China and Pakistan Ink $45 Billion Infrastructure Deal

China and Pakistan Ink $45 Billion Infrastructure Deal

China and Pakistan Ink $45 Billion Infrastructure Deal

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Nov. 21 2014 5:20 PM

China and Pakistan Ink $45 Billion Infrastructure Deal

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Pakistani Prime Minister Nawaz Sharif.

Faisal Mahmood/Reuters

In a deal between two countries bonded by a common desire to counterbalance American influence and Indian ascendancy in South Asia, China has agreed to build $45.6 billion worth of infrastructure and energy projects in Pakistan, including a hydroelectricity project that would be the biggest in the world.

The deal was one of more than 20 signed by Pakistani Prime Minister Nawaz Sharif on a trip to China earlier this month. Energy projects will account for $33.8 billion of the Chinese funding, while another $11.8 billion will be allocated for the development of infrastructure like roads and railways. From Reuters: 

Pakistan sees the latest round of Chinese investments as key to its efforts to solve power shortages that have crippled its economy.
Blackouts lasting more than half a day in some areas have sparked violent protests and undermined an economy already beset by high unemployment, widespread poverty, crime and sectarian and insurgent violence.
Under the CPEC agreement, $15.5 billion worth of coal, wind, solar and hydro energy projects will come online by 2017 and add 10,400 megawatts of energy to the national grid, officials said.

China will also spend hundreds of millions developing Pakistan's Gwadar port, a project that carries potential for conflict. More from Reuters: 

The port is close to the Strait of Hormuz, a key oil shipping lane. It could open up an energy and trade corridor from the Gulf across Pakistan to western China that could be used by the Chinese Navy—potentially upsetting rival India.

The deal fits into big-picture strategies being pursued by both countries, as Pakistan tries to extend its network of allies and promote stability in preparation for the U.S. withdrawal from Afghanistan. Pakistan has been courting an alliance with Russia and the two signed a landmark defense cooperation agreement on Thursday. Meanwhile, China has been aggressively trying to expand its international influence through development and investment abroad. The country won a $12 billion deal to build a railway along the coast of Nigeria on Thursday, China's largest single overseas contract ever.

Just last month, China was joined by 20 other countries in signing a memorandum creating the Asian Infrastructure Investment Bank, a project proposed by Chinese president Xi Jinping last year as an international development bank to rival the World Bank. And this year, China's overseas investment will exceed foreign direct investment into China for the first time.