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CPEC: Progress and Prospects

  • March 19, 2020
CPEC: Progress and Prospects
Image caption CPEC: Progress and Prospects

The China Pakistan Economic Corridor (CPEC), as a pilot project of the “Belt and Road” Initiative, was officially launched in 2013. President Xi Jinping, during his visit to Pakistan in April 2015, noted that the CPEC construction should play a leading role in the practical cooperation between the two countries, and determined the “1+4” layout of cooperation focusing on the CPEC construction supported by the Gwadar port, energy, transportation infrastructure and industrial cooperation.

Practices in the past five years have proved that the CPEC construction is not targeting specific regions or groups, but is aiming at the whole country of Pakistan and benefits all the people of Pakistan.

I. Fruitful achievements in CPEC construction

CPEC has played a flagship leading and demonstration role in the “Belt and Road” construction. It has become a platform for all-round pragmatic cooperation between China and Pakistan.

Improving macroeconomic conditions in Pakistan

CPEC has driven the development of Pakistan. The two-gap model proposed by economist Hollis B. Chenery posits that developing countries must introduce foreign investments and stimulate exports to boost growth for their national economy. CPEC has solved the problem of limited investment capacity caused by insufficient savings and shortage of foreign exchange in Pakistan and provided a high-quality source of impetus for Pakistan’s economic development. As of January 2019, CPEC included 9 completed early harvest projects and 13 projects under construction, with a total investment of US$19 billion. It drove Pakistan’s economic growth by one to two percentage points every year and created 70,000 jobs in Pakistan. The Chinese government provided US$5.874 billion in concessional loans to Pakistan, with a consolidated interest rate of only 2%, far lower than the average interest rate. The Chinese government also provided US$143 million in interest-free loans for the Gwadar East-Bay Expressway project and free assistance for some livelihood projects in Pakistan.

Thanks to favorable factors such as the CPEC construction, Pakistan’s macroeconomic conditions have been improved and its economy has maintained a momentum of rapid growth. Over the past five years, Pakistan’s GDP grew by an average of 4.77%, especially in the 2017-2018 fiscal year when Pakistan’s GDP grew by 5.8%, being the highest growth rate in the recent 13 years. Pakistan’s annual foreign direct investment grew from US$650 million to US$2.2 billion, and the per capita annual income rose from US$1,334 to US$1,641.

Alleviating Pakistan’s energy shortage

Energy shortage is a hard nut to crack which restricts the economic development of Pakistan. It is a problem that previous Pakistani governments attached great importance to and desperate to solve. The electricity gap cost Pakistan an annual average loss of US$13.5 billion in GDP, according to a study by PwC in 2012. Power shortage left Pakistan in the dark for a long time, with rolling blackouts across the country lasting about 10 hours a day in major cities and up to 22 hours in rural areas.

CPEC has regarded the alleviation of energy shortage in Pakistan as one of the important areas of construction since its launch. Currently, 12 projects with a total installed capacity of 7,240 MW have been commenced or put into operation. Through five years of construction, energy projects under the CPEC framework added 3,340 MW of electricity to Pakistan by early April 2019, accounting for 11% of the country’s total installed electricity capacity, thus greatly alleviating the power shortage in Pakistan.

In addition to power generation projects, China built the Matiari–Lahore ±660kV HVDC Transmission Line Project in Pakistan- the second HVDC transmission line in the world- to address the aging of Pakistan’s power grid.

Improving infrastructure connectivity

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