Road (MSR).1
appetite of raw material and regional re-balancing. Combining these visions there are huge
1
Speech by Chinese president Xi Jingping to Indonesian Parliament, 2nd October, 2013, Available at: http://www.asean-china-
center.org/english/2013-10/03/c_133062675.htm Accessed on: 14th November, 2016.
China will propose the establishment of an Asian infrastructure investment bank that would give priority to ASEAN countries
needs. Southeast Asia has since ancient times been an important hub along the ancient Maritime Silk Road. China will
strengthen maritime cooperation with ASEAN countries to make good use of the China-ASEAN Maritime Cooperation Fund
set up by the Chinese government and vigorously develop maritime partnership in a joint effort to build the Maritime Silk Road
of the 21st century.

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expectation from year 2049 for China as well as production competency and capacity by improving
for rest of world as its spillover effects will be their design and development on research-based
enjoyed by rest of world too. model. They need to realize the potential
associated with CPEC, as being the most important
There are other changes in international economic
of the components of the greater One Belt One
spectrum simultaneously like new technologies
Road (OBOR) initiative as well as it relation with
and knowledge intensity as driver of growth,
other sister components which include the 21st
integration of value chains, declining skilled
Century Maritime Silk Route, Bangladesh-China-
population or work force in developed world,
India-Myanmar Economic Corridor, China-
growing concerns about energy and food security
Mongolia-Russia Economic Corridor, China-
throughout the world and big population bulge in
Central Asia-West Asia Economic Corridor
countries such as Pakistan as well as emergence of
(Eurasian Land Bridge) and China-Indochina
India and other countries as fast growing
Peninsula Economic Corridor.
economies. There is a huge increase in economic
activity throughout the world as it is evident in If CPEC is seen as part of the bigger picture of
increased global trade volume including the these global initiatives which were aimed, along
maritime trade activities. The Organization of with other objectives, at creating the global value
Economic Cooperation and Development (OECD) chain regionally and internationally, the prospects
figures suggest that international trade grew in of growth and expansion for any business in
second half of 2016.2 The same report states that Pakistan increase manifold. With the emergence
for the first time since early 2014, a modest growth of OBOR which CPEC is an integral part of the
was evident in trade among 19 members of G20 future will witness removal of investment and
countries representing 85% of global GDP. trade barriers with FTAs, avoidance of double
taxation, and investment protection agreements;
CPEC, when seen in this larger context becomes
customs cooperation and information exchange;
even more significant and a historic opportunity
mutual recognition of regulations, inspections,
for Pakistans business community. Nevertheless,
quarantine certification and accreditation, standard
the opportunity may get lost if Pakistans business
measurement, statistical information, etc.; single
community does not prepare itself to be part of
window for clearance at entry and exit points;
CPEC, as a project of connecting new international
enhanced trade liberalization; lower non-tariff
value chains and consequently invest in research
barriers and division of labor and industrial chains.
and development to enhance its capacity to meet
the challenges and reap the prospects that the With investment avenues kind of saturating in
Chinese initiative is set to create in the near future. Chinas own domestic manufacturing sector,
Traders and industrialists need to augment their chances for establishment of joint ventures with
2
An OECD News Release of August 30, 2016 issued from Paris says that G20 total international merchandise trade, seasonally
adjusted and expressed in current US dollars, grew modestly, in the second quarter of 2016, the first increase since early 2014,
but remains significantly below post-crisis highs. Exports rose by 1.5% and imports by 2.0%, following seven and eight
consecutive quarterly falls, respectively, mirroring the rise in oil prices (to almost $50 a barrel in June 2016, compared with
around $35 a barrel in December 2015). Exports in Q2 2016 grew in almost all G20 economies except Argentina, Canada and
China. For Canada, exports have fallen for seven consecutive quarters, and now stand at their lowest level in over six years.
India, South Africa and Turkey on the other hand, all recorded export growth of more than 5.0% in Q2 2016, although like in
all other G20 economies, export levels remain around 15% below post-crisis highs. All G20 economies recorded growth in
imports in Q2 2016, except Argentina, France, India, Indonesia, Mexico, with marginal falls, and Russia, where imports fell
by 5.0% in Q2 2016. China recorded 6.6% growth in imports in Q2 2016 but levels remain around 20% below recent highs.
Available at http://www.oecd.org/std/its/OECD-trade-Q22016.pdf (accessed Dec 31, 2016.)

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Pakistani counterparts and potential phasing of
some industry into Pakistan are also an area to
benefit Chinese industrialists and businessmen in
Economic Zones which will be part of CPEC. It
has already led to Chinese businessman showing
interest in investment in many new areas within
Pakistan including small and medium enterprises.
Entrepreneurs from different arenas like
international logistics, building materials, high-
end clothing production, supply-chain process,
furniture, steel structure and the export-import
business have already shown keen interest in joint
ventures.3 However, to cope with these upcoming
opportunities and challenges, there is need to
modernize and up-grade SMEs and various sectors
like textile. 4 With companies like Zonergy
Company Limited dealing with whole cloud-
computing industry chain, R&D of Solar PV
technology and project contracting, bio-energy,
Palm Cultivation and oil- processing trade5, its
surely opening new arena for Pakistan
businessmen to expand their investments.
Automobile industry is yet another sector. The low
labor cost in Pakistan will facilitate the assembling
of Chinese origin vehicles locally in Pakistan with
little investment. Companies like FAW (First
Automobile Work) and Defong already have their
assembling plants in Karachi6 while Corporations
like JAC, Zotye, Foton Group and China Auto are
in talks with government in investing in Pakistan
automobile industry. 7 It may be pointed out here
that National Logistics Cell (NLC), considering
the need for heavy vehicles in the years ahead in
the wake of CPEC projects, is starting a production
plant in Karachi with the help of a German
company.
Currency swap agreements, Renminbis inclusion
in the SDR basket of IMF, bond market in Asia
(Renminbi bonds in China), Asia Infrastructure
Development Bank, BRICS New Development
Bank, SCO financing institutions, Silk Road Fund,
China-ASEAN Inter-Bank Association and equity
investment funds are the key features of this great
Chinese leap. In the given scenario, Pakistani
business, trade and industry by taking timely
initiatives, can minimize its dependence on the
government, and start putting in the hard yards
beforehand to prepare itself to avail best of the
opportunities when they arrive.
Through joint ventures with Chinese businesses
we can enhance our capacity, productivity and
revenues manifold. Chambers of Commerce and
Trade and Industry Associations need to conduct
comprehensive studies to realize the benefits
offered by the CPEC to in their respective areas.
Similarly, energy, food, agro-based industry,
livestock, construction, steel, transport and
logistics, light engineering, plastics, value-added
textile, mining and ore, non-ferrous metals,
assembly operations and IT services are some
other key sectors in the country which may be
identified as potentially beneficial areas. Focusing
on less developed areas, adjacent to CPEC routes
Pakistan will accrue long term benefits to, not only
the concerned areas but the overall national
development. This can be done by making more

3
China eyes Pakistan as potential market, 29th June, 2016, Available at: http://tribune.com.pk/story/1132446/china-eyes-
pakistan-potential-market/
4
Joining hands: Garment industry, China Chamber sign cooperation deal, 29 th March, 2016, The express Tribune,
http://tribune.com.pk/story/1074573/joining-hands-garment-industry-china-chamber-sign-cooperation-deal/
5
China eyes Pakistan as potential market, 29th June, 2016, Available at: http://tribune.com.pk/story/1132446/china-eyes-
pakistan-potential-market/
6
Report, Competitive Analysis of Auto Sector in Pakistan and China 2016, Institute of Business Administration, Available at:
https://iba.edu.pk/News/industrial-note-automobile-sector.pdf
7
Chinese Foton Group to invest in manufacturing of automobiles in Pakistan, 24 th September, 2016,Availble at:
https://www.automark.pk/chinese-foton-group-invest-manufacturing-automobiles-pakistan/

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 educational institutions and skills development
and training programs at the grassroots level.
The CPEC by altering Pakistans economic
outlook, is also expected to stimulate a wave of
foreign investment from other countries, including
the United States and Europe. Many countries
including Central Asian States (CAS), Iran,
Afghanistan and Turkey have shown keen interest
in getting involved in economic activities that will
be generated by CPEC. While political issues
cannot be ignored the decision making at all levels
should give due consideration to economic gains
and multiplier impact on the economy.
Last, but the most important aspect, all
stakeholders must have good understanding of
Chinese considerations8, being the investor.
Among the most important of their considerations
are secure and uninterrupted energy supply chain
as well as managing the shortages of raw
materials; notably, it was announced openly by
Chinese government officials that by 2020 China
will encounter serious shortages in twenty-five
different raw material items.
With countries like Turkey, France and Iran
showing keen interest in CPEC, it is definitely a
game changer for Pakistan and it is up to
Pakistans business community to make the best
use of this opportunity in their favor with well-
timed and research based initiatives.
Indeed, timing is the key.

Prepared by an IPS Task Force | For queries: Mairaj-ul-Hamid, Asst. Research Coordinator, mairaj@ips.net.pk | w w w. i ps. org. p k

8
Fulco Mathew, Solving the Prickly Issue of Overcapacity in China, China-focused Leadership and Business Analysis, 14th
June, 2016 Available at: http://knowledge.ckgsb.edu.cn/2016/06/14/chinese-economy/solving-the-prickly-issue-of-
overcapacity-in-china/ Accessed on: 20th October, 2016. for example Aluminum production capacity reaches 40 million ton
exceeding global consumption by 9 million and steel production volume is more than double of next four leading producers
combined i.e. Japan, India, US and Russia

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