US-China rift on CPEC

The US-China trade war and political rivalry is getting more intense as it drags on, keeping the business world on edge. Another controversy has risen as both countries have now issued conflicting statements about CPEC – a key part of China’s flagship Belt and Road Initiative.

The US has cautioned that CPEC would push Pakistan into even greater debt, which would have serious economic damage when repayments are made. Alice Wells, the top US diplomat for South Asia, has said that CPEC projects were not grants but rather non-concessionary loans, and will only profit Chinese companies. 

She also dispelled the impression that it would create jobs as the Chinese send their own labour and material, despite the rising unemployment in Pakistan. The corridor would take a toll on Pakistan’s economy in the coming years and affect the reforms agenda of Prime Minister Imran Khan.

The statement has been deemed as unusually specific by the international media as the US has gone on an offensive against Chinese infrastructure projects in the region. The US cities lack of transparency by the Chinese in CPEC projects warning it could increase project costs and foster corruption. 

This also comes as Pakistan and the US are trying to rebuild their strained relationship. The US believes that it has a better development model than the Chinese. It wants Pakistan to question why the model is different from the one which brought economic success in China. It acknowledges that US does offer investments from state-owned companies, but private investment along with grants could improve Pakistan’s economy.

CPEC was heralded as a game-changer in the region but geo-political issues has drawn the project into controversy.  Pakistan has been borrowing from China to tide over a financial crisis, but still the gap could not be filled, forcing the nation to knock at the IMF’s doors. It is now estimated that Pakistan owes more money to China than the IMF.

The Chinese ambassador to Pakistan has hit back at the statement stating that CPEC projects were free from corruption. The envoy has asked where was the US when Pakistan faced an electricity crisis and why did it suspended aid instead. He dispelled the impressions of debt burdens as Pakistan owes only nine percent to China while the rest is owed to the West.

Pakistan is currently gearing towards the second stage  of CPEC by linking the Gwadar port with China. However, USA’s meddling is bound to raise further aspersions. Pakistan needs to juggle its relationship with both countries as it moves towards a path of economic development.