If the China-Pakistan Economic Corridor doesn’t live up to the hype, Russia may stand to benefit.
China’s planners have studied the art of using economic pacts to pursue strategic objectives. The “One Belt, One Road” initiative (OBOR) and the Asian Infrastructure Investment Bank (AIIB) are prime examples. China has pinned its hopes of gaining strategic preeminence in the South and Central Asian regions thanks to its deep pockets.
Infrastructure investment confers power to influence regional affairs. But South and Central Asia are not lacking of powers seeking influence — Russia and Iran have their own regional investments, plans and partners.
The China-Pakistan Economic Corridor (CPEC) is particularly important for China. With access to Pakistani ports, China will be able to expand its market reach and bring in foreign direct investment to ease the devaluation of the renminbi.
The renminbi’s drop signals China’s hope to increase the amount of low wage jobs abroad and play it safe on future risks while implementing financial reform. Though China has become the world’s largest banking system, debt has played a pivotal role in its growth in recent years.
OBOR serves as a buffer: debt finances infrastructure projects abroad to provide short-term employment, create some growth abroad, unload industrial overcapacity, and cement influence and ownership of assets in other countries. Though CPEC is ostensibly profitable, it better represents China’s attempts to buy influence and access to the Indian Ocean with debt while providing Chinese industries a stimulus. Pakistan has proven a willing partner due to its political interests in the region and need for investment.
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