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China’s Service Outsourcing market Grows

China’s service Outsourcing Industry reported stable growth in the first nine months of 2019, the latest data from the Ministry of Commerce (MOC) showed.

Chinese businesses inked service outsourcing contracts worth 886.4 billion yuan (about 125.29 billion U.S. dollars) during the January-September period, up 4.4 percent year on year.

Of the total, offshore service outsourcing contracts reached 538.04 billion yuan in value, rising 11 percent from a year earlier.

The industry’s structure improvement picked up with rapid growth of emerging productive service outsourcing business, including consulting, testing, e-commerce platforms and other fields, the ministry said.

Service outsourcing with countries along the Belt & Road totalled 65.28 billion yuan during this period in terms of the fulfilled contract value, MOC data showed.

Source: Belt and Road News Network 

Dated on: 28/10/2019

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China is creating a New Global Data Highway

China has a massive blueprint for boosting its economic growth, and part of the project is called the “Digital Silk Road.”

Not to be confused with the online darknet marketplace, China’s “Digital Silk Road” refers to a route that lies alongside the country’s big infrastructure push across continents termed the Belt & Road Initiative (BRI) or the New Silk Road deeply integrating it with the rest of the world.

Over the past few years, China has poured billions of dollars into developing its digital capabilities in various ways from fostering homegrown talents like Alibaba and Tencent, to deepening its digital reach with other continents like Europe, ultimately hoping to “generate fresh economic growth, foster effective governance and control, and project global power,” according to a report by Berlin based Mercator Institute for China Studies (MERICS).

To be clear, “Digital Silk Road” is only one part of China’s grand plan to achieve those three objectives. And it’s a crucial story of the modern wold that involves players like the Chinese Communist Party, Huawei, and the U.S. government.

Digitisation Helps the CCP Reestablish Legitimacy

With the original BRI, a colossal project in its own right  China has pushed billions of dollars into various economies in Asia and Europe through opaque loans to expand influence around the world.

The BRI is envisioned as a revival of an ancient trade route between China and Europe, as well as a vehicle to boost economic growth and re-establish legitimacy among its people.

“The CCP’s legitimacy rests heavily on economic performance; stagnating or even declining growth poses a serious risk to its grip on power,” the MERICS researchers wrote.

As a result, digitisation was considered one of the best ways forward to “upgrading China from the ‘workshop of the world’ into a high-tech leader with globally attractive innovative products and services, and modernised manufacturing processes,” they added.

Digital Silk Road as a National Security Threat

But China’s goals aren’t singularly focused and that economic growth isn’t the only objective, argue experts.

The MERICS researchers say that China’s digital ambitions “combine economic goals with broader normative and security aims.”

The U.S. Government also sees Digital Silk Road projects like the Chinese and Russian tag team that’s building up cable networks connecting Asia and Europe overland to bypass “U.S. controlled data routes,” according to MERICS, or undersea cables laid out or upgraded by Chinese company Huawei as a national security threat.

Source: Belt and Road News Network

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Iran’s interest in CPEC strengthens regional integration

Iranian Ambassador to India, Ali Chegeni, was reported by India’s The Hindu newspaper on September 10 as telling members of the Indian Association of Foreign Affairs Correspondents that “Iran is now discussing an Liquefied Natural Gas (LNG) pipeline to China along the China-Pakistan Economic Corridor (CPEC), as India is not expected to retain its prior interest in LNG imports from Iran.” This remark hasn’t received the attention that it deserves, however, despite it being a visionary proposal for strengthening regional integration.

First things first, it’s important to explain the context in which it was made. Ambassador Chegeni was talking about the consequences of India’s decision to comply with the U.S. unilateral sanctions against his country’s energy industry, which he was understandably displeased with. Still, he remained very professional when addressing this issue, even saying that “We love the Indian people. But we cannot force somebody to love us. The government of India has to decide according to its national interest. Just as the Chinese have.”

It’s here where one can better understand why the diplomat decided to reveal the existence of hitherto unreported discussions between his country and China over the proposal to build an LNG pipeline to the latter via CPEC. China, unlike India, only complies with international law and not the dictates of any individual country like the U.S. whose demands run contrary to the aforesaid, which is rightly respected by Iran. Furthermore, there has previously been news about connecting the Iranian port of Chabahar with CPEC’s terminal one of Gwadar.

It therefore makes sense for Iran to consider how it could take ties with China to the next level by including an energy dimension into its plans to integrate with CPEC, which is the flagship project of the Belt and Road Initiative (BRI), after India is no longer regarded as a reliable customer of its resources. A CPEC-parallel pipeline (E-CPEC+, with the “E” referring to “energy”) would be the natural outcome of the unfortunate situation that Iran has found itself forced into and thus help turn a regrettable situation into a positive one for all.

The South Pars gas field in the southern port of Assaluyeh, Iran, July 19, 2010. /VCG Photo

Strengthening regional integration is the embodiment of the win-win outlook on international relations, yet doing so in the manner proposed by the Iranian Ambassador to India might cause some concern among his hosts who remain opposed to CPEC because of their claims to the Kashmir conflict that have resulted in them holding the official position that the project transits through disputed territory that they consider to be their own.

Being aware of this backdrop, it’s more newsworthy that it was Ambassador Chegeni who revealed the existence these pipeline discussions and not any other Iranian official because it shows how seriously the country is considering this, but also that it cares about not offending India’s sensitivities too. That’s why it was Iran’s top representative to India who broke the news and explained why his country was pursuing that possible course of action, chiefly in response to India’s voluntary compliance with the U.S. sanctions regime.

In the event that the negotiations are a success and eventually lead to E-CPEC+ entering into activity sometime in the future, then it would represent a pragmatically reliable form of indefinite sanctions relief for Iran, the strengthening of regional integration processes, and ultimately an exemplary form of South-South cooperation between the three countries involved. In addition, these positive outcomes might convince India to moderate its uncompromising position against both CPEC and BRI and therefore accept that both of them are here to stay.

Even if it remains opposed to them, Iran nevertheless has the sovereign right to participate in any regional integration projects that it wants to, especially those such as E-CPEC+ which could ensure its long-term economic security amidst the U.S. ever-tightening sanctions pressure that already compelled India into discontinuing its import of its historic partner’s resources. It would be best for everyone if India supported Iran’s pipeline plans, but its lack of support wouldn’t have any influence on stopping this proposal in that case.

Editor’s note: Andrew Korybko is a Moscow-based American political analyst. The article reflects the author’s opinions, and not necessarily the views of CGTN.

Source: CGTN 

Dated on: 17/9/2019

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Belt & Road Trains drive Chinese & European Industries Closer

In the plant of the world’s top auto glass manufacturer Fuyao Group in Changchun, capital of Northeast China’s Jilin Province, forklifts are busy transporting windshields into standard containers.

These windshields, designed for the medium and high-end models of Audi, will be transported to Heilbronn, Germany by the Changchun-Manzhouli-Europe cargo trains before arriving at Audi’s assembly plants there.

The return trip of the train will carry auto components from Germany to Volvo’s Daqing factory in Heilongjiang Province, which neighbours Jilin.

The China-Europe cargo trains have closely linked the old industrial base in northeastern China to the manufacturing bases in Europe and led to increasing industrial cooperation which is mutually beneficial and has contributed to the economy for both.

Advantaged Cooperation

A cargo train loaded with containers carrying windshields, wooden flooring, activated carbon and auto components left Changchun on Thursday night to deliver the cargo to Russia, Belarus, Poland and Germany along the Changchun-Manzhouli-Europe route.

As an important project for Jilin to join the construction of the Belt & Road, the Changchun-Manzhouli-Europe cargo train line was launched in 2015

The route starts from Changchun, exits China via Manzhouli, the largest land port on the China-Russia border, and passes through Russia, Belarus and Poland before arriving at the terminus of Nuremberg, Germany.

It measures about 9,800 km, and a single trip usually takes 14 days, saving more than 20 days compared with sea transportation, said Wang Yue, Chairman of the Changchun International Land Port Development Co., Ltd. (CCILP), which operates the cargo trains on the route.

The inbound trains carry imports of engines, gearboxes and steering shafts from Europe and outbound trains have exports of goods like windshields, brake pads and bearings made by Chinese companies.

Since the Changchun-Manzhouli-Europe cargo train service was launched in August 2015, it has transported over 43,000 standard containers with the value of over 13.8 billion yuan (1.94 billion U.S. dollars).

Demi Ben, Managing Director of the CCILP GMBH, said, Changchun and some other northeastern Chinese cities are home to a number of top auto manufacturers and auto components enterprises, while Bavaria, where Nuremberg is located, is a major German automotive manufacturing base.

The similar structure of the industrial clusters in northeastern China and the European country has paved the way for further cooperation.

The Nuremberg warehouse for the Changchun-Manzhouli-Europe railway has been very busy since it was put into use in June 2018, said Demi Ben, who is also in charge of the warehouse.

The auto components such as windshields and bearings from northeastern China are usually put into the warehouse for short-term storage and then sent to the appointed places required by the local business customers via the “door-to-door” service.

Source: Belt and Road News 

Dated on: 9/9/2019

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Qatar launches biggest Silk Road Exhibition in Middle East – SRE 2019

In a major shift in regional and global strategy, Qatar has launched the biggest 10-year platform on trade and investments in the Middle-East titled “Silk Road Exhibition (SRE 2019)” from 3rd-5th November 2019, to establish closer ties in investments, trade and diplomacy with China and the Belt and Road countries.

The shift comes after Qatar attended the 2nd Belt and Road Forum in April 2019 with a delegation consisting of Minister of Transport and Communications H E Jassim bin Saif Al Sulaiti and Minister of Commerce and Industry H E Ali bin Ahmed Al Kuwari. The same ministries have now launched SRE 2019 to host government delegates and businessmen from over 50 countries to diversify it’s business and diplomatic interests in the region and integrate itself with China and BRI.

The Ministry of Transport and Communications (MOTC) and Qatar Chambers is aiming to enable invited countries to participate with all their trade, manufacturing, service and logistics sectors to meet under one roof to share experiences and investments; and close major business deals with Qatari enterprises and among themselves. According to the official Qatar 2030 strategy, there is a qualitative shift of Hamad Port and Logistics Area, and the future development plans require a lot of services that may be provided by the participating companies of the Belt and Road partners. “Qatar’s position in the region helps it to play an important role in the Belt and Road Initiative, especially with its economic and geographical components,” said Gui Hanfeng, chairman of Global Economic Development Forum (GEDF), a global platform to bolster co-operation as well as economic, trade and cultural coordination among nations.

The statement assumes significance considering that the Qatar Chamber (QC) last year signed a memorandum of understanding with the China Council for the Promotion of International Trade to join the Silk Road Business Council.
The presence of shipping lines between the two countries contributes to the growth of economic relations, and also supports investment opportunities between them, he said, adding the 2022 FIFA World Cup and the Qatar National Vision 2030 make it an ideal environment for attracting investment, which is expected to see progress and prosperity under these incentives.

The invited sectors on SRE include Customs Authorities, Investment Authorities, Shipping and transportation companies by sea, air and land, Logistics Services companies, Port construction and development companies, Dry Dock (Shipyards) Developers, Construction Companies, Insurance companies, Shipbuilders, Container Builders, Oil & Gas Tankers Builders. Land Freight Trains, Port Management companies, Industrial and Commercial products of countries located on
the sea and air silk line, Navigation Technology Management, Navigation Universities and Training Institutes, Security and safety companies for Shipping Lines, International organizations and companies specialized
in the same field, Consulting Companies, Cruise Ships, Navigation & Meteorological System, Cargo Packaging Equipment, Courier Express, Logistic Zone, Design and Construction of Warehouse Providers, Environmental and Pollution Control Technology and Manufacturing Companies.

The participating countries at SRE 2019 will include China, Pakistan, Turkey, India, Iran, Iraq, Japan, Korea, Oman, Austria, Belgium, Bulgaria, Croatia, Republic of Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the UK.

SRE 2019 has also allocated a separate pavilion for Pakistan where it’s expecting a strong participation from the government and private enterprises due to its central role in the development of Belt and Road in South Asia through CPEC and it’s strong relevance to Qatari Vision 2030 due to historical close business and diplomatic ties.

Note: For any information regarding participation in SRE 2019, please feel free to get in touch at info@obortunity.org

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Huawei to put South Asian Regions Headquarters in Pakistan

Vice President of Huawei Group, Mark Xueman has announced that Huawei will invest $100 million in Pakistan this year, in his recent meeting with Pakistan ́s Federal Minister for Planning & Development Makhdum Khusro Bakhtyar.

The Investment will be utilised to upgrade the technical support centre of the company in Pakistani along with the establishment of Regional Headquarters in Islamabad.

¨Pakistan is a strategic market for China and Huawei, therefore the company will set up Headquarters for South Asian region in Islamabad¨

The project will cost around $55 million and will create employment opportunities for young engineers across the country.

Besides the Minister for Planning & Development, Planning Secretary Zafar Hasan and China-Pakistan Economic Corridor (CPEC) Project Director Hassan Daud were also present to discuss the projects Huawei’s VP plans to invest.

China-Pakistan Economic Corridor is the Pakistan arm of the Belt & Road Initiative with a collection of US$62 billion worth of infrastructure projects under construction across the country.

While discussing the details about its upcoming projects in Pakistan, Huawei’s VP said;

“Huawei will also invest $15 million in its technical support centre in Pakistan and it will also hire more workforce for it, taking the number of its staff from 600 to 800 this year. Huawei is eager to initiate more projects in Pakistan on grant funding from the Chinese Government.”

Meanwhile, Planning Minister Khusro Bakhtyar appreciated Huawei’s continued efforts to equip Pakistan with modern technology & infrastructure. He said that the world’s leading telecom giant can boost Information and Communications Technology (ICT) sector of the country.

Minister mentioned that Huawei not only has a 25% share in the mobile phone industry of Pakistan but is also the top tax-paying Chinese company in the Country.

Government of Pakistan is looking forward to Huawei to contribute to its e-governance initiative as well in centralising data to improve efficiency and productivity.

Source: Belt and Road News

Dated on: July 19, 2019

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Chinese tariffs hit US food exporters, leaving other nations to make hay while the sun shines

At the start of the summer, a group of officials from Maine wrote to US President Donald Trump, urging financial support for the state’s iconic lobster industry.

“One of the first victims of retaliation imposed by China after the initial round of tariffs was lobster shipped from Maine,” wrote Maine Senators Angus King and Susan Collins, along with state Representatives Chellie Pingree and Jared Golden.

China had become the second largest importer of Maine lobster, buying US$128.5 million in the second half of 2017, before increasing purchases by 169 per cent over the first half of 2018.

But then the tariffs hit, and last year, the market died and US lobster exports to China fell by 80 per cent in 2018.

China has not lost its taste for the delicacy: over the first half of 2019, Canadian lobster sales to China were almost equivalent to their total for 2018, according to the Associated Press, as the same species of lobster exported from Maine is also found in waters off Nova Scotia and New Brunswick.

On Sunday, things got worse for American lobstermen – along with food producers across numerous industries – when a new raft of Chinese tariffs further jeopardised the market share for American food exporters in the world’s most populous nation.

With frozen Maine lobsters now attracting a tariff of 45 per cent, after an increase of 10 per cent, Canadian fishermen can look forward to more and bigger paydays ahead, leaving Maine’s political leaders to continue pondering “the blow of Chinese tariffs on a hallmark American industry that has done nothing to deserve the punishment that it is presently forced to bear”.

Soybeans, wheat and pork were also on the new tariff list, and the US’ loss will be other nations’ gain. With 1.4 billion mouths to feed, Chinese buyers are sourcing their food from nations with lower-tariff access to Chinese ports, a trend that will deepen as tariffs on the US rise.

According to Darin Friedrichs, a soybean analyst working for INTL FCStone in Shanghai, “yellow soybeans are the only ones that matter”, when it comes to US sales to China. The tariff on yellow beans has risen to 33 per cent, compared to just 3 per cent from Brazil and Argentina, China’s other major suppliers.

The blow of Chinese tariffs on a hallmark American industry that has done nothing to deserve the punishment that it is presently forced to bear Maine’s political leaders

Unsurprisingly,US soybean farmers have fairly negative views on the trade war, which has allowed Brazilian rivals to grow their market share in China to 77 per cent over the first nine months of the 2018/19 market year, while their share has fallen to just 10 per cent, according to the US Department of Agriculture (USDA).

A survey of 400 US farmers released on Tuesday found that 71 per cent are not expecting a trade war resolution soon. The survey, conducted by Purdue University in Indiana, also found that 71 per cent of farmers think that government subsidies have helped offset the effects of tariffs, while 58 per cent expect more help in 2020.

The subsidies may well be needed as a 30 per cent tariff differential on beans from Brazil and Argentina will not be attractive to Chinese buyers, who were touring Argentinian facilities in August, looking for cheaper substitutes for US exports and competition for those from Brazil.

The situation with Argentina is complex, but the country’s traders are hoping that political machinations do not stop it from becoming a rival to Brazil in the US’ absence having returned with a bumper crop this year after drought destroyed the nation’s soybean crop in 2018.

“The Argentinian market in general is benefiting from the prices China is paying, or at least from the loss of ability for China to go to the US,” said Rogier Keviet, a soybean trader at Agree Market in Buenos Aires.

The Argentinian market in general is benefiting from the prices China is paying, or at least from the loss of ability for China to go to the US,Rogier Keviet

However, its ability to plug the gap has been damaged by a plunging peso, which lost 27 per cent against the US dollar the day after pro-business President Mauricio Macri lost a primary to left-wing opponent Alberto Fernandez in August.

“When you have a currency devaluation of 27 per cent in one day, the normal reaction of the farmer is to sit on the beans and wait for more certainty. Over the past year, physical soybeans have been the best savings a farmer could have. It always retains the value, that is the best thing to do,” said Keviet.

American wheat farmers, meanwhile, have also been losing out to their Canadian rivals. In August, “Canada’s share of total Chinese imports of wheat has rocketed above 60 per cent in market year 2018/19, up from 32 per cent on 2017/18, as US wheat exports to China have plunged,” the USDA wrote in a report last week.

US wheat flours, grains, starches and seeds are now subject to a range of higher tariffs of up to 90 per cent, while tariffs on US frozen pork have risen to 72 per cent at a time when China is desperate for imports.

Even with tariffs at 62 per cent, the National Pork Producers’ Council complained that “America’s pig farmers and their families are patriots who are demonstrating enormous commitment to the greater good of our country as they shoulder a disproportionate share of trade retaliation against the US”.

That was before an African swine fever outbreak threatened to decimate 50 per cent of China’s pig population by the end of 2019, according to Rabobank, increasing the need for imports of the popular meat.

The latest USDA data, for the week ending August 15, showed that far from taking advantage, US pork exports to China are declining, despite desperation in Beijing to ensure prices do not spike further. That week, US farmers exported just 6,900 metric tonnes of pork to China, compared to 19,484 metric tonnes over the same week a year earlier. Instead, the market is going to European rivals, particularly Spain and Germany, as well as growing agricultural power Brazil.

And while US goods have been getting more expensive for Chinese importers, many products from the rest of the world have become cheaper due to lower tariffs.

In a June report, Chad Bown of the Peterson Institute of International Economics, found that since the beginning of 2018, China has increased tariffs on US exports to an average 20.7 per cent.

“But also striking for American farmers, companies, and workers is that China has reduced tariffs on competing products imported from everyone else to an average of only 6.7 per cent,” Bown said, noting that at the beginning of last year, products from the US and other exporting nations were both subject to an average tariff of just 8 per cent.

Dated on: 9/5/2019
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Yuan’s fall may increase Pakistan’s trade deficit with China

ISLAMABAD: 

The recent currency devaluation by China, which has brought the yuan-dollar parity to the lowest level since 2008, as part of its efforts to offset the impact of its tariff war with the United States, doesn’t augur well for Pakistan.

The yuan’s sharp devaluation means that, all else equal, Pakistan’s exports to China will become less competitive, while imports from China will become cheaper. The devaluation, combined with slowdown of the Chinese economy, is likely to exacerbate Pakistan’s trade imbalance with its single largest trading partner.

Exchange rate movements by themselves have a limited impact on competitiveness, which is essentially a function of productivity of the factors of production and technological and managerial efficiency with which the resources are combined. In the absence of productivity and efficiency, currency depreciation or devaluation normally doesn’t significantly shore up exports.

Thus during FY19, the rupee was allowed to shed its value drastically but exports remained stagnant.

However, as in the case of China, if exports are otherwise competitive, the downward movement of the exchange rate can be an effective response to an increase in tariffs (US) or imposition of regulatory duties (Pakistan). Hence, the currency depreciation may hit the bull’s eye for one economy and may come a cropper for another.

In recent years, Pakistan’s massive trade deficit relative to the size of the economy has been a major cause of concern for both the government and businesses.

From $22.16 billion in FY15, the trade deficit went up to $23.9 billion in FY16. The next two years saw the trade imbalance balloon to $32.58 billion and $37.58 billion. In FY19, the trade deficit was brought down to $31.82 billion.

However, the $5.76 billion reduction in the trade deficit was undergirded by the deceleration of economic growth from 5.5% to 3.3% and imposition of regulatory duties, resulting in a $6 billion fall in imports. As a percentage of gross domestic product (GDP), the trade deficit came marginally down from 11.9% in FY18 to 11.2% in FY19.

China has been the principal source of Pakistan’s trade deficit. In FY15, the trade deficit with China was $8.05 billion, which made up 36.31% of Pakistan’s total trade deficit. In FY16, the trade imbalance rose to $10.44 billion or 43.67% of the total trade imbalance.

The following two years saw the trade deficit enhance to $12.67 billion (38.39% of the total deficit) and $14 billion (37.26% of the total deficit). In FY19, the trade deficit with China came down to $10.89 billion, which accounted for 34.22% of the country’s total trade deficit.

Thus, between FY15 and FY18, Pakistan’s trade deficit with China cumulatively increased 74%. During the same period, Pakistan’s overall trade imbalance registered a cumulative growth of 69.58%. Thus, the growth in deficit with China outpaced that in the total deficit. In FY19, the trade deficit with China went down 22.23% while the overall deficit fell 15.32%. This means in both expansion and contraction the trade deficit with China outpaced the overall deficit.

The foregoing makes it abundantly clear that attempts to slash the total trade deficit need to focus on substantially improving the trade balance with China. As always, there are only two ways to reduce the trade imbalance – one is to increase exports while the other is to curtail imports.

Free trade

Since the conclusion of a free trade agreement (FTA) with China – signed in 2006 and became operational in 2007, Pakistan’s imports have gone up at a gallop. As per Pakistan Bureau of Statistics (PBS) data, in 2006-07, the last pre-FTA implementation year, Pakistan’s imports from China were $3.52 billion, which accounted for 11.52% of total global imports of $30.54 billion. At the close of 2017-18, Pakistan’s imports from China had gone up to $15.74 billion, which accounted for 25.89% of total global imports of $60.79 billion. In 2018-19, a contracting pace of economic growth together with trade restrictive measures, such as imposition of regulatory duties, saw a decline in imports from China to $12.70 billion, which made up 23.17% of Pakistan’s total imports of $54.79 billion.

Thus, between 2006-07 and 2017-18, Pakistan’s imports from China increased cumulatively 347%, while during the same period its global imports registered a much weaker cumulative growth of 99%. Not surprisingly, the share of China in Pakistan’s global imports more than doubled.

During FY19, Pakistan’s global imports and those from China contracted 9.8% and 19.31%. Thus, China holds the key to Pakistan’s import growth or contraction.

Tariff concessions

What caused so drastic import growth under the FTA with China? To answer this question, we need to look at the tariff concessions offered to China.

Pakistan gave China concessions on 5,686 tariff lines, of which tariffs were eliminated on 2,423 tariff lines. The concession covered 59% of Pakistan’s imports from China.

Giving such a substantial concession to a much bigger, diversified and much more efficient an economy without preparing the domestic industry to cope with the competition was always a recipe for a massive import influx.

It is argued that implementation of the China-Pakistan Economic Corridor (CPEC) drove up imports heavily from China in the form of machinery and other capital goods. Is it so?

CPEC agreements were signed in April 2015. Therefore, the impact of CPEC on Pakistan’s trade with China began in FY16. In three years, FY16-18, Pakistan’s imports from China increased 30% at 10% per annum from $12.10 billion to $15.74 billion.

In the three years (FY13-15) preceding CPEC, Pakistan’s imports from China had increased 53% at 17.79% per annum from $6.63 billion to $10.17 billion. Thus, it is primarily the enormous difference in productivity and competitiveness, widened by the FTA, between the two countries that underlie Pakistan’s heavy import bill, and by implication the enormous trade deficit with China.

While it imports massively from China, Pakistan’s exports to China are only $1.86 billion. Generally, two reasons are given for Pakistan’s inability to take advantage of the FTA and thus a highly skewed bilateral trade.

One, although Pakistan received concessions on 6,418 tariff lines under the FTA, these tariff lines covered only 5% of China’s imports from Pakistan. Thus, in effect Pakistan was given a meagre market access by China.

Two, the products of Pakistan’s export interest suffered preference erosion in the wake of China’s FTA with Asean member countries. The tariff faced by Pakistan’s rice was 65% while the average tariff for home textiles, knitted garments and woven garments was 4%, 7% and 9% respectively.

On the other hand, Asean countries received duty-free market access in China for home textiles, knitted garments and woven garments, while for rice the applied Chinese tariff was 35%.

This obviously placed Pakistan’s star products in a relatively disadvantageous position in the Chinese market. In the second phase of the Pakistan-China FTA, which is likely to kick-start soon, Pakistan has been given market access for these products at an even kneel with Asean.

The increased market access in the second phase of the FTA is important but given Pakistan’s severe productivity constraints viz-a-viz its competitors in the Chinese market, it may not be sufficient to rack up exports. In fact, such constraints should have been addressed before going into the second phase of the FTA.

Moreover, since the FTA is not a free lunch, China will also get enhanced market access and being more productive and efficient than Pakistan head and shoulder, it is likely to remain the bigger beneficiary. The yuan’s devaluation will, for sure, give a leg-up to the Chinese competitiveness.

The writer is an Islamabad-based columnist

Published in The Express Tribune, Septembert 2nd, 2019.

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China’s Western Region set to attract more Investment

China’s western region is set to attract more investment as the country’s top private companies are discovering the great potential in the region.

During the recently concluded China Top 500 Private Enterprises Summit in Xining, capital of northwest China’s Qinghai Province, entrepreneurs shared their insights on investment and high quality development in the western region.

“By holding the summit, we are expecting to boost the development of Qinghai and its neighbouring areas, and promote the implementation of the country’s strategy of developing the west,” said Gao Yunlong, chairman of the All-China Federation of Industry and Commerce, organiser of the summit.

A total of 120 billion yuan (about 16.9 billion U.S. dollars) was channelled to Qinghai during the event, according to official data.

China’s western region boasts rich natural resources but remains relatively underdeveloped compared to other parts of the country.

Located in northwest China, Qinghai ranks first in the reserve of 11 kinds of minerals and is a major hydro-power base in the country.

The plateau province enjoys about 11 percent of China’s solar energy resources.

“Qinghai has great potential for development due to its abundant resources. There are many things we can do here,” said Li Ruibin, President of Longy Group, a company that focuses on development and construction, energy and financial investment.

The company based in Shaanxi Province, will invest over 10 billion yuan in Qinghai, covering fields of smart city construction and sand control.

Chinese telecom firm Huawei is also working with the province to build a big data park in Hainan Tibetan Autonomous Prefecture, which is Huawei’s 33rd cloud services spot in the country.

In 2018, Huawei started the construction of the park which is made up of facilities including big data centre, smart city display centre and big data industry incubation base.

The total investment will amount to 50 billion yuan by 2025 upon the completion of the park, according to local officials.

Apart from China’s strategy of developing the west, the Belt & Road Initiative is also bringing new opportunities to China’s west, making it a new engine for the country’s economic growth.

Due to the improved transportation, northwest China’s Xinjiang Uygur Autonomous Region is now better connected with the rest of the country than ever before.

As China’s gateway to Central and West Asia, the once-remote region has become a business hub on the Belt & Road.

Thanks to many preferential policies granted to the region, Xinjiang is becoming a hot spot for business investment. An increasing number of multinational corporations are shifting their focus from China’s east to west, channelling more and more investment to Xinjiang.

In the first half of 2019, Xinjiang recorded a fixed-asset investment of about 184 billion yuan, up 7.3 percent year on year, according to an economic performance report issued by the regional government.

However, the development of China’s west is still unbalanced and inadequate, which is a major challenge faced by the region.

Governments at various levels have rolled out measures to promote more balanced economic development and improve the business environment to attract more investors.

“We will break down all kinds of invisible barriers to create a level playing field for private enterprises, and cut taxes and administrative fees so they can go forward with fewer burdens,” said Liu Ning, Governor of Qinghai Province.

Source: Belt and Road News

Date: 29/8/2019

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Pakistan, China trade volume jumps to $15.6b under FTA

ISLAMABAD: China, Pakistan Free Trade Agreement (CPFTA) appeared to be a milestone in the two countries’ bilateral economic cooperation, as their bilateral trade has jumped to dollar 15. 6 billion in the recent years,

China Economic Net, quoting official sources reported on Friday that within the first phase of CPFTA, Pakistan’s exports to China have increased to US$1.85 billion (FY19) from US$575 million (FY07), and the bilateral trade volume has jumped from around US$4 billion to US$15.6 billion accordingly.

The CPFTA was signed in 2006 and came into effect in 2007. It is the first FTA China signed with South Asian countries.

The signing and implementation of the CPFTA has led to the rapid development of bilateral economic and trade relations. According to the statistics of Pakistani customs, so far, China has been Pakistan’s largest trade partner and the second export destination country for 5 consecutive years, and topping the FDI original country for 6 consecutive years.

Along with the constant upward trend of China-Pakistan trade, a rising concern on trade deficit with China has been echoing in the Pakistani business communities. It is pertinent to mention that the main reason behind the trade imbalance has to be the structural problems in nature between industries of two countries.

China has a strong manufacturing base to export goods as compared to import. Up to now, China turns to be the largest trading partner of more than 120 countries and regions in the world, and China has never intentionally pursued the trade surplus, not with any trade partner.

To address the major concern of Pakistani side, China has proactively taken a lot of measures to maintain a balanced trade relation with Pakistan. According minister counselor, Economic and Commercial Section, Chinese Embassy in Pakistan, in cooperation with Pakistani counterpart, China is keen to expand more market access for Pakistani products and organizes varieties of trade promotion activities in Pakistan and China every year.

In the meanwhile, in pursuit of a higher level of trade liberalization, the second phase of negotiations of CPFTA was launched in 2011, and successfully concluded after 11 rounds of talks.

Witnessed by the two countries’ leaders this April, the protocol of the CPFTA Phase II was signed at the second Belt and Road Forum for International Cooperation held in Beijing and will take effect in due course.

The second phase of CPFTA is a substantial upgrade of the original one and is expected to be a milestone in the history of the two countries’ economic and trade development. The two sides will, based on the original FTA, significantly reduce the tariff between the two countries and further expand the liberalization of trade in goods. After the Protocol takes effect, the level of bilateral trade liberalization will increase from the previous 35% to 75% in terms of tariff lines elimination.

Source: The News

Date: 26/8/2019