China’s Neo-Mercantilism And Sino-Pak Strategic Relations By Quratul Ain Hafeez

The economic reforms of 1978 in China brought about an increase in its Foreign Direct Investment (FDI). Following the-neo mercantilist policy it has encouraged the free trade wherein the Chinese firms introduced themselves and opened up to the international markets. Although the central government gave some relaxation on some of the industrial products but there are still state owned enterprises in large numbers. Better educational plans, export/import controlled regimes, and Chinese engagement in FTA with different South Asian countries including Pakistan are contributing factors in the Chinese economic strides.
Today China’s top trade commodities are textile, technological equipment, organic chemicals, iron, steel and other products. According to an estimate China earned $10.36 trillion GDP growth in the fiscal year 2014. Midyear 2015 China’s trade surplus was worth $59.49 billion achieving the favorable amount of $70.9 hundred million in balance of trade.
It is to be understood that the Chinese neo-mercantilism is not harmful for developing and under developed regions of the world, despite the heavy criticism China’s economic policies face. It is one of the core assumptions of neo-mercantilism; that along with a state’s economic development, it emphasizes on the world’s economic development as a whole. In fact, Neo-mercantilism promotes regional organizations and markets, as it provides a broader platform. So far, China has received a positive response that encourages it to make investments abroad because most of the investments are for providing better infrastructure, roads, bridges, energy sector and railway projects etc. It not only benefits China by providing Chinese contractors business, but it is also helpful for creating job opportunities in Pakistan and for its economic growth .The purpose these policies of China is that it is, itself going through the process of development. So it’s encouragement towards establishing businesses in different parts of the world is because overseas economic relations are mutually beneficial for China’s domestic markets and other countries.
Similarly, this approach should not be seen as harmful for Pakistan’s strategic relations specifically within the context of the Sino-Pak strategic partnership .Both countries have previously enjoyed harmonious relations, while for the past decade there has been a focus on economic ties as well.
China believes in promoting regional trade and inter-regional corporate communication. China’s active role in regional organizations like SARRC, ASEAN, and SCO is a part of its efforts to bring economic stability for the whole South Asian region.
According to Board of Investment, Pakistan’s expected net foreign direct investment has risen by about 60 percent from 2017-2018. Hence it can easily be interpreted as a project of mutual interests and collective benefits
Another aspect of neo-mercantilism is that it puts emphasis on increasing a nations exports and decreasing its imports. According to the estimates collected from the UN Com-trade Database and the UN Com-trade Statistics and International Trade Centre (2016) by 2013 the trade volume between China and Pakistan has increased over $12 billion. In 2000 Pakistan’s exports to China were $244.65 million and in 2004 and 2005 it reached $300.53 and $435.68 million respectively. While Pakistan’s imports from China in 2000, 2004 and 2005 were $550.11, $1488.7 and $2349.3 respectively.
It might appear that China through its mercantilist policies is only increasing its own level of exports but in reality, it is simultaneously providing business to Pakistan. However as per official records it is evident that Pakistan is doing most of its trade with China, and Chinese companies are providing Pakistan with good business opportunities’.
There is no denying the fact that China is one of the world’s largest economies and it is hoped that the Pak-China economic collaboration will bring economic stability in South Asia and will make Pakistan a regional hub of trade activity. Currently China has started about 22 projects in Pakistan including there construction of the Karakorum highway, a heavy machinery complex, and the mega project of the Gwadar Seaport under the umbrella of CPEC (China Pakistan Economic Corridor). CPEC being a flagship project of China’s BRI strategy includes Chinese investment of about $52 billion from deep seaport Gwadar to civil energy agreements, infrastructure and road projects. This will enhance trade and commercial opportunities for Pakistan. Moreover about 10,000 MW of electricity will be generated when it is completed by the end of 2018.
Eventually China’s neo mercantilist policies are a source of regional economic integration and the BRI will bring the countries closer through a network of interdependence. The CPEC will be a major project of China’s Vision of BRI and will make Pakistan a source for FDI. Already according to Board of Investment, Pakistan’s expected net foreign direct investment (FDI) has had a jump of about 60 percent from 2017-2018. Hence it can easily be interpreted as a project of mutual interests and collective benefits and by no means should CPEC be viewed as another British East India Company.
The writer has an M Phil in international relations from Quaid-I Azam University Islamabad. She is currently working as a Research Associate at Strategic Vision Institute Islamabad. She can be reached at
Published in Daily Times, August 2nd 2018.

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