Pakistan's president Asif Ali Zardari began a four-day state visit to China on Tuesday, seeking aid for his near-bankrupt nation from an increasingly powerful ally.

"China is the future of the world," Mr. Zardari, widower of slain former Prime Minister Benazir Bhutto, told Chinese state news agency Xinhua on the eve of his trip. "A strong China means a strong Pakistan."

Pakistan's economy was already in a critical state before the global financial crisis. Mr. Zardari is reaching out to China, the U.S. and Saudi Arabia, among other so-called Friends of Pakistan, to make the case that the world has an interest in helping to stabilize the nuclear-armed nation, which has been shaken by Islamist militancy.

Pakistan is seeking $5 billion to $6 billion from donors. Government officials are urgently trying to shore up dwindling foreign-exchange reserves -- now down to $8.32 billion -- and revive the ailing economy by boosting the confidence of foreign investors. It sees China as a substantial source of this capital.

On his first official visit abroad since taking office, Mr. Zardari promised to return to China every three months and said the relationship would focus on business.

Shaukat Tarin, economic adviser to Pakistani Prime Minister Yousuf Raza Gilani who was in Washington early this week, said Pakistan had secured $1.4 billion from the World Bank, and expected additional financing from the Asian Development Bank.

The U.K., meanwhile, doubled its aid to Pakistan and will give the country about $825 million over the next three years, according to the British High Commission in Islamabad.

But China may offer Islamabad its best hope for a major cash infusion. The Asian giant's foreign-exchange reserves are the world's largest, at $1.9 trillion. Chinese officials could be eager to demonstrate their new wealth and diplomatic heft, analysts say.

"China is already involved in building a large port in Pakistan. But neither Chinese nor Pakistani officials have offered details of any current aid agreement.

The decades-long friendship between China and Pakistan is grounded in arms sales, energy assistance and an all-weather geopolitical alliance. China has sold conventional weapons and missile technology, and is suspected of helping Pakistan develop nuclear weapons. In 2006, China and Pakistan signed a pledge to increase bilateral trade to $15 billion a year by 2011.

As India and the U.S. have worked to complete a civilian nuclear agreement, China and Pakistan have discussed a similar deal. A Chinese foreign-ministry spokesman said there would be "in-depth discussions" on cooperation in "some major areas," but declined to confirm if a nuclear deal was in the works. Xinhua, quoting the Pakistani foreign ministry, said China and Pakistan expect to sign "several agreements" during Mr. Zardari's visit.

Pakistan's ties with the U.S. remain fraught with tensions. Mr. Zardari has reached out to U.S. leaders, but in doing so has faced criticism at home, particularly because of repeated U.S. missile strikes inside Pakistani territory targeting Islamist militants near the Afghanistan border. An economic collapse would only further undermine the battle against Islamic militants, experts warn.





Soucre: The Wall Street Journal.

Published on October 16 2008 ,Page 7

Pak-China relationship
WITH the West preoccupied with the financial meltdown and our Middle Eastern allies thus far baulking at providing an emergency economic lifeline, President Asif Ali Zardari’s state visit to China has assumed added significance. Separating hype from reality, however, reveals a more complex picture. Let’s begin with what Pakistan currently needs most: money — approximately $3-4bn in the next quarter and $7-10bn over the next year. China has the cash (its reserves are nearing $2tr) but handouts are not its favoured mechanism to shore up friends and allies. Perhaps it is with this in mind that the president is seeking a soft loan of only $500m to $1.5bn according to The Financial Times. Beyond short-term cash, however, the economic and security possibilities are limitless, though there remain significant hurdles. On the economic front, a free trade agreement signed in 2006 aims to increase bilateral trade to $15bn by 2011 (it was less than $2bn at the start of the century). Pakistan’s export strategy emphasises its agricultural base: cotton yarn and fabric, grain, fruit, vegetables and leather. Minerals are another emphasis. This is a sensible policy given the relative strengths of the Pakistan economy.
On the investment side, Chinese capital is being sought across a range of industries, from manufacturing to construction and automobiles to telecommunications. The power sector — from exploiting coal reserves to building new dams to setting up nuclear power plants — is critical to Pakistan’s future, and the Chinese are expected to play a big role in whatever energy policy we decide to pursue.

Now to the problems. The Chinese are an extremely security-conscious nation and Pakistan’s record of protecting their nationals is problematic. The recent kidnapping of two Chinese engineers by militants has once again highlighted the danger to the nearly 3,000 Chinese engineers, technicians and entrepreneurs in the country. The threat is not only from Islamic militants; in Balochistan, Chinese working on infrastructure projects face threats from nationalist militants. Terrorism in mainland China is also an issue of great concern for the Chinese authorities. Partially to address the terrorism threat emanating from the Central Asian republics on its borders, the Shanghai Cooperation Organisation was set up in 2001. Pakistan was granted observer status in 2006, and China remains concerned about the links between Islamic militants in Pakistan and in the Xinjiang Uighur Autonomous Region, which is where the Karakoram Highway terminates in China. However, the Indo-US nuclear deal will force a rethink of the regional security equation in Islamabad and Beijing, and may even act as an impetus for closer economic ties. Closer defence partnerships, such as in the JF-17 multi-role fighter aircraft, and purchase of Chinese planes and frigates will also help pull the two countries closer. If used sensibly, security concerns can act as a springboard for greater economic cooperation.