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Asia's Game of Thrones
China Rushes To Rescue Pakistan

China has lately made a major public display of its growing partnership with Pakistan—and behind the scenes, they’ve been putting up the bailout money to prove it. Financial Times reports: 

China has provided Pakistan with over $1bn in bailout loans since June last year, as the south Asian country looks to stave off a foreign currency crisis that could yet lead to another multinational rescue package.

State-backed Chinese banks have come to Pakistan’s rescue on two separate occasions, officials have told the Financial Times, with $900m coming in 2016, followed by another $300m in the first three months of this year.

The loans demonstrate the perilous fragility of Pakistan’s stocks of foreign currency, which have been depleted in the past few months as imports have risen while both exports and inbound remittances from Pakistanis abroad have fallen.

There are plenty of political reasons why Beijing would offer Islamabad cushy loans. China is increasingly courting Pakistan as a key ally in order to balance against India, consolidate its “string of pearls” of strategic ports in the Indian Ocean, and use the China-Pakistan Economic Corridor as the lynchpin for its broader One Belt, One Road initiative. But much like China’s doomed investments in Venezuela, its bailout of Pakistan seems to be a classic case of political considerations trumping sound economic strategy.

As the FT explains, Pakistan last year finished repaying a $6.6 billion loan from the IMF, leading some to prematurely conclude that Islamabad was on the road to stability. But meanwhile, its growing trade deficit with China has continued to deplete its currency reserves, leading China to quietly extend emergency loans so Pakistan can repay the older loans and stave off default. And the vicious cycle could well get worse: as Pakistan’s trade gap with China widens, experts are warning that it may need return to the IMF cap in hand for further loans.

This is hardly the recipe for a healthy long-term economic relationship, but it does provide yet another data point in how China’s politically motivated lending will cause Beijing headaches for years to come.

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  • rheddles

    We’re off the hook. Let’s get out of Islamabad while the getting’s good.

  • Kevin

    Cheap for buying (or renting) political influence there – as long as they don’t confuse it with an economic investment.

    • Sami Shahid

      Isn’t it what the US is doing in Afghanistan ? Buying or renting political influence there !

  • Fat_Man

    Couldn’t happen to a nicer bunch of guys. We need to pull all of our troops out of Pakistan, and Afghanistan where Pakistan has been sponsoring a war against us, bomb all of the dangerous toys we gave the Pakistani military, and send India a letter saying that Pakistan is their problem, and we will help them deal with it in any way we can.

    • Sami Shahid

      You really seem to be a fat man… The US never provided any sort of dangerous weapons to us. Pakistan is not waging any sort of war on your country in fact your own military is waging war on it self since years. As far as China is concerned then China is helping us whereas, the US is protecting the Good Terrorists of Afghanistan but dropped the mother of all bombs when it realized that Russia and China have started intervening. When your military is deployed in another country of another region you should not blame anyone for waging a war on you !

      • Fat_Man

        So, you are the official voice of Pakistan. Good.

        The US has provided billions of dollars worth of weapons to the Pakistani military. The Pakistani government formed and directed the Taliban and has sponsored them in their war against the American armed and trained government of Afghanistan, and the American presence in Afghanistan. The Pakistani government at the very least succored Osama bin Laden, and more likely aided and abetted his murderous attack on the United States. These are just facts. Your denials will be totally disregarded.

        The US needs to recognize that Pakistan is its enemy, and treat it as such.

        It is absolutely foolish to try to conduct any military operation, other than retreat, in a territory that may only be accessed through territory strongly held by its enemies. In the case of Afghanistan this is Russia and Pakistan.

        The US must, therefore, remove its soldiers and civilian personnel from Afghanistan, as soon and safely as is humanly possible.

        In light of its transfers of weaponry and training to the Pakistani military, the US has a moral obligation to do something to prevent Pakistan from using them against their neighbors, especially a non-hostile democratic country like India. We could politely ask for their return to the US via the cargo ships hauling our people and equipment out of Afghanistan. If the polite request is declined, as I am sure it will be, the US should use its heavy aerial bombardment capabilities to blow as much of that stuff up as we can.

        The people of the United States recognize that Pakistan is of no strategic interest to the United States. It has no industrial or technological capabilities, and no natural resources. It is a failed state, and we do not have the capability, the resources, the desire, nor any incentive to fix it, if it is at all fixable, which I believe is impossible for any liberal democracy to do.

        As for the rest of the “Stans”, they are literally “Hell Holes“. None of them has any industrial or technological capabilities. There may be natural resources there, but the logistical issues render those resources uneconomic. If the Russians or the Chinese want to exploit those resources then they should have at it. We may or may not buy and minerals or fuel from them, but we will do so on a completely transactional basis.

        Pakistan and the other “Stans” are on the other side of the world from the United States. We have no reason to be involved with any of them. If they are not under imperial control, the peoples of those places will take to fighting and killing each other. That is fine by us, they may kill, cook, and eat each other. It boots us not.

        I should add that India is another kettle of fish entirely. India is a a liberal democracy and has been such for more than two generations. India has an enormous population of highly educated people, and a growing economy that is an important player in the 21st century world. Further India is located at the head of an enormous body of blue water, its eponymous ocean.

        The freedom of the high seas and peaceful commerce thereon is of the utmost strategic importance to the United States. It is a prime reason for us to maintain the largest Navy in the world. The country of India must be concerned about its own access to and use of the Indian Ocean. Especially, in light of the Chinese declarations that they want to surround India by building a ring of naval bases.

        The US and India should recognize their mutual interest in opposing China and enter into an alliance to based on naval cooperation to keep the Indian Ocean open to commerce and to India’s economic interest.

  • Anthony

    Headaches or not (as Pakistan borders China in the northwest) this specifically gives more relevance to Post’s gist: “China is increasingly courting Pakistan as a key ally in order to balance against India, consolidate its ‘string of pearls’ of strategic ports in the Indian Ocean, and use the China-Pakistan Economic Corridor as the lynchpin for its broader One Belt, One Road initiatives.”

  • Jacksonian_Libertarian

    “But much like China’s doomed investments in Venezuela, its bailout of Pakistan seems to be a classic case of political considerations trumping sound economic strategy.”

    The Chinese Communist Party believes their own propaganda that they’re responsible for the so called “Chinese Economic Miracle”. And therefore thinks they know what they’re doing. When in reality they’re creating money pits, by reinforcing bad economic policies. A look at China’s fellow travelers, North Korea, Pakistan, Iran, Cuba, Venezuela, and Russia, is to recognize that they all suck economically. And with China’s economy hitting the wall as capital flight, and the foreign investors that did create the “Chinese Economic Miracle”, leaving China like rats leaving a sinking ship.

    In the decades since the fall of the Chinese “Iron Curtain”, China hasn’t created a single world class brand name like: Sony, Toyota, Kia, Samsung, Microsoft, Apple, Intel, etc… This lack of creativity is evidence of the absence of competitive free markets in China. And without the “Feedback of Competition” forcing continuous improvements in Quality, Service, and Price, or the competition improved foreign investors building state of the art factories to provide proprietary products to world markets, China’s economic uplifting will end.

  • FriendlyGoat

    Hard to know what’s worse in an Islamic place, a supported possible enemy with nukes or an unsupported possible enemy with nukes.

    • Sami Shahid

      If your comment is related to the US and Pakistan then I would like to say that you people should not blame another country when you invade and occupy a country in the name of war on terror and if that war is really against terrorism then you should wage a war against every terrorist group which obviously include Anti-Pakistani Jihadists living under the nose of US military in Afghanistan…The US doesn’t want to act against Anti-Pakistan terrorist groups because US wants Pakistan to fail in S.Asia so that India can compete with China. So what I can understand is that USA is not loyal to Pakistan whereas, China and Pakistan are brothers since 1947 !

      • FriendlyGoat

        The main goal for general humanity is that no nation with nuclear weapons ever uses them and that no nation with nuclear weapons ever lets them fall into the hands of non-state actors like the Jihadists you mention. Whether that goal is better achieved by China and Pakistan working together as mutually-supporting allies, I don’t know.

  • Let them try…rescuing that corrupt nation will take much more time and energy than even China can imagine.

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