The long term plan has been revealed of China-Pakistan Economic Corridor (CPEC) removing misconceptions with regards to the transparency of the project. The 26-page document covers a broad range of areas of cooperation and confirms that the project will be operational by 2030. An important part of the plan is that China will be supporting Pakistan’s access to the Asian Infrastructure Investment Bank (AIIB). Financial cooperation will be enhanced under the long-term plan.
A deeper look at the long term plan will certainly prove that China, through CPEC, has shown the utmost sincerity of purpose insofar as Pakistan’s infrastructural development is concerned. Beijing seems to have committed itself to goals that exclusively constitute Pakistan’s own responsibilities to send a strong message across that it has deep respect for its neighbor’s strategic and financial sovereignty. In this generous deal, however, China wants Pakistan to accept its currency as the currency of bilateral trade. Speaking to journalists after the formal launch of CPEC’s LTP (2017-30), Minister for Planning and Development Ahsan Iqbal said Pakistan is examining a proposal to replace the US dollar with the Chinese yuan for bilateral trade. According to him, the rupee will be used within the country, but China desires that bilateral trade should take place in its own currency, “and we are examining the use of RMB instead of the US dollar for trade between the two countries.”
CPEC, which is the flagship of China’s historic One Road One Belt project, envisages, inter alia, two profound features: greater monetary cooperation between the State Bank of Pakistan (SBP) and People’s Bank of China (PBoC), and greater strategic cooperation between the two neighbours whose friendship is taller than the Himalayas and deeper than the oceans. The long-term plan, therefore, commits the two countries to implementing existing bilateral currency swap arrangements, exploring the use of the rupee and the yuan for settlement of bilateral trade/investments, a cross-border inter-bank payment system, promoting free flow of capital, financial cooperation between free trade zones and strengthening cooperation between the stock exchanges of Karachi and Beijing. The plan requires the two countries to strengthen cooperation in the fields of oil, gas, electricity and power grids, and focus on promoting construction projects of thermal power, hydropower, coal gasification and renewable power generation, and support networks enhancing power transmission and supply reliability. It also requires them to explore the establishment of multi-level cooperation mechanisms and strengthen policy coordination. They should also strengthen their own financial reforms, innovate their own financial products and financial services, and control financial risks to create a good financial environment for the construction of CPEC.