Beijing won’t hesitate to aid Pakistan, but efficient use of funds is crucial issue

Although China has not yet announced the details of an economic aid package to Pakistan, saying more discussion is needed, there has been no change in China’s attitude toward the China-Pakistan Economic Corridor (CPEC).

China on Friday promised to support Pakistan’s economy, but some Chinese officials told the media on Saturday that they were still in negotiations over the details of any aid package to Pakistan, the Financial Times reported. The report said this move is “a departure from Beijing’s usual practice” and left the outside world guessing about the outcome of Pakistani Prime Minister Imran Khan’s visit to China.

Western media organizations have perhaps read too much into the news. Although details are still under discussion, China will definitely meet its commitment to provide Pakistan with economic aid.

Pakistan’s growing fiscal problems have raised concerns about its ability to repay foreign loans, but China’s attitude toward the CPEC has never changed. The question is how to maximize the effectiveness of Chinese aid and investment to bring tangible benefits for economic development. It will take some time to negotiate with the Pakistani side.

Pakistan’s foreign reserves have reportedly plummeted 42 percent since the beginning of this year, highlighting an urgent need to find an internal driver for economic development and export growth. Pakistan received a $6 billion rescue package last month from Saudi Arabia. Offering a similar-sized package to Pakistan won’t be difficult for China, but talking with Pakistan about making Chinese aid and investment a real impetus to improve its economy’s efficiency and productivity is perhaps more important.

The aid package is expected to be only one component of China’s effort to help Pakistan increase its debt repayment ability. Those measures will likely focus on two areas.

First, China is willing to help the South Asian country tap its economic potential through methods such as poverty alleviation. If China can offer aid to Pakistanis who have lost their means of earning a living, it will help Pakistan raise its labor productivity and improve its export competitiveness.

Second, boosting Pakistan’s exports are necessary to reduce the country’s debt burden. Pakistan’s prime minister is scheduled to attend the China International Import Expo (CIIE) on Monday in Shanghai, where Pakistan is exhibiting a wide range of export products. The CIIE might serve as a bridge and a window for Chinese consumers to gain a better understanding of Pakistani goods ahead of China’s Singles’ Day on November 11, the world’s biggest one-day shopping spree.

Along with the CIIE, the CPEC is likely to play a bigger role in helping Pakistan boost exports and slash its trade deficit with China. China will not be stingy in offering help to Pakistan to strengthen its economy and improve its financial status. What is important is how to find the most effective way and maximize the benefit of Chinese aid.